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Monday, 12 April 2010

Labour Party Manifesto, competition law and regulation

The Labour Party has launched its Manifesto today, so I thought I would take a look and see what it has to say about competition law and policy.
The first point is a non-barking dog; namely, that no change is mentioned in relation to the competition authorities or the substantive rules that they operate.

There is, arguably, one exception to this (which will teach me to just do a word search for "competition"), namely the proposal to extend the public interest test to proposed takeovers of infrastructure and utility companies which is hidden away in the section on proposals for renewing the national infrastructure. What this means is anybody's guess. To implement it, certain considerations would have to be specified for the purposes of s. 58 of the Enterprise Act, rather than just listing companies. Presumably, as in communications, you would want the opinion of the regulator as well. You would probably have to be careful to set up arrangements which did not impinge on free movement of capital in the EU. Having done all this, there is the not so minor issue of making the right decisions and the Labour Party does not have a glorious history here - Lloyds/HBOS anyone? So, really, waving the public interest flag just won't do here.

There are, also, proposals for increasing competition in the banking and energy industries.

In the banking sector it is proposed to break up the banks in which the government has a controlling stake (RBS and Lloyds), transform the Post Office into a People's Bank offering a full range of competitive, affordable products and introduce portable bank account and cash ISA numbers. In energy, they want to ensure greater competition in the energy supply market while at the same time ending fuel poverty and creating a fair energy system.

Although in principle greater competition in the UK banking system looks desirable, there are a lot of unanswered questions here. For example, how do you juggle breaking up banks with ensuring a return to the state for its investments? Do you really want the Post Office to enter, for example, the financing of small businesses? Both of these developments could also raise state aid questions and require approval from the European Commission. Similar points can be made in relation to energy. As Catherine Waddams has pointed out (in relation to the Conservative's document on energy policy on April 6th at trade-offs will need to be made between the different objectives of energy policy, something notably absent from a Manifesto which talks about "revolutionising Britain's energy system." For a non-party political take on problems in energy regulation see:

Finally, there are apparently good and not so good regulators. Ofcom's independence is to be safeguarded, while the role of Ofwat is to be reviewed to ensure customers get the best deal and that their voice is heard in the process of price-setting. Ofwat presumably being surprised to hear that it did not listen to customers and hasn't got the best deal for consumers.

One should not expect too much from party manifestos, although given that such commitments may drive future policy decisions, they need to be subject to more critical scrutiny. I'll have a look at the other parties in these areas as the manifestos are published.

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