What should we make of the suggestion from David Cameron and Nick Clegg that energy companies should be bound to offer consumers the best tariff? It is a bold response to the justifiable anger that most people feel as they see energy companies banking big profits and pushing up prices. It should also be seen as a victory for Caroline Flint and for Labour who have been arguing that companies should do this for pensioner households. But it also tells us something much more significant – Cameron has given up, maybe inadvertently, on one of the basic tenets of Thatcherism, that the consumer always knows best.
When the Thatcher governments stumbled on privatisation as their big idea, they thought that regulatory bodies would only be needed for a transitional period, until the full rigours of the market took over. They were wrong on every count, of course. The myth of perfectly functioning markets, with all-knowing consumers making rational decisions has always been just that – a myth. Just as with bank charges, insurance renewals and pension fees, energy companies know that most of us have neither the time nor the patience to track their constant changes. The end result is that most of us feel ripped-off, and most of us are. This form of competition has enriched a few, and short-changed the rest of us. The challenge for Labour is to design a regulatory system that really does work for consumers, but Cameron running up the white flag for Thatcherism is a sure sign that the time for new thinking is coming