Written evidence submitted by Ombudsman Services (LRS0072)
1. General comments
1.1 We welcome the Business, Energy and Industrial Strategy (BEIS) Select Committee’s inquiry into ‘Post-pandemic economic growth: Levelling up – local and regional structures and the delivery of economic growth’. This submission includes Ombudsman Services’ response to the Committee’s questions on sustainable local economies. As the situation continues to evolve, we would be happy to provide further data and insights to the Committee that we consider useful and to provide oral evidence if appropriate. Ombudsman Services has also submitted a response to the BEIS Select Committee’s broader inquiry into ‘Post-pandemic economic growth’, which adds further information to the points made in this submission.
2. About Ombudsman Services
2.1 Ombudsman Services is a not-for-profit private limited company established in 2002 which runs a range of discrete national Alternative Dispute Resolution (ADR) schemes across different sectors, including the sole ADR scheme in the energy sector, the Ofgem-approved Energy Ombudsman. We also operate in the communications sector and run an appeals service in private parking. Each scheme is funded by the companies under our jurisdiction and our service is free to consumers. In 2019 we received 157,808 initial contacts from complainants and resolved 88,840 complaints. In the energy sector we received 116,700 initial contacts and resolved 58,034 cases, and in the communications sector, we received 40,184 initial contacts and resolved 17,426 cases. We also received over 84,000 appeals in our private parking appeals service.
3. How we operate
3.1 We operate at a critical juncture between suppliers, consumers and the government to resolve complaints and mediate disputes. Our work covers key areas of infrastructure, from smart meters and energy networks to 5G and fibre broadband. In order to streamline our work in the energy sector, we operate a tripartite model between ourselves, Ofgem and Citizens Advice. This enables clear communication and the sharing of data and insights to help deliver better innovation and competition that results in positive outcomes for consumers. This practice enables us to drive up standards in the industry by encouraging collaborative approaches to making improvements, managing expectations and informing policy.
3.2 We invest heavily in building this data and insights capability. Our focus has become more explicitly systemic and preventative as we have built up expertise in understanding where consumer trust is under threat and how best we can work with industry, regulators and policymakers to recover it.
4. Our objectives
4.1 At Ombudsman Services, we can process complaints from domestic consumers as well as microbusinesses (less than 10 employees), however, we cannot currently process complaints from small and medium sized enterprises (SMEs – fewer than 250 employees).
4.2 We believe that this needs to change if we are to support businesses adequately, particularly those that have been vulnerable during the pandemic, as we implement a green recovery. Businesses will need to feel confident that, when investing in green technologies and initiatives, they will be supported if things go wrong. Ombudsman Services is calling on the government to expand the definition of microbusinesses in the energy sector, so that we can offer independent, strategic redress to more businesses and help to ensure the success and longevity of the green recovery. We would be happy to engage more directly with the Committee on this issue.
5. Responses to questions on sustainable local economies
5.1 How could a green economic recovery stimulate local economies and embed upskilling at a regional level?
5.1.1 The post-pandemic economic recovery provides an opportunity to increase the UK’s resilience to the climate crisis whilst stimulating the economy, generating jobs, and improving public health and wellbeing. The government would be right to leverage this opportunity to invest in low-carbon infrastructure locally, which would boost local economies and spur the creation of local, long-term green jobs. Building back greener would also drive innovation and competitiveness and would establish the UK as a climate leader ahead of its presidency of the G7 and COP26 climate conference next year.
5.1.2 Ombudsman Services therefore welcomed the Chancellor’s announcement in July of a new £3 billion green jobs plan to protect employment whilst greening the UK’s infrastructure in the wake of the Covid-19 pandemic. In particular, the £2 billion Green Homes Grant is a welcome stimulus to the sector, which will increase the energy efficiency of homes and create sustainable work for local businesses. The plan is also set to create tens of thousands of new jobs by bringing forward work on £8.8 billion of new infrastructure, decarbonisation and maintenance projects. We are clear that to reach net zero by 2050, new roles in the energy sector will need to be created and filled, and we believe that this plan is a positive step towards addressing this.
5.1.3 Whilst we welcome these measures, we understand that consumers, particularly vulnerable consumers, have been victims of poor sales practices when paying for installation to improve the energy efficiency of their home during previous green programmes, such as the Green Deal scheme. There is a risk of greenwashing and mis-selling from rogue traders, which would increase costs for consumers and be detrimental to their trust in the green energy market. Whilst we welcomed the government’s announcement confirming that all tradespeople operating under the Green Homes Grant must be registered with TrustMark and subject to accreditation and quality assurance checks, we believe that offering further consumer protections at the end of this process and for when things go wrong will help to maintain and build trust in the industry. We think access to free, independent redress could play a role here, as it does in the broader energy market.
5.1.4 At Ombudsman Services, we understand that the energy efficiency market is a vital component of the journey towards net zero, and it is therefore vital that local green infrastructure projects are established on a sustainable footing. We welcome the measures introduced by the government that seek to ensure only quality providers are able to undertake work associated with the scheme.
5.1.5 As we build back better, we must also build back fairer by ensuring that, where investment is being used for infrastructure projects, there is a clear focus on consumers. Investing in green infrastructure, whilst important, will not move this country forward on its own. Equally important is building consumer trust and confidence in that technology. Without trust, we risk not taking consumers on that journey. Where that risk exists, it is often the most vulnerable members of our society who get left furthest behind.
5.2 Which tiers are best placed to provide the leadership of local net zero and skills-based priorities?
5.2.1 Many local authorities have already declared a climate emergency, with some of them committing to become carbon-neutral in advance of the current national 2050 target. Both local and regional government have a responsibility in leading the drive to net zero and delivering the changes that the green recovery agenda promises to consumers, businesses, society, and the economy.
5.2.2 Local government are uniquely placed to understand the specific challenges facing microbusinesses and consumers, particularly vulnerable consumers, that fall within their geographical remit. Consumer and business confidence in the market will be vital in delivering regional economic growth, particularly as we are currently experiencing a cycle of economic contraction and may face a second wave of Covid-19 infections this winter.
5.2.3 Powerhouses, local enterprise, partnership and growth hubs, city and regional mayoralties and councils, in their ambition to meet our net zero targets, must ensure that adequate protections are in place for consumers and microbusinesses, to support them along the way. Local projects and initiatives driven forward by local and regional government must ensure that consumer protection, particularly for vulnerable consumers, is at the heart of their decision-making process. In such challenging times, support needs to be offered to consumers and businesses to ensure their continued confidence in the sector, as well as their ambition to switch to and invest in greener technologies.
5.2.4 Ombudsman Services has data and insights that can help in understanding the challenges that consumers and microbusinesses have experienced with innovative new technology in the energy sector, thanks to our position as the sole ombudsman in the sector. We understand how consumers and microbusinesses have engaged, why they might choose not to engage, and the challenges they have faced with these services.
5.2.5 Ombudsman Services would welcome the opportunity to engage with local and regional government and share our understandings and insights with them, so that they can effectively plan and prepare for designing and taking forward green recovery strategies in their regions.