Julian Knight is the MP for Solihull and Chairman of the All-Party Parliamentary Groups for Fairer Fuel and Financial Education.
In the wake of Jeremy Corbyn’s unexpectedly strong performance at the general election, those of us who believe in capitalism must confront an urgent question. With Labour willing to promise all things to all people, and simply shout about ‘ending austerity’ when pressed on how they would pay for any of it, we must work out how to persuade the public that a free economy remains the best solution.
Our party believes, as Theresa May has said, in “the good that government can do”. If you doubt it, just read Ruth Davidson’s recent essay for UnHerd, in which she sets out how strategic investment in programmes like technical education can help those left behind by a rapidly-evolving economy.
But, as she argues, this must never become code for conceding to the Opposition’s big-state, high-spending agenda. I believe that there is an important way in which the Government can intervene in markets to make them work for ordinary citizens: by becoming a champion for consumers.
Before I was elected to Parliament, I built my career as a personal finance and consumer rights journalist at the Independent and the BBC. I’ve seen first-hand how scams and sharp practice can spread poverty and misery. Since taking my seat in 2015, I’ve tried to put my expertise to use: as chair and founder of the APPG on Alternative Lending, I led our investigation into high-cost credit and, last year, I opened a Commons debate on scams and their impact on the vulnerable. In this new Parliament, I am honoured to have been elected as chairman of the APPGs for Fairer Fuel and Financial Education.
We have already seen progress: for example, my colleagues and I are very pleased to see that overdraft charges by banks, which our investigation found are one of the single biggest causes of problem debt, are already being phased out by banks such as Lloyds.
The Government has already announced that, from January, it will be banning unfair fees for using credit and debit cards, protecting families who may be unaware that they’re racking up needless costs on their weekly shop, and Ofgem is extending tariff protections to people on pre-payment meters who until now were often ripped off by energy providers.
But there is much more that ministers could do to empower and protect ordinary consumers – and win once again the case for market solutions and popular capitalism.
Some of these fixes are very simple: for example, we could ban broadband providers from forcing people to sign a new contract when they move house. We don’t expect this for our water or electricity rates: why should the internet be any different? Likewise, let’s drop talk of a ‘toxin tax’ on diesel cars. Solihull is a car-making town, and I’m shocked that a few unscrupulous manufacturers misled buyers and regulators for so long. But it’s self-evidently unfair to punish ordinary motorists, who acted in good faith on the advice of Tony Blair’s ministers, for Volkswagen’s lies. We can go further on banking, too: the crackdown on punitive overdraft fees is a good start, but let’s make sure every citizen who needs has help to set up a basic bank account, and push to make fees and options more transparent (and more reflective of the cost to the bank, too).
Indeed, one of the single most important ways the Government can work to improve markets, and empower consumers, is to drive towards clear choices and easy-to-understand options. If a market is too complex to be understood by those using it, it can too easily be turned against them by unscrupulous individuals and business. Let’s start by cutting back the impenetrable thicket of different rail ticket types. Corbyn likes to win cheers by calling for a return to the days of British Rail (clearly his young fans don’t remember them!), but the Government has a legitimate role to play ensuring transparent, competitive pricing across the national ticket system.
However, we must not let this consumer drive get lost in small, headline-chasing initiatives: there are some big issues to confront ,too.
For example, I want to see anti-fraud measures built in to the law-making process. Too often, new regulations are introduced (or old ones scrapped) without proper consideration being given to how criminals may exploit the changes, leaving Trading Standards to play catch-up. By stress-testing new regulations whilst they’re still in the planning stages, we can identify problems before consumers are put at risk.
Another of the most pressing is pensions. One of George Osborne’s most significant legacies as Chancellor may well be his introduction of ‘pension freedom’: the ability to take out your contributions as cash instead of being forced to buy an annuity. But nobody has any experience with this new market so, quite understandably, many people are not making the best choices about what to do with their money. Indeed, many are simply sticking with their previous provider, even if they’re offering some of the worst terms available.
Ministers must always remember that you can’t just drop consumers into a brand new market and expect it to thrive: we’re savvy food shoppers because we grew up buying groceries. Smart shopping is something you learn, and wherever we want to try market solutions we must be sure that consumers, as well as producers, receive the training and state support they need.
Of course, these interventions must be carefully judged. Heavy-handed intervention very often has undesirable side-effects, such as stifling growth and innovation or even smothering new industries before they can find their feet. It can also become a means by which old-fashioned businesses and other vested interests can try to shut competitors out, creating stale monopolies which often hurt far more consumers than a few cowboy firms do.
But if we want to win the case for free markets, we have to be able to tell people, and show people, how properly-functioning markets make life better for ordinary families: how they broaden choice, spur innovation, and drive down prices. Informed, empowered consumers are absolutely essential for any market to function properly. Let’s support them.