April 21, 2013 8:05 pm

Tories plan to help utility consumers

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The Conservatives are developing policies which they hope will increase competition among utilities and contain the rise in household bills as party strategists gear up for a “living standards election” in 2015.

Proposals to shake-up the energy, water, banking and broadband markets are among those being worked on with the aim of encouraging more choice and lower prices for consumers.

An ally of David Cameron’s chief policy adviser will this week publish a paper, “We Deserve Better”, recommending ways for consumers to more easily compare prices and switch suppliers in key utility markets.

The proposals by John Penrose, former parliamentary aide to Oliver Letwin, could pave the way for similar measures to be included in the 2015 Tory manifesto, which is being drawn up by Mr Letwin, the cabinet office minister and Downing Street policy chief.

Mr Penrose said high utility bills and lack of competition were acting “as a millstone around Britain’s growth because of rising prices for consumers and input costs for businesses”.

“Some utilities – energy, water, banks and broadband make us feel ripped off,” he said. “It impacts on the less well off because they spend much more of their take home pay on utilities and it also hurts the vulnerable because they are less able to switch.”

All three main parties are looking for policies to ease pressure on squeezed households as wages and economic growth stall while inflation remains stubbornly high.

“The cost of living is, by miles and away, the thing people are thinking about most – the cost of fuel, the cost of train journeys, the supermarket,” said one Number 10 adviser.

“Most people know the actual ability of government to do much here is limited but one of the most popular things we have done . . . was to force [power] companies to offer consumers the lowest tariffs. So this is all a very important message.”

Reforms floated by Mr Penrose include installing a common labelling system for energy and credit card bills to make it easier for consumers to compare tariffs and making it easier for consumers to switch bank accounts.

The water industry could be unbundled so other suppliers could use pipes, as has been done in the Scottish market, the report also said.

Mr Penrose, a former tourism minister, argues that regulators such as Ofwat, Ofcom and Ofgem, are partly to blame for their lack of customer focus. His paper calls for reforms to put “consumers in the driving seat”.

An official survey in December showed widespread consumer dissatisfaction with utilities, which accounted for 11 of the 22 least popular goods and services. Only estate agents and second hand car dealers ranked lower.

More than half did not trust gas or electricity companies to deal with customers fairly while another 50 per cent did not trust banks to sell them mortgages or pensions.

In a sign of Downing Street’s focus on living costs, Mr Cameron last week launched the Tories’ local election campaign by highlighting government efforts to help squeezed households, such as its increase in the income tax threshold.

 

Penrose’s plan

 

Energy

Consumers should be given more power to compare prices and products quickly and transparently. A simpler switching mechanism would allow consumers to change provider more easily. Government could also consider cheaper access for suppliers using the network monopolies in gas and electricity.

Water

The water industry could be unbundled to give consumers a choice of supplier and make it possible for new competitors to enter the market. At the moment people only have one supplier – such as Thames Water – because the old monopolies still own all the pipes.

Telecoms

Already one of the most competitive utility markets but the sector could be shaken up to make it easier for people to switch suppliers – and make sure BT gets no preferential treatment from the former state-owned group’s dominant network infrastructure.

High Street Banks

Bank products should have clearer labelling so consumers can compare quickly and easily. It should be made simpler to switch bank accounts – only 4 per cent of customers bothered to change in 2012. A new code of behaviour for bank staff would rebuild consumer trust.

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