Time for consumers to take some responsibility

The shoppers and the shopped.

For Adam Smith, the one characteristic that set humanity apart from the beasts was our ability to strike a bargain. “One dog”, he wrote, “does not change a bone with another”. The exchange of bones, grain, motor cars, iPhones and the rest has built up over the last 250 years into a system more complex than even Smith could have imagined. At its heart, however, capitalism remains a grand bargain; we as consumers make clear the force of our demand, and producers respond to that with the scale of their supply. The nuances of that extend to pricing, to service, to quality and to the behaviour of companies in society.

It may seem of late that one side of the capitalist bargain is no longer being upheld. Beyond the economic car-smash of the banking crisis –with causes so obscure as to be beyond the understanding of most consumers– in the last few months no newspaper has seemed complete without at least one headline of the "Big Company Does Bad Thing" variety. PPI mis-selling, large-scale tax avoidance and rumours of price fixing are only some of the most prominent. Indeed, the malaise goes deeper. In the UK, we suffer some of the highest costs of living in the developed world, combined with some genuinely poor standards of service.

Research shows that, in the UK, more of us care about service than we do about price – by a factor of something like 2:1. That’s good news for companies, as it means that competitive advantage needn’t mean a squeeze on the profit margin. On the other hand, it’s bad news for consumers, the majority of whom say that they are unhappy with, or indifferent to, the standard of service they receive. The UK media would appear to be on the consumer’s side, and are all too ready to hurl opprobrium, whether for illegal rate-fixing or long call-centre queues. The phrase “responsible capitalism” is used often, but not always in a responsible manner; it’s noticeable that the media punishment does not always fit the corporate crime. However, when even the President of the CBI calls for more responsible attitudes from business, as he did recently in the Guardian newspaper and also at this week’s CBI conference, then that can be taken as a sure sign that it’s time for change.

As consumers we have as much power as companies do to effect that change. After all, two parties to a transaction have equal rights, to progress or to withdraw as they see fit. While it may be harder for us, as consumers, to fully exercise our power I would suggest that not only do we have the right to do so, but that we have a responsibility. If our capitalism has become irresponsible, then we cannot lay the blame for that solely at the feet of producers; as consumers, we too must consider what we might do better.

The same research that shows a disparity between what consumers want from companies and what we actually get, also shows a disparity between our desire for change and our willingness to act to achieve it. In a nation where customer boycotts are rarer than hen’s teeth, it’s perhaps unsurprising that unethical business practice can go unpunished by the consumer; it may be that we simply don’t care about tax evasion as much as our media does. It’s much more surprising that, for a nation that values good service over almost everything else, we are unusually reluctant to speak out about bad service, or even to seek better. Compared to consumers in the US, for example, or Poland or Russia, we are less likely to complain, to ask for the manager, to get angry with staff, or even to shop around for a better deal. The higher standards of service enjoyed in these countries is a testament to the success of such tactics.

In the UK, we consumers need to decide on our priorities (though it seems that many of us have), and to act to make them a reality (which we do not, as a rule). We should not expect to have the best service or the best price handed to us on a plate; that simply isn’t how capitalism works. Whether at the market stall or in the call centre queue, if we suffer in silence it benefits no-one and changes nothing. Only by making our views known can we hope to build the positive customer experiences that we all expect.

Returning to Smith, it may be time for us in the UK to refocus ourselves on “the constant and uninterrupted effort of every man to better his condition… the principle from which opulence is originally derived”. As consumers in the UK, there’s an opportunity for us all to gain a little more “opulence”. If we could take our obligations as consumers as seriously as we take our rights, then we would all feel the benefit, and our companies would too.

Claire Richardson is a VP at customer relations consultants Verint.

Photo: Getty Images
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How can Britain become a nation of homeowners?

David Cameron must unlock the spirit of his postwar predecessors to get the housing market back on track. 

In the 1955 election, Anthony Eden described turning Britain into a “property-owning democracy” as his – and by extension, the Conservative Party’s – overarching mission.

60 years later, what’s changed? Then, as now, an Old Etonian sits in Downing Street. Then, as now, Labour are badly riven between left and right, with their last stay in government widely believed – by their activists at least – to have been a disappointment. Then as now, few commentators seriously believe the Tories will be out of power any time soon.

But as for a property-owning democracy? That’s going less well.

When Eden won in 1955, around a third of people owned their own homes. By the time the Conservative government gave way to Harold Wilson in 1964, 42 per cent of households were owner-occupiers.

That kicked off a long period – from the mid-50s right until the fall of the Berlin Wall – in which home ownership increased, before staying roughly flat at 70 per cent of the population from 1991 to 2001.

But over the course of the next decade, for the first time in over a hundred years, the proportion of owner-occupiers went to into reverse. Just 64 percent of households were owner-occupier in 2011. No-one seriously believes that number will have gone anywhere other than down by the time of the next census in 2021. Most troublingly, in London – which, for the most part, gives us a fairly accurate idea of what the demographics of Britain as a whole will be in 30 years’ time – more than half of households are now renters.

What’s gone wrong?

In short, property prices have shot out of reach of increasing numbers of people. The British housing market increasingly gets a failing grade at “Social Contract 101”: could someone, without a backstop of parental or family capital, entering the workforce today, working full-time, seriously hope to retire in 50 years in their own home with their mortgage paid off?

It’s useful to compare and contrast the policy levers of those two Old Etonians, Eden and Cameron. Cameron, so far, has favoured demand-side solutions: Help to Buy and the new Help to Buy ISA.

To take the second, newer of those two policy innovations first: the Help to Buy ISA. Does it work?

Well, if you are a pre-existing saver – you can’t use the Help to Buy ISA for another tax year. And you have to stop putting money into any existing ISAs. So anyone putting a little aside at the moment – not going to feel the benefit of a Help to Buy ISA.

And anyone solely reliant on a Help to Buy ISA – the most you can benefit from, if you are single, it is an extra three grand from the government. This is not going to shift any houses any time soon.

What it is is a bung for the only working-age demographic to have done well out of the Coalition: dual-earner couples with no children earning above average income.

What about Help to Buy itself? At the margins, Help to Buy is helping some people achieve completions – while driving up the big disincentive to home ownership in the shape of prices – and creating sub-prime style risks for the taxpayer in future.

Eden, in contrast, preferred supply-side policies: his government, like every peacetime government from Baldwin until Thatcher’s it was a housebuilding government.

Why are house prices so high? Because there aren’t enough of them. The sector is over-regulated, underprovided, there isn’t enough housing either for social lets or for buyers. And until today’s Conservatives rediscover the spirit of Eden, that is unlikely to change.

I was at a Conservative party fringe (I was on the far left, both in terms of seating and politics).This is what I said, minus the ums, the ahs, and the moment my screensaver kicked in.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.