Regulators must work together to prevent consumers being exploited – watchdog

The regulators of essential household services must do more to protect consumers and prevent suppliers from using competition as an opportunity to exploit them, a watchdog has said.

The Commons Public Accounts Committee (PAC) said consumers, particularly the vulnerable, were too often facing problems common across the water, energy, telecoms and financial services sectors, such as debt problems, a struggle to access the best deals and impenetrable bills that could significantly affect their daily lives.

The PAC said Ofgem, Ofcom, Ofwat and the Financial Conduct Authority (FCA) had not made enough progress in working together on common problems and needed to be more specific on “what exactly they are trying to achieve” for consumers.

A “huge part of the problem” was that regulators had “traditionally worked on the basis that competition will lead to the best outcomes for people”, the report said.

But the committee said regulators needed to do more to ensure that competition led to better services and more choice for consumers “rather than presenting opportunities for them to be exploited by suppliers”.

The PAC said it welcomed the regulators’ acknowledgement “that they can and should do more to address these issues”.

UK households spent a total of around £140 billion in 2017 buying these services, mostly from private companies.

But the report noted that many consumers struggled to afford all of their essential services and often owed debts to more than one service provider at a time.

Rising utility prices, including a 37% real-terms rise in electricity prices since 2007, put further pressure on affordability, while Ofwat estimated that over the next five years the number of households receiving assistance to pay their water bill would nearly double.

Elderly consumers, those who were less well off and those who did not use the internet were also least likely to switch provider to access the best deals, while estimates suggested that those who did not switch their energy, telecoms and financial services providers could be overpaying by up to £1,000 more in “loyalty penalties” every year.

The ability of consumers to choose deals, know what support is available or avoid being missold inappropriate products depended on how well they understood bills and other information, which was often unnecessarily complicated.

Committee chairwoman Meg Hillier said: “Consumers – disproportionately vulnerable ones – can face serious problems in accessing essential services such as water, energy, communications and finance.

“Issues including debt problems, struggling to access the best deals, and seemingly impenetrable bills can significantly impact people’s daily lives.

“The primary role of regulators is to protect consumers from such issues. The main regulators of these sectors, however, too often take inconsistent approaches. They need to be clearer about what they are trying to achieve for consumers and the common solutions they can bring.

“Regulators must work closer together with the best interest of consumers at their heart. They must ensure that competition leads to more choice, better services and prevent consumers from being exploited by suppliers.”

An Ofgem spokesman said: “We welcome the challenge set by the PAC for Ofgem, Ofcom, Ofwat and the FCA to build on the progress we have made in working more closely together and to address policy and legislative barriers to protecting consumers. Ofgem looks forward to updating the PAC on our progress.”