THE BLOG
01/05/2014 13:19 BST | Updated 01/07/2014 06:59 BST

Is the Present System of Consumer Protection Up to the Job?

There has long been recognition of the central importance to the economy of consumer and competition policy.

Geoffrey Howe, speaking as the first minister for Consumer Affairs in 1972, was clear that getting regulation right is central to economic growth. The then prime minister, Ted Heath, called him the 'Minister for Keeping Prices Down'.

It's good for consumers and good for businesses, for example when regulation levels the playing field and ensures that firms that break the rules don't get an unfair competitive advantage.

And it's good for the economy if action by regulators helps drive consumer demand for the best businesses, supporting their growth, incentivising efficiency and innovation. That, obviously, is what Which? has been about since the 1950s.

But is the present system of consumer protection up to the job?

In our view, despite good steps forward with some of the recent reforms, the arrangements we have today are still not what we would build if we were designing from scratch a new system for the 21st Century.

We've welcomed the merger of the OFT with the Competition Commission, but it's too early to say whether the one month old Competition and Markets Authority is going to be strong enough to command consumer confidence and the respect of businesses.

It has a big job to do, starting with the proposed energy market investigation, and the CMA must show how its emphasis on competition will lead to better outcomes for consumers in markets where competition law enforcement has for years been neglected by sectoral regulators.

Trading Standards services have been given greater responsibility for consumer law enforcement, including national cases that local councillors will be very wary of taking on.

With the Trading Standards Institute reporting a 45% reduction in capacity since 2009, we've called for local authorities to do more to share services and expertise, for example in food law enforcement. There is a big job to do here and it is critical that they pull together.

Meanwhile some economic regulators have been too slow to raise their game.

In vital sectors such as energy, water, transport, communications, financial services and healthcare, we have a landscape of regulators with a wide array of objectives and accountabilities. They have at times failed to put the consumer interest first, and have made very little attempt to consider how the system as a whole affects consumer welfare or the wider economy.

At worst, they have failed to enforce competition law, giving the appearance of being captured by the businesses they regulate, and losing the confidence of consumers.

This weak and disjointed approach is frightening given the government's planned pipeline of at least £151billion of infrastructure investment in the next five years that will fall onto consumer bills. Of course, there are also more practical issues such as learning lessons and sharing best practice across the regulatory framework.

That's why we've welcomed the joint BIS and Treasury review to look at how regulators could make decisions in a more coordinated and consistent manner.

The creation of a UK Regulators Network is a step in the right direction. But staffed by only two people, at present, and responsible for covering coordination of work across sectors that directly account for at least 20% of the economy - and indirectly underpin the whole of the UK economy - it is at best a very modest step forward.

So we need to keep thinking afresh about improving our regulatory landscape and how we achieve that: independent regulators working together more closely than ever before, in the interest of consumers; a system focused on achieving clearly defined consumer outcomes; more effective enforcement of both consumer protection and competition law, nationally and locally.

The economy needs confident consumers dealing with better businesses. We all know that in many markets this still requires better regulation. The question is how we get there.