The drive for economic growth could confront a Labour government with choices between competition and industrial aims, says competition watchdog’s former strategy director.
In a guest blog published by the Social Market Foundation, Stuart Hudson – former Senior Director of Strategy at the Competition & Markets Authority (CMA) – warns that a Labour government may face difficult decisions between its industrial strategy and competition policy – in the pursuit of growth.
Hudson argues that promoting competition is a “no brainer” for a Labour government, given the important role it can play in increasing economic growth and reducing economic inequality. But it can also conflict with industrial policy objectives. As more successful firms win customers and create jobs, the competitive process means other firms will lose out, putting jobs at risk. With an active industrial policy aimed at addressing regional economic disparities, the next government may face pressure to subsidise declining firms, even if they are not ones where public investment is most likely to generate a return.
Another example of a trade-off that Hudson presented is between low consumer prices and the delivery of a broader public policy objective. At a time when the public finances are strained, it may be appealing to ministers to, for example, allow two companies to merge if they promise more investment in a sector that the government regards as critical to its industrial strategy, even if the CMA says a merger would mean a worse deal for consumers.
Hudson points out that, in the past, governments have tended only to address these trade-offs when confronted with a live crisis. He argues Labour’s objectives are best met by resolving such conflicts in good time and transparently.. In the guest blog, he argues that the incoming Labour government should try to address these policy questions by reviewing the relationship between competition policy, industrial strategy and growth; and making any changes to legislation or guidance accordingly.
Notes
- The blog will be published at https://www.smf.co.uk/commentary_podcasts/labours-competition-conundrum/ on Thursday 4th July, 2024.
- About the author: Stuart Hudson was formerly Senior Director of Strategy at the Competition and Markets Authority and a Special Adviser to Prime Minister Gordon Brown. He is now a Partner at the corporate advisory firm Brunswick.
Contact
- For media enquiries, please contact Impact Officer Richa Kapoor, at richa@smf.co.uk
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