Competition probe to nudge consumers into switching
A GOVERNMENT study on competition will outline plans to ‘nudge’ consumers to make the best decisions.
In his Autumn Statement the Chancellor said a green paper on competition was planned for spring.
It will have a wide remit, but a key feature will be to explore ways to encourage the public to alter their behaviour and exploit competition among firms.
Sources said Secretary of State for Business Greg Clark is interested in conducting a deeper review amid frustration that while competition policy has created more choice, it has not necessarily benefited consumers.
‘It’s great that consumers have more choice, but not everyone exercises that choice,’ a source said.
The idea of ‘nudging’ consumers to make better choices became popular in Whitehall under David Cameron. The then Prime Minister set up the Behavioural Research Unit in the Cabinet Office.
It drew on research into behavioural economics that suggested consumers could be encouraged to make better long-term choices, in part by looking at the way they were presented with decisions.
The unit went on to be privatised, offering its insight to other countries. But this week one lobbyist told The Mail on Sunday: ‘Nudge is back.’
Clark has taken a particular interest in behavioural economics, writing a foreword to a 2011 book on the subject called Nudge, Nudge, Think, Think.
Major recent competition studies have focused on expanding the choices people face and making them more transparent.
A recent investigation into banking by the Competition and Markets Authority recently recommended the creation of a comparison website for small business finance. The move was criticised by challenger bank bosses, who said it missed the point that small banks faced much higher capital costs than their big rivals and that as a result the website would only entrench their advantage.
The Chancellor said in the Autumn Statement last week: ‘The Government will bring forward a green paper in Spring 2017 that will closely examine markets which are not working fairly for consumers.’