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We Deserve Better Policy Paper by John Penrose MP (2013)

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John’s policy document ‘We Deserve Better’ asks why Britain’s utilities (gas, electricity, water, high street banking, etc) are so unpopular and distrusted by their customers while other industries which provide day-to-day necessities, like food or clothing, do better. Here is a link to the full policy document. What follows is a breakdown of the recommendations and the progress implementing them so far:

John recognised that utility companies have it too easy. Once a customer is signed up it is difficult for them to leave, even if they get poor service or could find better deals elsewhere. John proposes making it simpler & more convenient to switch suppliers, so utility firms have to work harder to keep their customers.

Results to date

  • George Osborne and the Payments Council announced a new, quicker and simpler system for moving bank (it's now takes just 7 days, it was up to 30!). 609,300 customers switched between October 1 2013 and March 31 2014 – a 14% year-on-year increase. The Director of The Payment's Council reports that: “There’s been a noticeable surge of advertising activity from current account providers big and small, suggesting that the new [switch] service is helping foster competition and choice for customers."
  • The Government’s new Water Act 2013 allows business customers to switch to a different water firm for the first time – before then it was illegal. Domestic customers still can’t switch though.
  • Ofgem made a decision that forces energy firms to move towards one-day switching (formerly it was 3-5 weeks).


It’s too hard for consumers to be sure whether they’d really get a better deal if they switched to a different provider, or whether all the small print and different tariffs means they’d be no better off after all. So people tend to stick with the status quo, which makes it harder for innovative new firms to beat the unpopular big firms. John proposes making complicated products easier to understand, so consumers can be sure whether they’re getting what they need. The best example is the ‘Annual Percentage Rate’ (APR) in banking, which boils all the different types of loan down into a single, easily understood cost comparison.

Results to date

  • Mobile Phone Company, Three, announced that all the add-ons and confusing top-up options are being thrown out the window. Their new and existing customers will now pay 3p per minute for phone calls, 2p a text and 1p for 1MB of data. Full stop.
  • Energy Regulator Ofgem is consulting on introducing an equivalent of the APR% for energy bills. In the financial services market, ‘APR’ is a standard comparative measure which helps consumers understand, in a simple and clear way, the cost/impact of an otherwise complex financial product. It takes account of variable rates, and other incentive/penalty charges in order to provide the consumer with a headline point of comparison. This would serve as the main basis for consumers looking to make a comparison between energy suppliers.

The vast majority of products in the UK – whether it’s cars, clothing, cornflakes or coffee - work by giving consumers the whip hand. Consumers are given a basic framework of rights, and then compare the different options before choosing whichever one they want. But with utilities, an expensive regulator takes focus and power away from customers and means utility firms spend more on lobbying – and less on customer research – than in many other industries. John suggests making utility companies behave more like other firms, by switching from this 'Big Regulator' model to the 'Big Consumer' model and putting consumers back in control.

Results to date

John has spoken at a number of policy events, met with high-profile regulators and consumer organisations to discuss his ideas. Additionally, print magazines such as Utility Week, The Financial Times and Utilities Savings have supported his proposals. But, so far, there has been no institutional reform.

 

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