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Rt. Hon. Stephen Byers - Former Secretary of State for Trade and Industry (Dec 1998 - Jun 2001)Consumers and Competitive Markets |
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Tomorrow I shall be setting out the case for an active industrial policy which supports the development of a dynamic knowledge economy. I'll be emphasising that businesses have to innovate and raise productivity in order to compete in the global economy. It is sometimes suggested that my responsibility for industrial policy is at odds with my responsibility for consumers. That there's a contradiction between having demanding consumers and successful businesses. The Government does not subscribe to that view. We believe strong consumers and strong businesses actually go hand in hand. Demanding consumers and competitive markets stimulate innovation and productivity. Any successful business will tell you that the key to their success is meeting customer needs: providing quality, value for money and good service. Knowledgeable and demanding consumers are a positive force for business - they should be seen as a challenge not a threat. They identify weaknesses and signal where improvements are needed. In a competitive, knowledge based economy, continuous improvement is essential in business. Input from customers can make a significant contribution. Businesses need to listen to their customers. Complaints and suggestions from consumers are information which businesses ignore at their peril. Demanding consumers can help us to build a dynamic economy. Of course people are also consumers of services which are funded by the government. They demand more money for schools and hospitals - understandably so.
In government we have to recognise that many people feel a real sense of grievance about this issue. We must listen to their concerns and as the Chancellor said in his "Times" interview we are happy to enter into a debate about spending and taxation and that should feed into the Pre-Budget report this autumn and the Budget itself next spring. The United States has for many years had a strong consumer culture. It is perhaps no coincidence that the US economy also has high productivity and economic growth. In the UK we can not afford badly informed, undemanding consumers. If we do, families and individuals lose out, but so does the economy. That is why the DTI has put such an emphasis on consumers. Rejecting the idea that the department that is interested in the competitive position of Britain should have nothing to do with consumers, as though they are against business. But understanding that particularly in the new economy we need these elements to come together. Today I want to set out what we have done so far in this area and what we intend to do to carry this forward over the next year - to identify the part consumers can play in building competitive business. It's easy to forget how much things have changed in the last 30 years. The consumer movement was born out of a rigid, uncompetitive economy in the 1960s and 1970s. It was a reaction to the producer-first, consumer-last culture in management and the workforce. A reaction to an old boys club economy protected by trade barriers. An economy in which consumers had lost their voice, conditioned to accepting second best by war-time and post-war constraints. The costs can be seen in the slump in our competitive position as well as in the poor deal consumers received. Governments stepped in to address this situation. Opening markets to European and international competition. Introducing legislation for consumer protection. Introducing new bodies such as the Office of Fair Trading. This was a painful period as it exposed the uncompetitive nature of many of our businesses - but it was an essential precursor of change. And markets have changed out of all recognition since then. They are more diverse than ever before. People buy things now - like pensions and health care - for use in future decades. We've seen the development of home shopping - first TV shopping; now internet shopping. We buy essential services from competitive markets not from the State. Changes in the market offer more choice and better value for consumers. But they can also offer new opportunities for rogue traders to cheat consumers. In response, we need to modernise and reform the framework for consumer protection to keep pace with such change. To provide a framework which supports rather than blocks innovation and ensures that everyone, including disadvantaged consumers, benefits from these opportunities. That's the approach we set out in the Consumer White Paper last year - a White Paper drawn up in partnership, with Government, business and consumer organisations working together. This set out a new approach. First and foremost I believe that open and competitive markets are the best way of securing the best deal for consumers. In the last year we have brought in new pricing rules, improving the visibility of prices and making it easier for people to compare them for different goods. We have changed the rules on how the advertised annual percentage rates for mortgages are calculated, to make clearer the true costs of low-start mortgages. We gave the Consumer Association powers to take injunctions under the Unfair Terms in Consumer Contract Regulations which has strengthened their position in discussions with individual lenders about mortgage terms. Banks have stopped their proposals for double charging for using their cash machines. And I have introduced measures, which took effect at the beginning of this month, to increase competition in the supply and sale of new cars and help reduce prices. Over the last year the pressure we have brought to bear to get a better deal for consumers has been positive and successful. Part of that success is down to the role played by consumers themselves. I also want here to give credit to the very many manufacturers and retailers that have responded to the new mood in extremely positive ways. As I meet business people I find increasingly that they want to make responding to consumers' desires their number one priority, to get this culture running through their company. I welcome this. But there is more we can do, in business and in government. Opening up markets has to be a key priority. Strong competition is the best way of ensuring consumers get a good deal. And the best way of promoting the business innovation and productivity we need in the modern economy. To secure these benefits we need strong competition law, vigorously applied. Take new cars for example. The Director General of Fair Trading, John Bridgeman, was not satisfied the market was working properly and referred it to the Competition Commission for a detailed investigation. They found that private buyers in this country were paying on average about 10% too much for their new cars and that there were a number of restrictions on competition to supply private buyers. They recommended major changes to the way the market works. The Order I made last month under the Fair Trading Act will require a new approach in the industry and will deliver a better deal for consumers. I am pleased to say there are already signs that competition has been sharpened, reflected in keener prices for buyers. There are lessons to be learnt from this process. It shows how a combination of strong competition law and well-informed, demanding consumers can deliver real results. It is right that consumers should demand better value for money, and that the authorities should ensure that it is delivered through effective competition. The Government's aim has to be to ensure this happens. We are determined to make sure that the legislation and institutions which safeguard competition are fully equipped for the new demands of the 21st century. That's why the Government introduced the new Competition Act which came into force on 1 March this year. It creates the strongest competition regime ever seen in this country. Introducing outright bans on anti-competitive behaviour, backed by powers to impose heavy penalties. I am determined to open up more activities to scrutiny by the competition authorities. For example, we have asked the Director General of Fair Trading to undertake a review of restrictions on competition in the professions, including restrictions on entry to a profession, reserving categories of work to certain professions, and advertising. The Government will consider the appropriate action in the light of the Director General's advice. We need to consider whether these restrictions are justified in the consumer interest, or whether consumers would benefit from a relaxation of them. John Bridgeman has steered the OFT through a period of major change. He has started modernising the OFT to raise its profile and make the most of its powers, and to increase its accountability and transparency. His successor, John Vickers, who starts next month, has a strong base from which to work. But I believe that there is more we can do to help him tackle the wide range of problems he will face. His remit is large and he should be able to call on high-level, independent support. We need a modern OFT to reflect a modern economy; an OFT capable of responding quickly to new developments. And so today I am publishing proposals for a radical restructuring of the OFT to meet these new challenges. Central to these plans for reform, on which we will be consulting widely, is the proposal for a Board to support the Director General. The Competition Act gives the Director General wide ranging powers. We are also proposing a new role for the OFT in setting national standards for local trading standards services. I want to bring in outside expertise to provide a broader decision-making base which will help John Vickers and the OFT to discharge its new duties effectively. We don't want to slow decision-making down, or to complicate it. But I do believe that having a board with outside expertise will help guide the OFT's strategy, while retaining the flexibility and pragmatism for which the OFT is rightly renowned. We are setting a framework for competition to prosper. But competition only works if we have consumers who are prepared to challenge their supplier, who will check that they are getting a good deal, and who are able to switch if they are not. Earlier this year my Department commissioned independent research to evaluate whether consumers are able to switch suppliers with ease. We will be publishing that research within the next few weeks. The Internet is one tool which can help provide consumers with the information they need to make decisions on switching. E-commerce offers new opportunities for consumers. With the expansion of internet shopping, consumers have more choice than ever before. And they are easily able to compare prices and find real price savings. But there are concerns. Consumers must be confident that confidential information will be protected; payments are secure; and any complaints will be sorted out easily. Our approach has been to establish a regulatory framework that is flexible and can keep up with the speed of developments in this fast moving market. A framework based on co-regulation wherever possible, where Government sets public policy objectives, but then tasks industry with actually achieving them, and where statutory regulation, which inevitably is a bit slower, is reserved only for those situations where self-regulation has been shown not to work. Some people wanted us to legislate to protect consumers from every possible risk. But such an approach would have made it virtually impossible to trade over the internet. That would not only be bad for business, it would be bad for consumers. Instead, we are taking forward a strategy which gives both consumers and businesses the confidence they need to enter this new market. Important parts of the strategy are already being put in place. In July, my Ministerial colleague Patricia Hewitt launched Trust UK to approve business codes of conduct. When you visit a website bearing the Trust UK hallmark you can be confident of a high level of commercial standards which offer good consumer protection. The Distance Selling Regulations, which come into force next month, will also boost consumer confidence by creating a legal requirement for clear information before a consumer decides to buy and a cooling-off period. The Regulations create a level playing field for business across Europe by ensuring that all internet retailers must live up to the good practice already followed by many of the market leaders. As more consumers make purchases direct from other European countries, we also need cheap, quick ways for consumers to get redress across borders when something goes wrong. Working together with our partners in Europe we have taken an important first step. Earlier this year governments across the European Union launched a new scheme which links alternative dispute resolutions schemes in each country and gives consumers access to them through national clearing houses. We aim to establish the UK 'clearing house' next year. We will also be encouraging business to establish more good quality schemes, particularly online, to provide user friendly, low cost alternatives to the courts. E-commerce and the rapid growth of cross border shopping also pose new challenges to public authorities. We need to take steps to ensure that new ways of working don't provide new opportunities to deceive and con consumers. The Internet knows no boundaries. We are making progress in Europe, but what about the rest of the world? We need a global approach to tackling consumer problems. We need better collaboration between agencies in different countries especially in those countries where UK consumers are most likely to shop. As a first, important step, my Department has been talking to the US Federal Trade Commission about a UK-US agreement on enforcement co-operation. We are close to concluding our discussions and I hope to have this agreement in place shortly. It will give consumers here better protection when buying from American websites. New markets offer new opportunities. We must make sure these are available to all our people - not just the well educated and the wealthy. We must make sure change doesn't leave some behind: the poorly educated, those who don't have access to the internet. And to protect the vulnerable. Old scams come in new forms. The Government has a duty to protect all our people. Not just economic protection. Also safety. Very often it is the poorest or oldest consumers who are most at risk. That's why we are determined to tackle unsafe products. Working with business to develop good practice on product recalls. Highlighting child safety and campaigning to reduce accidents in the home. Effective competition requires that consumers have the information they need to make the best choices, to be knowledgeable and demanding. Consumers need to know which are the companies they can trust. Brands, past experience and recommendations from friends and families all play a role. So too can good codes of practice, with quick and simple ways of helping people get problems sorted. We are continuing our work with OFT on a new approval scheme for such codes of practice. We aim to give a progress report on our work in the Autumn, with two or three codes being given early approval in the Spring. In most cases, going back to complain will get problems sorted. In some cases, it won't. Consumers need accessible, straightforward sources of advice and information about their rights. Our award-winning Consumer Gateway launched last year was a start. But more is necessary. I want to see a new consumer support network where people can go for quality help. I want to see better use of new technologies to give consumers advice, whether through call centres, email or the Web. The Minister for Consumer Affairs, Kim Howells will set out our plans next month - ambitious plans that will ensure people can get speedy answers to their consumer problems. We also need to modernise our approach to enforcement. To strengthen consumer rights on the ground. To provide better consistency for business. Tough action against the rogues; better support for the honest. Consumer problems are in the main local ones. Local government therefore has an important role in this but it needs to raise its game. The Audit Commission found last year that the services provided by Trading Standards Departments up and down the country varied enormously. Some councils provided excellent services. Others hardly provided a service at all. This means that consumers' ability to secure their rights depends on where they live, while business is faced with inconsistency and confusion in understanding what is required of it. The Audit Commission suggested that the Government should look at ways of improving the consistency of services. We're looking at ways of doing this. We proposed in July that the Office of Fair Trading should take on this vital co-ordinating role, setting national standards and reporting on how far authorities have met them. We're discussing with local authority bodies and the OFT how to take this forward. Our aim is to provide a clear lead from the centre, but giving councils the opportunity to meet local needs. Strong consumers and successful business are not opposing forces. They are two sides of the same coin - two sides of a prosperous and fair economy. In the knowledge economy the consumer voice has to be strong. Strong because technology is breaking barriers, strengthening competition. Strong because information flows to consumers more rapidly. Strong because although brands carry more value than ever before brand loyalty is weaker. To my mind this is excellent news. The knowledge economy embodies powerful new forces for improving the competitive position of businesses. And powerful new forces for a fair deal. And it enables me, in pursuing my objectives of a more prosperous but also fairer Britain, to work through the market and less through legislation. Helping people to get a fair deal in a competitive market has to be our aim and objective. Giving them the chance to back the best in British business. And to ensure that British business will be able to improve, to innovate, to raise its game and be in a strong position to meet the challenges of the 21st century. |
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Other speeches by Rt. Hon. Stephen Byers - Former Secretary of State for Trade and Industry (Dec 1998 - Jun 2001)
(the following are available from the archive) |
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