As Keir Starmer welcomed business leaders to last week’s investment summit in London, a story appeared in the Financial Times suggesting the new UK government had the country’s economic regulators in its sights.
The FT article was headed, “Prime minister targets competition authority and other regulators he believes are stifling global appeal”. It went on to quote the PM as saying, “We will rip up the bureaucracy that blocks investment…and we will make sure that every regulator in this country, especially our economic and competition regulators, takes growth as seriously as this room does.” It also pledged that “ministers would back cutting-edge sectors through a new industrial strategy” to be published later that day.
But when the industrial strategy appeared later that day, it seemed to strike a different tone. It said competition and competition policy have a positive role in driving growth: “Competition policy creates incentives for businesses to innovate and allows more productive firms to increase their market share.” In some areas it suggested there should be more competition, not less, pledging to “investigate ways to boost competition, including in growth-driving sectors, whether through competition law and economic regulation, or through integrating competition considerations into other government policies such as planning, skills, and trade openness.” And it backed the independence of the Competition and Markets Authority: “The government is committed to robust and independent enforcement of competition law and consumer protection.”
In the subsequent days a number of senior regulators – from the chairman of the CMA to the chief executive of the Prudential Regulation Authority – argued publicly that their work was entirely consistent with the government’s growth mission and that they had made recent changes, from the CMA’s new strategy to the PRA’s implementation of its secondary competitiveness and growth objective, to ensure that this was the case.
What are we to make of all these apparently conflicting signals?
First, the government is still at a relatively early stage of its thinking on competition and regulatory policy. It was not a major issue in the election campaign and Labour did not come into power with detailed plans. Right now, regulatory issues are most likely to get onto ministers’ agendas in response to an immediate and pressing challenge, such as the potential collapse of Thames Water, rather than in a considered discussion of the government’s objectives for competition and regulatory policy as a whole. We have not heard the government’s final word on the matter.
Second, just because policy development is still at an early stage does not mean ministers can remain silent on the topic until they are ready. They will occasionally have to opine and, when they do, you need to look at the context for their remarks. In this case, business leaders and investors frequently complain about regulation and so ministers and officials planning the investment summit were well aware it was an issue that would come up. Rather than deal with negative comments on the day, it was sensible to lance the boil in advance. And if you brief a story to the FT (rather than to, say, the Mail or the Mirror) and you do so to land on the morning of the investment summit, it is clear who the intended audience is. That does not mean the story is simply PR spin or that it does not represent the government’s position. After all, Number Ten have not walked back from the story at all; and they know that if government departments or regulators then start taking actions which appear to run counter to the PM’s comments, his words will be thrown back at them. But one media story briefed to one outlet on one day is unlikely to give you a complete picture of the government’s cross-cutting thinking on a complex set of issues.
The same goes for private conversations too. They should all speak for the government but a permanent official at DBT is likely to have a different perspective from a political adviser at DSIT, who in turn will have different priorities than the communications director at Number Ten.
Third, the content of the PM’s remarks is worth revisiting. He did not make a generalised call for softer regulation. Indeed, it would be surprising if he had done so, given the number of areas on which the Labour manifesto signalled tougher regulation, from energy to water, the private rental sector, building safety and children’s social care. Instead, Starmer called for the regulators to focus on economic growth, in line with the government’s number one mission, something that Marcus Bokkerink and Sam Woods have explained this week that they are committed to doing.
So does this mean that the regulators are off the hook?
Not quite.
The implication of someone calling on you to focus on ‘X’ is that they think you might not be doing so right now, or that they worry that you might slip back, so I think it is clear that ministers expect at least some behavioural change from regulators. Certainly, ministers’ public comments have raised expectations externally that this will happen, so it would be damaging to the government if it does not.
One illustration of this is if you compare the language in the government’s new industrial strategy with the one that that Labour published while still in opposition. In 2022, Labour warned “there are signs that competition has been weakening across the UK economy” and it emphasised the need for robust enforcement. Interestingly, the new industrial strategy published last week draws on exactly the same evidence base from the CMA – its 2022 State of Competition report – but having done so it concludes that “UK markets remain relatively competitive despite modest deterioration in performance over the last two decades.” There is still language about robust enforcement, but ministers are thinking a lot more about the trade-offs.
In practice, I think the pressure on regulators is likely to be greatest on those decisions which (a) affect international companies whose investment the UK government is seeking to attract; (b) involve multiple governments/regulators internationally and so companies can easily compare their approaches; and (c) the UK regulator’s approach appears more interventionist and could be portrayed as suggesting the UK is a less welcome environment for investment. That is why the FCA’s approach to ‘naming and shaming’ companies under investigation, and the CMA’s prohibition of the original Microsoft/Activision deal, were so controversial.
The next opportunity for the new government to set out guidance to regulators in more detail is in its ‘strategic steers’, and it has said it will publish one in draft form shortly for the CMA. Historically, these steers have not made much of a difference to regulators because they usually set out a long list of priorities and policy trade-offs with no clear guidance on how the regulator should adjudicate between them, and so it is left up to the regulator to decide what to do.
I would be very surprised if the new steers for the CMA and the FCA went so far as to call on them to put the interests of businesses before those of consumers. For a start, that would be inconsistent with the statutes under which those bodies operate, and in the event of such a conflict a regulator would have to prioritise its statutory duties. Plus, when the next corporate scandal occurs – as at some point it must – the government will not want to be blamed for having encouraged the regulator to go soft. As a result, some degree of nuance is inevitable, but I would expect to see a greater emphasis on the need for regulators to take into account the impact of their decisions on international investment into the UK.
