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Friday, 18 May, 2001, 14:52 GMT
A fair deal for consumers?

Labour has cast itself as the consumer's champion, but the jury is still out on its efforts to crack down on "rip-off Britain".


BACKGROUND

The growth of consumer power has been one of the major social changes to take place in the late 20th century - and particularly in the 1990s.

Public anger over cashpoint charges, high petrol and car prices and other issues has translated into high-profile consumer boycotts, catching both business leaders and politicians on the hop.

From the outset, New Labour tried to cast itself as the consumer's champion.

It has aimed to protect people from the worst excesses of the free market, while at the same time promoting strong competition.

This desire to make the private sector publicly accountable is seen as being central to its Third Way philosophy.

But Trade and Industry Secretary Stephen Byers' headline-grabbing war on "rip-off Britain" has had mixed results.

Some of his reforms - such as the proposed Consumer Bill, which promised extra powers to deal with 'rogue traders' - have failed to materialise, although some measures have been introduced as secondary legislation.

Mr Byers did strengthen the powers of the Office of Fair Trading (OFT) and the government has introduced a new City watchdog, the Financial Services Authority, following a string of financial scandals such as the mis-selling of pensions.

Mr Byers also replaced the old Monopolies and Mergers Commission with the Competition Commission, charged with investigating anti-competitive practises.

Now Labour says it will take competition policy out of the political sphere altogether.

The decision to give the go-ahead on mergers will not be taken by ministers but by the Competition Commission, solely, the party claims, in the interest of the consumer and the wider economy.

The new Commission has led the government's assault on "rip-off Britain" with a series of high-profile investigations into alleged profiteering in banking, new car sales and supermarkets.

The Tories believe Labour has undermined confidence in British business through its sustained attack on the price of goods and services.

They have seized on reports, such as an international price comparison survey conducted by the DTI in February 2000, which show UK prices are not significantly higher than elsewhere.

But the Liberal Democrats want tougher competition laws and more consumer protection.


BANKING

Britain's high street banks came in for stinging criticism in the Cruickshank Report, which was published on the eve of the March 2000 budget.

The report accused banks of overcharging the average household by 400 a year and questioned the excessive charges made to some small business customers.

Chancellor Gordon Brown promised to act on the report's recommendations.

The section dealing with small businesses was forwarded to the Competition Commission, which is due to submit its report after the election. But so far Labour has resisted pressure to establish an independent regulator, PayCom.

Among other things, this would speed up the way banks move money around the economy, particularly the clearance of cheques.

The banks responded to Cruickshank by toughening up their voluntary code of conduct, ending double charging on cashpoint transactions and allowing more competition in the credit market.

The Consumers Association has voiced concern that some banks are not sticking to the voluntary agreement.

But the banks claim they are cleaning up their act and strongly resist calls for further legislation.


CAR PRICING

In September 2000, Stephen Byers introduced legislation to give ordinary car buyers access to the same discounts as fleet customers.

This cut car prices by an average of 1,100, after the Competition Commission found British consumers were being overcharged by an average of 10%.

The gap between prices in Britain and the rest of Europe has halved since then, but new car prices still remain 20% higher on average than in countries using the euro, according to latest figures.

However, new car sales have jumped in the UK as a result of the price cuts.

The Consumers Association, which took the unprecedented step of setting up its own car importing operation, to help buyers take advantage of lower foreign prices, welcomed Mr Byers' move.

Further progress largely depends on the intervention of the European Commission, which is due to review the car industry's block exemption from competition law in 2002.

If the commission allows the block exemption to continue - this would protect the monopoly of dealer networks - consumer groups are likely to press the government to act unilaterally.


SUPERMARKETS

Britain's supermarkets have also come under the Competition Commission spotlight.

A two-year investigation concluded in October last year that customers were not being ripped off and supermarkets were not making excessive profits.

However, the chains under investigation - Tesco, Sainsbury's, Asda, Safeway and Somerfield - were rapped over their heavy-handed treatment of farmers and other food producers.

They were asked to sign up to a new code of practice designed to improve their dealings with suppliers.

Stephen Byers said the food retail market had become more competitive since the start of the investigation, with the introduction of US giant Wal Mart in particular driving prices down.

But groups such as the British Retail Consortium accused the government of unfairly targeting the retail sector and undermining consumer confidence.


THE PRIVATISED UTILITIES

Labour made a manifesto commitment in 1997 to promote competition among the privatised utilities.

This translated into moves towards a single, supposedly more powerful, industry watchdog.

In January 2000, Stephen Byers provoked outrage in the House of Commons when he announced that the new body, Ofgem, would cover gas and electricity - but not water and telecommunications.

Instead, Oftel, the communications regulator, which has come in for much criticism for its failure to keep British Telecom in check, will become part of a new 'lighter touch' communications regulator, which also covers commercial TV and radio.

Meanwhile, a separate water regulator is to be set up.

And Labour has promised to strengthen competition among utilities in Europe.

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