Policy Hub
On 30 December 2009, the think tank Reform published a paper (2010: the year of competition) which argues that 2009 was a bad year for competition in the UK economy.
The paper recognises that the short term effects of the recession have been inescapably anti-competitive: fewer firms in markets and fewer resources for firms to spend on new business ventures. However, policy decisions have worsened the situation. EU state aid rules have been weakened whilst the government’s industrial strategy has served to divert firms away from their core activities and towards attracting government interest and support. Similarly, the government made the public sector the ‘preferred provider’ of NHS care.
The paper insists that competition is in the public interest and stimulates wealth creation, innovation and diversity. Monopoly has the opposite effect. 2010 needs a new approach. The goal of competitive markets has not changed but its urgency has increased.
Although the political focus on deregulation is important, the paper contends that it will not in itself deliver competitive gains – competition needs active support to deliver its full benefits. The need to challenge and address market failure requires a new business strategy focused on improvement of the general business environment rather than support for industries in difficulty; the renewal of competition in the banking sector; the reversal of EU state aid changes and the introduction of competition in the big UK public services of health and school education.