Where's the beef, Mr Brown?

The more specific the evils, the easier it is for company lawyers to wriggle out If he is serious, he should have something to say about health care and the law
Click to follow
The Independent Online
Labour's leaders speak the language of competition, but Perri 6 is not convinced

You go to your local car showroom. The dealer only stocks one brand, and her agreement with the manufacturer means that you would have to travel out of the area to find a competitor selling the same make. You want to set up a franchise for the same brand a few streets away and you can't. What do you do?

If you were in the United States, you could bring a case through the courts. If your complaint was about big companies carving up the European market, and you couldn't get the European Commission to act, you could bring an action yourself in the European Court.

In Britain, if you can't persuade the Office of Fair Trading and the Monopolies and Mergers Commission to do anything, you're stuck. Would it be any different under a Labour government?

Yesterday Gordon Brown, the Shadow Chancellor, set out his ideas on restrictive practices. Like the proverbial preacher on the subject of sin, he was against them. Like most Labour politicians nowadays, he told us once again about the party's Road to Damascus conversion to "the rigours of competition". The speech went further than Labour's leadership has previously gone in acknowledging the importance of a strong competition policy. He recognised, sensibly, that Britain is an open economy, enmeshed in global economic networks, and acknowledged that lack of competition at home makes for poor competitiveness abroad. Yet still too many of the rigours Mr Brown wants are those of regulation.

He proposes to create a single competition authority, called the Competition and Consumer Standards Office. So far, so long overdue. He says it will tackle restrictive practices, price-fixing, rigged tenders and abuse of monopoly power. So far, so good - although many of the powers exist already but remain unused by our timid authorities.

In addition, Labour will legislate to prohibit specific practices - we are not told exactly what. This may be self-defeating. The more specific the evils, the easier it is for companies to hire cunning lawyers and wriggle out from underneath the definitions. There is a lot to be said for generally framed offences, leaving enforcers to concentrate on the spirit, not the letter. Finally, there will be bigger financial penalties: in principle this is sensible.

Mr Brown is worryingly silent about the independence of his unitary competition authority. In general, Labour tends to demand "accountability" from bodies such as the central bank, quangos and the competition enforcers. Accountability too often means the right of politicians to push such agencies around at the behest of vested interests. Unless Mr Brown can explicitly and credibly promise independence for his unitary authority, his policy won't carry conviction.

There are various ways to ensure independence for public agencies. The German central bank offers one model, but not the only one. A bigger role for the courts in overseeing decisions is another. Giving consumers and firms the right to start enforcement action themselves reinforces the independence of competition regulation. Just as in the US and the EU, this would give a role to the judiciary, which has rather greater independence from politicians than most quangos. Critics may point out that this route would make British competition policy more like that of the litigious US. This is not necessarily a bad thing because consumers need more power and it provides outside pressure on the competition authorities.

Sources close to Mr Brown suggest that Labour might well support yesterday's National Consumer Council report's recommendation that consumers should be able to challenge restrictive practices. This more than anything else would transform British competition policy.

Despite his evidently sound intentions, some of Mr Brown's proposals would do as much to undermine competition as they would to promote it.

Mr Brown would vastly increase the scope of utility regulation, which would also reduce competition. Prices for fuel, water and telephone services are currently controlled. He doesn't tell us what extra price-setting powers he will give the regulators (shades of Labour's 1970s Prices and Incomes Commission?) Tony Blair has frequently promised that regulators will control boardroom salaries. Yesterday Mr Brown added "service standards" to the list. Now he wants regulators of the utility companies to have the right to control profits directly. Businesses considering entering those markets will hardly find this battery of controls an enticing prospect.

On top of all that, Mr Brown threatens public "hearings" when firms propose price rises. There is certainly a role for more transparency in the regulation process, but such rituals could be cumbersome. It is also unclear just what purpose Mr Brown thinks they would serve. It's hard to strike a sensible balance in regulation between openness and effectiveness. Perhaps he expects to use these inquisitions to get information out of firms about their costs, which risks turning competition in these industries into a legalistic farce and enabling firms more easily to form cartels.

Astonishingly for one newly converted to free markets, Mr Brown was talking the language of economic nationalism in an interview in yesterday's Financial Times. He proposed a test for acceptability of takeovers, whereby bidding firms would have to show that their proposals would "benefit the British public interest" and would not "deprive Britain of useful companies and technologies". This smacks of the old desire to pick "national champion" firms. Mr Brown must know that this is incompatible with European single market rules, and he will surely drop the idea. Nevertheless, it is revealing that the "modernising" Shadow Chancellor still has such instincts.

If Mr Brown is serious about competition, then he ought to have something to say about it in health care and in the law. Competition in these areas is an old socialist taboo, and it is far from clear that much has changed in "New Labour". At last Saturday's Clause IV conference, Mr Blair promised to "renationalise" the NHS, whatever that means. Whenever the Tories have tried to get hospitals and their doctors to compete with one another, "wasteful duplication" has been Labour's mildest term of abuse. Despite a low-key consultation paper offering questions but no answers, Labour still has no policies to offer in tackling the legal profession's restrictive practices such as the continuing limitations on solicitors competing with barristers in presenting cases in the higher courts.

The Labour Party traditionally opposes more competition in the labour market. Unfortunately for the coherence of Mr Brown's policies, getting more competitive firms means workers - including doctors and lawyers - being more competitive, too.

Until Mr Brown recognises this, his rhetoric about being the party of the consumer and the dynamic market economy will leave behind only the tell-tale smell of unbuttered parsnips.