16 February 2021

Power to the People: a recipe for pro-consumer tech reform

By John Penrose MP

Whether you think digitisation is a blessing, a curse, or an opportunity to make your fortune, everyone knows that it’s changing everything. It is transforming almost every part of our lives by making things cheaper, faster and more convenient. It puts amazing cultural experiences within everyone’s grasp, and brings information from every library on the planet to the palms of our hands with just a few clicks. 

But there are downsides too. All these new industries have created digital versions of some highly familiar, old economy problems. The biggest are huge new monopolies that dwarf anything the original ‘robber barons’ could have dreamt of a century ago, with enormous commercial power and heft. Like any monopoly, if all that power is used to rip off the man or woman in the street then we are all poorer, and Britain’s post-Brexit, post-pandemic economy won’t be able to rebound as strongly, export as widely or create as many new jobs as it should once things get back to normal. 

These aren’t theoretical, abstract problems; they affect us all today because those monopolies mean innovative new companies can’t get a look in. The early years of the internet were fast-moving, with new and better products and services launching all the time. But now things are much slower; the major players have remained largely the same for the last decade, and potentially-exciting new challenger products and services are being blocked or throttled. The result is that every household in the UK is paying £500 more each year than if we had better choice and stronger competition in digital markets.

It isn’t a new problem, of course. Monopolies have been around for ages, and we’ve got specialised competition watchdogs like the Competition and Markets Authority, OfCom, OfGem or OfWat to keep them in check. But they’re using old-economy rules that haven’t been updated since 1998, when the world didn’t have Facebook, Twitter or Uber, and Google was in its infancy. Their weapons are analogue and out of date in a digital world, and they won’t do.

Today sees the launch of a Review which offers some of the answers of how to let the digital economy grow and deliver amazing, brilliant things for us all, without letting those monopolies get out of hand. It’s called ‘Power To The People’ because putting consumers in charge, so the customer is king or queen again, is the best way to make sure that you and I can’t be ripped off by all that new-economy monopoly power and muscle. It’s a recipe book of changes to make post-Brexit, post-pandemic Britain into a free-trading global powerhouse so our businesses, exporters and investors can become more competitive, creative, successful, digital and agile too.

What are the recipes?

Some cover the entire economy, like stronger powers for consumer watchdogs such as your local Trading Standards teams or the Competition and Markets Authority to crack down on rip-offs, so you and I know the system will be on our side if something goes wrong. Plus there are new ‘Country Competition Courts’, so entrepreneurial startups can fight back if bigger and longer-established local rivals gang up on them unfairly. And a stronger anti-red-tape regime, with much sharper claws to make sure we don’t cut or dilute the quality of everything from food standards to workers’ rights or animal welfare, but that we deliver them much more cheaply, digitally and less bureaucratically than before. And there are updated rules to make each digital online shopping trip just as safe and fair as walking down your local high street or shopping mall.

Then there are some areas where digital industries can teach the rest of the economy a thing or two. The most important is that no monopoly lasts forever, and today’s unassailable market lead can vanish as quickly as the time it takes to launch a disruptive new app. But when a monopoly is destroyed by new technology, two things usually happen; the first is that consumers get better deals, and the second is that the monopolist goes crying to politicians and regulators to stop it. So our competition watchdogs need a legal duty to encourage new firms, and to turn monopolies back into normally competitive, pro-customer markets by demanding changes like making rival systems interoperable so customers can use both seamlessly, or by changing default settings to give competitors an equal chance, or by making sure customers can move their data safely and easily from one firm to another, like the Current Account Switching Service and Open Banking. 

Some of the lessons are less good. For example, notionally ‘free’ products always come with a price of some form. We usually pay for them by signing away our data, which digital firms use to target advertising. But if we don’t know the value of the data we’re handing over, how can we know the price we’re paying? And if we don’t know that, how can we tell if we’re being ripped off or getting a great bargain, or if a rival firm’s offer would be better or worse? 

With any luck, ministers will think these recipes are tasty. They asked for them, after all: ‘Power To The People’ isn’t government policy, but it was commissioned by the Chancellor and the Business Secretary. It proves they’re on the lookout for fresh new ideas and, at a time when ministers are besieged with multi-billion-pound pleas for help from struggling industries everywhere, the proposals in this Review will be some of the cheapest, best value for money and strongest economic medicine they can buy.  

And it’s got a sprinkling of political mojo on it too. Because sticking up for consumers by injecting choice and competition is a strand of Conservative Party thinking that leads straight back to Margaret Thatcher’s reforms in the 1980s, and which underpinned a lot of her electoral appeal to Council House Conservatives at the time. She cured Britain of being ‘the sick man of Europe’ and, at a time when the pressures on government borrowing have never been higher and we need to heal the scars of a pandemic, it’s time for the Conservative Party to renew its supply-side reforming vows. I hope ministers will welcome the ideas in this Review with open arms.

The full report can be found at www.johnpenrose.org 

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John Penrose is the Conservative MP for Weston-super-Mare.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.