How improved consumer protections can boost economic growth: Rocio Concha

For businesses, it’s positive that improved economic growth is a clear priority for Rishi Sunak and Keir Starmer, even if they disagree about how to achieve it.

But having endured a global pandemic which shuttered thousands of shops and changed consumer spending habits, and now a cost of living crisis, firms are crying out not just for stability, but also a plan for how this government, or a government-in-waiting, will galvanise the economy.

Part of the government’s solution to solving the country’s long-term economic problems is a dose of deregulation in the financial services sector. The ability to diverge from our European counterparts in The City has long been a benefit advocated by proponents of Brexit. Meanwhile, Labour’s plan involves handing back control of areas to their local authorities, reducing the amount of overall control is based in Westminster.

Boosting skills, infrastructure and innovation will be key, whoever is in office. However, political parties tend to ignore the importance of the relationship between consumer confidence and economic performance.

The government has taken some steps to deal with issues that rip consumers off, such as fake reviews, announcing that it will be introducing the Digital Markets, Consumer and Competition Bill. That is a step in the right direction. Sustained economic growth will not be achieved without strengthened consumer protections.

Weak consumer rights allow harmful business practices to flourish, meaning customers get ripped off and lack the tools they need to push for improvements from underperforming companies. If, for instance, a company makes it difficult for customers to leave a contract because they can get a better deal elsewhere, that’s bad for the customer and bad for businesses offering a better deal.

The root cause of these issues is that consumer and competition laws have simply not kept pace with how we live our lives, especially online. Getting effective redress when things go wrong with a product or service is too difficult and regulators don’t have the agility and powers they need to clamp down on firms cheating online customers or crushing new and innovative entrants to the marketplace.

Regulators find their attempts to enforce consumer protections - like the CMA’s attempts to tackle secondary ticketing giant Viagogo - tied up in the courts for years, while for individuals, the small claims court is a puny weapon compared to the legal budgets of tech giants and other multinational firms. Other methods, such as Alternative Dispute Resolution, remain ineffective ways of accessing justice.

Strong consumer protections also give shoppers the confidence to try new products and services. This encourages innovation - a vital prerequisite for that Holy Grail of economic growth. Open banking, for example, has the potential to stimulate competition in retail banking and payments, but consumer mistrust over how data will be used, and a lack of consumer protections, makes some uneasy about trying it. Better regulation, which lets consumers know they’ll be properly protected and access to effective redress should things go wrong, can encourage take-up of these new services.

With the nation’s finances stretched, these reforms would not cost vast sums of money. Removing needless bureaucracy and giving regulators sharper teeth are relatively straightforward measures to introduce.

The UK has an opportunity to develop its own world-leading consumer and competition policy, encouraging innovation among businesses and giving customers more choice and lower prices. Whichever party next elected into office should take it.

Rocio Concha is Director of Policy and Advocacy at Which?