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A prominent figure in one of the 12 regional electricity companies privatised in 1990 recalled in a recent interview the omnipotence ascribed to “the market”, back in the day. “When you look back to the world of the 80s and the early 90s, there was this naïve belief that was then economic orthodoxy, and if you thought otherwise you were an idiot or a caveman from the hills. The market has always got the answer.”
What would market purists make of this week’s announcement that the government is running a nationwide advertising campaign encouraging consumers to do what they should do naturally – find the best deal? While stopping short of naming names, the campaign tacitly encourages consumers to switch to smaller suppliers. Meanwhile, Ofgem is merrily granting (mostly) small suppliers a clutch of exemptions from another extremely anti-competitive measure, the four-tariff limit of the Retail Market Review.
The government may well have it right: customers on standard tariffs with the big six suppliers are spending significantly more than they need to. They would be sensible to switch. But since when is it the government’s job to spend taxpayers’ money telling them so? In what other independent, competitive market does the government feel the need to intervene by telling customers to be sure they pay less for a given product?
Certainly, in financial services, it insists on customers being properly informed of their options, and treated fairly, to borrow the regulatory jargon. In the same vein, it has laid the framework for faster, fairer switching of energy suppliers. But are consumers actively encouraged by government to switch bank account, insurer or mortgage provider? They are not.
So why is energy singled out for special treatment? The coalition government is still smarting from Ed Miliband’s politically inspired, if logically challenged, notion of a prize freeze (ahem, price cap). No doubt it wants to highlight the action it has taken to make switching easier, and show itself a champion of affordability.
Sooner or later – and no doubt, later than 7 May – we’re going to have to face facts. The current market structure and regulatory regime were designed for an independent, competitive market governed by economic forces rather than policy objectives. That, in today’s political climate, is no longer acceptable. Something is going to have to give
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