Budget 1999: Competition - Crackdown on airports and utilities
Wednesday 10 March 1999
The policy will have measures to encourage competition in airports and the water companies whilst requiring the Financial Services Authority to produce league tables on the cost and charges of savings, insurance and pension products. The Chancellor said the tables will give consumers a better deal and avoid the mis-selling problems of the past.
In a speech that devoted a substantial section to competition policy, Gordon Brown said competition was the sharpest spur to enterprise and was: "too often missing in our country".
He said: "It is time for more competition and lower prices in basic essentials like the utilities, financial services, indeed the whole range of consumer goods, where too often British people are paying far more than they should for what they need to buy. It is wholly unacceptable that consumer goods can still cost up to twice as much in Britain as in America."
There have been complaints from consumer groups about consumer goods such as cars, compact discs and groceries which are more expensive in the UK than in other major Western nations.
The Office of Fair Trading will be granted 20 per cent extra resources and be charged with a pro-active remit to "root out cartels and restrictive behaviour". Obstructing investigations will be a criminal offence, the Chancellor said.
John Prescott, the deputy prime minister, will review competition in airports and in the water industry.
BAA, the company which controls seven airports including Gatwick, Heathrow and Stanstead, welcomed the move saying it had nothing to hide.
Des Wilson, BAA spokes-man, said: "The government's actions are perfectly reasonable. The regional airports could probably do with more help as the main London airports reach capacity. Our landing charges are amongst the lowest in Europe and we have provided top class services." He pointed to the pounds 450m investment in the Heathrow Express rail link which opened last year.
The investigation into water competition was welcomed by the major companies. Thames Water said: "This is the sort of thing we have been pushing for. Greater competition at home can only help us compete on the international stage."
The Chancellor's announ-cement came after Ofwat, the water industry regulator, said in October that companies may have to cut customers' bills by as much as 20 percent from April 2000. Some water companies have argued that a cut will undermine their efforts to improve customer services and water quality. Last month the UK water industry wrote to Mr Prescott complaining that it will not be able to meet the government's demand to cut costs and increase environmental spending.
Nigel Hawkins, analyst at Williams de Broe, a City stockbroker, said reforming the water industry would be very difficult as there is no central system. Shares in BAA and the water companies fell in late trading.
Commenting on the new requirement for the Financial Services Authority to publish league tables on savings, insurance and pension products, Scottish Equitable said that costs should not be the only consideration when investing in a savings or pension vehicle: "It is dangerous to say: `Cheapest is best.'"
Stewart Ritchie, director of the group's pensions development, said the government should not: "gloss over what has already been readily accessible to the investor from many customer-oriented providers".
The Building Societies Association praised the requirement for banks and building societies to publish reliable information on mortgage and savings prices. "In the competitive mortgage market such information will act as a valuable aid for consumers trying to weigh up the competing offers," said Adrian Coles, director-general of the BSA. Infor- mation should be consistent so that consumers can compare like with like, he added.
The Halifax said: "We will have to see the full proposals but there have already been some moves to ensure accurate comparisons can be made."
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