(by Andreas Stephan) The UK’s Labour party is currently in the process of selecting a new leader. The front-runner, Jeremy Corbyn, may become Britain’s first socialist Prime Minister in a generation. This blog post considers what a Corbyn government could mean for competition policy.
Competition policy is viewed by many as a free market oriented neo-liberal tradition. On the face of it, Corbyn has a very different take on how markets should work. He has long opposed privatisation and market liberalisation policies. Based on his past statements and media speculation, a Corbyn government may be likely to:
- Re-nationalise some regulated industries, such as the railways and energy.
- Reverse the reliance of the National Health Service on private providers and competition between NHS trusts.
- Widen the use of ‘Public Interest’ tests in merger control (currently limited to exceptional industries).
The argument for re-nationalisation is not entirely without merit in industries where many feel competition has failed to deliver and where regulators – once thought to be transitionary custodians of markets – have now become a very permanent feature. An attack on competition in the NHS may be harder to justify. The concern here is that there is a slide towards the privatisation of Health, one piece at a time. Yet there is evidence that competition between English hospitals saves patients’ lives and where done properly, procurement can save significant funds by outsourcing services to more efficient private sector providers. Finally, public interest tests are sound in principle, but they create uncertainty and leave competition policy open to manipulation for political gain.
A public survey carried out by Centre for Competition Policy casts some light on how the electorate view issues of competition (Working Paper with full results available here). When asked about government intervention in markets, nearly half of UK respondents (48%) felt that a free market economy, in which government control is kept to a minimum, is the best available economic system for creating wealth and prosperity. Just under a third (31%) believed that wealth and prosperity could be better achieved through greater government intervention in the economy. 21% were unsure. These results show there is still some public support for greater government intervention, albeit not as strong as support for the free market.
However, when asked specifically about pricing, the study showed that a clear majority of Britons (65%) expected businesses to set their prices independently of each other and recognised (79%) that price fixing is a harmful business practice that should be punished. Overall the survey showed a hardening of attitudes towards punishing anti-competitive behaviour since 2007, despite the financial crisis and the various financial scandals that were associated with it.
This may highlight the ‘apolitical’ nature of competition policy. Antitrust rules have been adopted throughout the world, including by number of ostensibly communist countries. The universal acceptance of antitrust rules may only be partially attributable to market liberalisation and neo-liberal values. Tackling anticompetitive behaviour is equally about preventing concentrations of economic power from being artificially created and abused. Competition policy prevents wealth transfers from consumers to wealthy businesses, promotes and protects individual choice and brings a host of other benefits too.
So while a Corbyn government might take issue with the level of market liberalisation in key industries and the lack of public interest consideration in mergers, it would be wrong to assume that this would be accompanied by a broader attack on competition policy. Indeed, embracing the fundamental principles of competition and consumer protection may be essential to creating a package of economic policies that are coherent enough to win over aspirational centre-left voters.
 To my knowledge, Corbyn has not expressed a wider view on competition policy beyond the specific comments reported in the media.