Work and Business: Healthy competition

David Walker

Pollsters scored Ed Miliband’s promise to freeze energy prices as the hit of the 2013 conference season, and the intervention did his personal ratings no harm at all. It signalled both Labour’s newfound muscularity over corporate interests and a welcome eclecticism in thinking about markets, competition and consumers.

Stewart Wood said the leadership had been reading Doris Kearns Goodwin’s joint biography of Theodore Roosevelt and William Howard Taft, successive American presidents in the Edwardian era. These Republicans asserted the public interest against cartels and business barons. Similarly now for Labour, the game is pragmatic, household-focused statecraft, remaking markets – especially energy, where the public interest embraces sustainability, the mitigation of climate change and the urgent need to decarbonise the generation of electricity.

Suddenly Labour has given itself permission to don the motley and think widely and undogmatically about competition, state organisation, regulation, mutualism, co-operation, alternative forms of production, promotion of small and medium enterprise – whatever it takes and whatever works to recognise the pressure on low and middle-income households, respect the rights of employees to decent conditions and liveable pay. If the Tories leave their clothes lying on the beach while they are swimming in the sea of irresponsibility, we’ll pinch them, Ed Miliband says. ‘There was a time when the Conservative Party stood for competition and consumers. But that time has gone. This generation of Conservative leaders has been entirely captured by powerful vested interests like the energy firms and the big banks.’

So it’s in the spirit of this new heterodoxy that Labour is embracing consumerism. Drawing on background work by the likes of Ed Mayo of Cooperative UK, Labour’s Work & Business offer includes the proposal to mobilise households as prompts and allies for the state as it subjects markets to annual ‘health checks’.

It’s a fascinating proposal. It harks back to Michael Young – both a co-author of the 1945 manifesto and later founder of the Consumers Association — and a long, if subterranean strand in Labour thinking about not just the rights but the political potential of people as they shop, purchase and deal with firms (and the state as supplier of collective goods and services).

Simultaneously, it casts forward, anticipating and seeking to mitigate trends in modern corporate capitalism towards further market concentration and pursue fairer shares between companies, their employees and consumers. The state must do more than hold the ring. Here is a vision of a government that is nimble and quick-witted, collaborating with civil society (for example Citizens Advice), understanding both the promise and the deformations of competitive markets.

But Labour mustn’t be naïve about consumer power. As a collective presence consumers are often shadowy; their organisations are weak. People can’t or won’t make the effort to become active participants in markets, and firms (notably energy companies and banks) won’t help them navigate tricky schemes to make competition real, and switch accounts.

Labour still has to do some hard thinking about state forms. What of elected local authorities as regulators and themselves market participants (pub owners)? How much autonomy should an arm’s length Competition and Market Authority be given; how transparent are the criteria it applies to judge competitiveness? How will it collaborate with much depleted local authority trading standards? Where does its remit abut that of the sector regulators such as the Office of Gas and Electricity Markets and the Financial Conduct Authority? Would a Labour-run Treasury or business department really stop identifying the public interest with that of big firms, as it did when Gordon Brown and Ed Balls were in command before 2010?

Those two would be the first to observe that the public interest ranges wider than consumers’. A big bank (RBS) in which the state retained a large stake could, as in France, be a useful player in identifying and stimulating growth sectors and supplying long-term finance. Energy prices have to rise long term: consumers need incentives (and help) to use less energy and insulate. Under European Union rules – which are all too often treated as gospel and not a moveable feast – Labour might be forced to transfer its tough competition policy for energy and the banks to public sector suppliers, which was the very heart of Andrew Lansley’s disastrous assault on the NHS.

It’s only in the heaven imagined by classical economists that competition maximises welfare, so Labour needs to avoid doctrinal rigidity. Contestability may be as effective as actual competition and, in certain markets, the only way to ensure it will be for the state itself to be present as a supplier, providing for comparisons of performance and a source of innovation.

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This article is part of our Labour’s Policy Review: Have your say series. For more articles in this series, click here.