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Regulators need to start listening to consumers

A new Fabians report has set out how the UK can address the poverty premium (Alamy)

4 min read

To rebuild trust in markets, government and regulators need to start listening to consumers.

The current cost of living crisis and ongoing fall in living standards are unprecedented in living memory. While many of the causes of rising prices are global and inescapable, some are domestic and avoidable. 

Whether it is energy, financial services, water or broadband, regulated markets have failed us all in recent years. But they have failed families on the lowest incomes the most. They are forced to pay £444 extra per year for essentials, simply because they are poor. This ‘poverty premium’ is a consequence of the way markets for essentials are designed to treat low income families differently and unfairly. 

The treatment of low income households reflects wider failures in the regulation of markets for essentials. Both government and regulators have neglected to protect consumers. Instead of acting, government and regulators frequently ‘pass the buck’ between each other. No one takes responsibility, with campaigners being pushed between departments and regulators.  

A lack of consumer representation is a major cause of this confusion. Too often, regulators and government see consumers as just another stakeholder group whose interests needed to be managed – rather than the critical group that underpins the success and legitimacy of markets.  

By side-lining consumers, the government and regulators have become especially disconnected from people living in poverty. As a result, regulators often prioritise greater choice and individual responsibility for finding a good deal, even though many people consider this to be unfair and stressful.

By not listening to consumers, government and regulators have created a system of markets that creates unnecessary, additional pressure on family finances. It is easy to see why the public have little faith in the markets they depend on, or in the government and regulators who are supposed to defend their interests.

But there is now an opportunity to rebuild public trust. The government and regulators are grappling with significant future challenges including decarbonisation, big data and AI. The voice and experiences of consumers should be at the heart of decision making as they make decisions on how these will affect all of us. 

A new report by the Fabian Society makes a series of practical recommendations to improve how regulators operate and advocate for the interest of all consumers. 

Firstly, every regulator of an essential market should have consumer representatives making up at least a third of their board. This would include Ofgem, Ofcom, Ofwat, the FCA and the CMA. These new members should have practical consumer affairs expertise, ideally from working with vulnerable individuals or those on the lowest incomes. And they would help embed consumer viewpoints and interests into decision-making from the top down within every regulator. 

Secondly, regulators should consult with a new consumer committee when deciding major policy interventions. People with lived experience of poverty and with protected characteristics should be strongly represented on these committees, allowing those most affected by decisions to have a role in scrutinising them.  

The government should consider giving these new committees the power to force regulators to look again at key policies, and to propose specific alterations. The regulator would be required to respond publicly, explaining why they are adopting or rejecting changes suggested by the committee. These committees would show ordinary consumers that all interventions have been challenged and scrutinised by people like them.

Now is the time to put consumers and low income-families at the heart of decision making. It is easy to see why the public have little faith in the markets they depend on, or in the government and regulators who are supposed to defend their interests. These two changes, among others in our report, would help these markets to function better, to ensure the consumer voice is heard, and to rebuild trust.

Ben Cooper is Research Manager at the Fabian Society and author of the report Cost Cutters: A plan to tackle the poverty premium and make markets work.

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