A new government can look afresh at the landscape and the coalition has realised it can help the public make the most of its money by reforming two of the worst corporate sectors: banks and energy suppliers.
Both come out badly in opinion polls because, generally, they are greedy and lazy. So the Government plans to eliminate outrageous bank charges (which prompted a campaign by The Independent) and wants more competition for gas and electricity. The Tories and Liberal Democrats have back-tracked on some things already – and much will hinge on the details of what they are proposing, but they amount to a substantial and welcome package:
Ultimately, the legal case against unauthorised borrowing fees fell in the Supreme Court, but the coalition says it will take measures “to end unfair bank and financial transaction charges”. It does not specify what they should be capped at. It’s hard to see why the charge for exceeding an overdraft limit should be more than the £12 for late payment fees charged by credit card lenders, given that banks decide whether you can actually go overdrawn and then charge interest on the borrowing.
Regulators will be given “new powers to define and ban excessive interest rates on credit and store cards”. Again, what constitutes an excessive interest rate? In the current economic climate, it is hard to see how rates above 20 per centage points can be justified, given that the Bank of England base rate is 0.5 per cent.
The coalition says it will also oblige credit cards companies to “allow consumers to find out whether they are receiving the best deal”. That is a smart piece of legislation that will help make the market more competitive, while costing taxpayers nothing. Another bright idea Mr Cameron and Co are proposing is to have a free national financial advice service funded by a social responsibility levy on financial institutions. There is no proposed action against doorstep and short-term lending, whose APR can be 2,000 per cent.
Disappointingly, the Tories have dropped their manifesto commitment to refer the energy industry to the Competition Commission, which could have ordered wholesale reform. Instead, the coalition is promising to review the work of the regulator Ofgem, which has come in for criticism for not adequately protecting customers, particularly vulnerable customers.
Suppliers will be forced to state their cheapest tariff on bills, flagging up when people are paying over the odds. Bills will also show typical energy use for a comparable property, hopefully spurring energy efficiency. Social tariffs will 'offer access to the best prices available'. There will be a roll-out of smart meters; another good idea, but the question is when?
The Government supports the creation of a Supermarket Ombudsman, to regulate the grocery giants which take the majority of the £100bn a year that Britons spend on food. Labour was committed to this but moved at a snail’s pace. The new Government says: 'We will introduce honesty in food labelling so that consumers can be confident about where their food comes from and its environmental impact.' This sounds good, but rules on country of origin come from Europe and are unlikely to be changed. Presumably, 'honesty in food labelling' will involve a voluntary agreement with the supermarkets. Showing 'environmental impact' will be hard. It is impractical to work out the climate change emissions for every product. Still, seven out of 10 so far: not bad at all.
HEROES AND VILLAINS
Electronics store sounds good for customer care
Hero: Richer Sounds
The no-frills retailer came equal first with John Lewis in a Which? survey of electronics stores. Members of the consumer group rated Richer Sounds highly for price, quality, service and customer score. The last time I bought something from them (a cheap DVD player), it didn’t work very well. I must have been unlucky.
It’s the best-known brand in the business, but Mothercare is not good value for money, say Which? members, who gave it two stars out of five for price in a national survey. Mothercare came bottom of the 11 shops in the baby and toddler section. John Lewis and Early Learning Centre (now owned by Mothercare) were top.