Peter Jones: Miliband turns consumer champion

Improving the quality of goods and driving down prices will allow consumers to shop more. Picture: AFP/Getty

Is the consumer, long a bit-player in British politics and barely an unseen extra in Scottish political play, about to be given a starring role? Possibly, if Labour leader Ed Miliband follows through on some recent rhetoric. And if he does, it’s a welcome development in my view – though it might have some unfortunate consequences.

Among all the labels used by politicians to describe who they are trying to win over – ordinary people, working people, hard-working people – the consumer usually never rates a mention. I have always thought that odd.

Whether we are rich or poor, we are all consumers. Every time we buy something, whether it is a tin of beans or a car, whether it is a bus ticket or a flight to the sun, an insurance policy or electricity from the mains, we are consuming something. As Adam Smith pointed out, consumption is the point of work; if we work to produce something and nobody consumes it, then the work is pointless.

So why don’t consumers rate a political mention? Probably because when you add the word “society” to “consumer”, then you are talking about something that carries an implicit tawdry meaning. Churchmen, for example, deplore the consumer society as devoted to selfish materialism, valuing possessions above selfless concern for others and, therefore, a bad thing.

And yet the consumer society implicitly does value others, for if we just concentrated on buying necessities, then all the jobs in shops, factories and transport that are associated with the production and sale of things which are nice to have but not an essential, or indeed a luxury, would disappear and our economy, and our society would be a lot poorer.

We have experienced the effects of that very directly in the recent recession. People, quite naturally very worried about their job and debts, reduced their spending. A sensible thing to do for individuals, but collectively it added up to less consumption, which meant there was less work and less income for those engaged in the production of the things that everybody was consuming less.

This points to a political dilemma. On the one hand, we want people to save more because it makes them more self-reliant when times are hard (and also provides more funds for investment in industry and commerce), but on the other hand we also want people to consume more because that creates more jobs and income.

Is it possible to square this circle? Well, of course, if you create an economy that is growing so fast that people can, collectively at least, both save more and consume more, then that does the trick. That, however, looks to be unachievable in Britain in the short to medium term.

It is possible to do things that may make a marginal difference in the short term and, therefore, accelerate the recovery. In a speech last week, Miliband said he wanted Labour to go into the 2015 general election “as the party of competition, the party of the consumer, the party of hard-pressed families, the party of working families”.

The conjunction of all these words in the same breath is interesting. He is, I think, doing more than trying to give a veneer of respectability to championing consumer interests by associating the “consumer” with apple-pie “hard-pressed families”. The word “competition” is the key, for without competition, the choices consumers make have little value. Competition drives improvement in products and services and drives down prices. Consumers end up spending more than they need to for a poor-quality product.

Therefore, if competition can be increased, prices can be reduced, quality improved and consumers have more money to spend on other things. In two areas that Miliband has targeted – banking and energy – the public strongly suspects that they are either getting poor service or are paying too much, or both.

So he proposes to put consumer interests into regulatory supervision by giving organisations such as Citizens Advice and Which? a place in the new Competition and Markets Authority, which will also carry out an immediate inquiry into banking. Consumers would thus be involved in the annual competition health check he proposes to investigate whether markets are working properly, while he thinks that the big banks, and perhaps also the big energy companies, should be broken up to create more competition.

This, I think, is the most overt appeal to the consumer that a British political leader – certainly a Labour leader – has made in modern times. It is no bad thing, and Scottish consumers, who are generally ignored by politicians and the media in pursuit of producer groups and their vested interests – trade unions, the CBI, teachers, local government workers, etc – could certainly do with somebody championing their cause.

Consumerist politics however, while extremely useful when it comes to winning elections, are an unreliable guide to policy. The idea of a cap on energy prices, for example, which Miliband has canvassed, may be very popular with energy consumers, but it can play havoc with the operation of the energy market.

A classic example is the California energy crisis of 2000-1. A few years prior, in the name of improving competition, three big generating firms were forced to sell some of their power plants to other firms.

Exploiting market peculiarities caused by inadequate regulation, some of these firms (one was Enron) were able to drive up the prices they charged distributors, which, because retail prices were capped, started losing money and, therefore, stopped distributing, causing black-outs.

In Scotland, the party most closely attuned to the possibilities of consumerist politics is the SNP. In the 2007 election, it came up with a policy – cutting class sizes – that was a big hit with one particular consumer group (parents) and a vested interest group (teachers). Parents thought they would get better education for their children and teaching unions thought it meant more teachers and so more members.

Unfortunately, as the evidence said at the time, it has turned out that better teachers, not smaller classes, are the crucial factor in improving the quality of education.

Thus, while we could do with some consumerism in Scottish politics, politicians need to be careful what they do with it. Like all populist ideas, it is a great vote-winner, but it can also produce some strange policy outcomes.