The deck is stacked against consumers — but it can be fixed

I was sitting alone in a very nice reception area a few days ago waiting for a meeting with one of the big economic regulators. While thinking through some of the points I was going to make, I spotted a big group of smartly dressed men a few sofas over, talking through a presentation they were clearly about to make to the same regulator. They were from one of the big corporates. Feeling slightly lonely and inadequate, I thought back to something one of the directors of a similar regulator said to me about a big consultation they were running on a hugely significant issue for millions of people. Paraphrasing only slightly — ‘please can you weigh in on this from the consumer perspective. We’re going to get 1,000 pages from industry and we need to hear both sides’.

Why does this matter?

Some people get wound up by excessive use of corporate power on an almost philosophical level. I get this, but my interest is more prosaically about outcomes — does it lead to consumers getting a raw deal.

In every area of policy making you have a similar-ish basic set up. Someone sets policy and direction, and then you have different sides or perspectives throwing in views and evidence. The hope is that this loosely balances and results in good and fair policy making. It arguably shouldn’t matter if there’s an imbalance of views, so long as both sides put their views across and if the policy maker is able to base decisions purely on objectively sourced evidence and fact. But often this isn’t the case, and they rely on those inputs from others. And we also know the chilling effect of only hearing one perspective again and again.

The problem in consumer policy is worse

This imbalance of power and perspective is exacerbated by the fact that consumers do not speak with one voice. Of course they don’t — we’re all consumers and we don’t meet up somewhere every week to plan our riposte to the latest failing markets and scams. Whereas businesses are by definition much more organised, with trade bodies representing sectors too. That is a very rational and logical thing for businesses to do and I have no problem with it. The problem is the imbalance. Take a few live examples. It’s easy to imagine just how much behind the scenes pressure is bearing down on the Treasury as they weigh up the future of Buy Now Pay Later regulation or DCMS and BEIS as they consider how to get future regulation of big tech right. So many big company mergers will be considered by competition authorities every year without any real consumer voice. Of course, on these topics and others, there are good examples of that consumer voice getting an airing — whether it’s organisations like Citizens Advice and Which? or individuals like Martin Lewis. But to say they’re hopelessly outgunned is an understatement.

This matters more because of the cost of living crisis

But how much does this really matter, when it comes to the impact on people’s lives? A lot actually. It will not be news to anyone that we’re in the midst of a cost of living crisis. As inflation erodes incomes, the challenge gets bigger. But with Government debt levels soaring, there are many who will argue that the Government is all out of fiscal levers to pull to put money in people’s pockets. If you follow this logic, then the levers which make things cheaper or help us to spend less are more important than ever.

We can look at this in two ways. First up, here is the number of people in what we call a negative budget (where their income does not meet their essential outgoings — not what they’d like to spend in an ideal world). The number has soared. And if we can’t do much to improve their incomes, then we have to help reduce expenditure.

A second way is to take a more individualised example. Here is the breakdown of the income and outgoings for one of our clients, Sharmin. Every line of expenditure represents, at best an opportunity to improve someone like Sharmin’s situation, at worst, a failure of policy making.

So what is the answer?

Well, largely that comes in the way we set policy and regulate to best balance the interests of business and consumers. But there is a lot we can do to shape the playing field to make this a reality.

Citizens Advice have a statutory role in certain sectors to channel that consumer perspective and give advice to individuals who most need it. A levy is raised from firms in the sector and that is used to fund research, advocacy and advice to ensure that the interests of consumers is taken into account by decision makers. And the advice and advocacy roles support and enhance each other — the insights gleaned from giving 1–1 advice to 1000s of people help us to spot where the system is broken and there’s a need for policy change. There are so many examples of where this has led to better balanced policy for consumers. Better protections for prepay energy customers, protection of the universal service obligation in Post and billions saved by tackling the Loyalty Penalty.

Billions saved when consumers have someone in their corner

But the best real value comes in those under the radar issues that often lead to consumers paying more than they need to, but go unscrutinised because no-one really understands them. This report tells the story of how we found consumers overpaying by billions for the pipes and wires which provide our energy, and subsequently put billions back in the pockets of consumers. The regulator was being relentlessly lobbied by one side — the energy network companies — who put huge resources into supporting the case for excessive returns, which went straight onto our bills. These are monopolies so there was nothing consumers could do — even if they understood how badly they were being exploited. It was only through our funded role as a statutory advocate that we were able to lift up the stone, really understand it and put the consumer case across. Had we not done this, we’d still be paying billions more than was right. There is no better example of power imbalance, but also of what can be achieved when we get this right.

Change on the horizon?

The Government is increasingly recognising the benefits of rebalancing power in this way. Citizens Advice will shortly be taking on new responsibilities in the heat sector as the advocate, and where it is accepted that the lack of regulation hasn’t always led to the best outcomes for people. DCMS have consulted in 2019 on a new advocate in the telecoms sector to provide this challenge. While the concept of a telecoms advocate has been discussed for a long time with no real action, any change in these sectors would be a really positive step for millions of people.

But this will still leave huge gaps. In many sectors we have no dedicated advocate. In financial services, ex-FCA chair Charles Randall wrote last year about the disparity in access and power. The opening paragraph is damning:

Now, more than ever, financial regulation needs to work for the whole country. Financial businesses or their lobbyists met Treasury minister nearly 200 times last year. In the same period Treasury minister met consumer organisations fewer than a dozen times. UK Finance and the Association of British Insurers (banking and insurance lobby groups) were granted ten times more meetings by ministers than Citizens Advice.

And more broadly, there are whole aspects of consumer policy which have little or no input from consumers. Take mergers as an example. Judging the likely impact of mergers on consumer outcomes is very tricky and clearly when it goes wrong, it will usually be consumers who pay the price — literally. Firms in favour will flood the CMA with evidence demonstrating the positive case. The voice of consumers? To say it’s a trickle would be an overstatement. We at Citizens Advice get asked repeatedly to chime in, but we just don’t have the capacity to do so. This could be fixed with enough imagination from Government.

And on that big consultation I mentioned at the beginning. We had to say no as we didn’t have the capacity to feed in on behalf of consumers and our clients. The hope is that the referee was able to see through and come to the best balanced decision for everyone. Here’s hoping.