Thought leadership

The UK is failing to keep up with online fraud, and systems to protect shoppers from scams do not yet provide value for money, the National Audit Office has warned.

The NAO estimated that consumers lost at least £14.8 billion last year, of which £4.2 billion is thought to be hidden and unreported losses from crime such as mass marketing fraud and counterfeit goods.

Consumer protection cost around £165 million over the year, with local Trading Standards services receiving around £124 million and Citizens Advice receiving £18 million, the NAO calculated.

But it said the system as a whole “has not yet demonstrated that it provides value for money in protecting consumers from modern scams, unfair trading, and unsafe goods”.

National Trading Standards, which was set up in 2012 following a previous NAO report, had made a “good impact” into consumer protection, preventing £345 million worth of losses since April 2014.

But the NAO said funding for this remained small compared with the size of the problem.

It warned that the system was not keeping pace with the growth in online consumer fraud within the UK’s e-commerce market – now the third largest globally.

Local Trading Standards teams lost 56% of full-time equivalent staff since 2009, with 20 services in England suffering funding cuts by over 60% since 2011 and some offices left with one qualified officer.

But despite this, the teams were expected to enforce 263 different pieces of legislation “with little direction from government on the priority of these”.

The NAO found that although changes to commerce meant more consumer issues were happening at national and international levels, just 7% of local trading standards teams based their priorities nationally.

It noted that the Competition and Markets Authority was also making a “good” impact, generating at least £74 million of direct financial benefits to consumers each year at a cost of £6 million.

NAO head Amyas Morse said: “Progress has been made since our 2011 report and consumer protection bodies have shown they can make good impacts with limited resources.

“As the threats consumers face become increasingly wide-ranging, however, the system has not kept pace with the changes, leaving consumers inadequately protected in a number of areas.

“While the improvements are welcome, the system as a whole has not yet shown it provides value for money.”

Leon Livermore, chief executive of the Chartered Trading Standards Institute, said: “The amount spent on trading standards has fallen from £213 million in 2011 to £125 million today, so it’s not surprising the system is struggling to cope.

“It has left consumers inadequately protected and has helped to set the conditions for issues like the horsemeat and hoverboards scandals and the ongoing problems with Whirlpool and VW.

“However, the report does recognise the benefits of enhanced coordination and in particular the work of the Consumer Protection Partnership and National Trading Standards, which has shown that trading standards can have a significant impact on a regional and national scale. We stand ready to support the Government and work with our partners to implement the recommendations in the report.”

Which? director of campaigns and communications, Vickie Sheriff, said: “The NAO paints a worrying picture of a system struggling to deal with the scale of problems that consumers now face.

“With consumer losses of around £14.8 billion annually, it cannot be right that some Trading Standards services have suffered dramatic cuts leaving people so poorly protected against scams and other threats.

“The Government must take action urgently to ensure that a sustainable and robust system is in place to protect consumers.”

A Government spokeswoman said: “This NAO report recognises the significant progress made since 2011 but highlights where more needs to be done.

“We will carefully consider the NAO’s findings as part of our ongoing work to examine the consumer protection regime and will publish a Green Paper in spring 2017.”

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