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Dr. Vince Cable opened his speech by noting that during the crisis, when there is an enormous pressure on governments to subsidize national industries, people with real integrity and strength to act and ability to establish clear rules are needed at the European level. According to Cable, Mr. Joaquín Almunia performed well in this respect by establishing a clear framework on state aids and their enforcement.
Dr. Cable claimed that the EU has every reason to celebrate a real success story in competition policy. It provides a unified policy framework with the EU Commission, courts and national competition authorities, which all apply the same rules.
The Secretary of State added that recently Europe experienced a very profound crisis of capitalism. In some countries the banking system collapsed, people became poorer, wages have fallen largely, thus people are angry and their trust in capitalism fell considerably. The current challenge is to determine how to restore trust in capitalism, which should work not only for businesses but for consumers as well. He mentioned how he and his colleagues worked out modest reforms in the UK which tried to respond to this challenge, such as the monitoring of excessive executive pay packages or increasing the transparency of company ownership by establishing a central register.
He went on emphasizing that for achieving a trusted form of capitalism the most essential task is to make markets work. The goal of the legislator with the establishment of the unified competition authority in the UK (called Competition and Markets Authority), which will start operating on 1 April 2014, is to strengthen the competition regime in the UK. The authority was given enhanced powers in the prosecution of cartels and in the investigation of special sectors crucial to economic growth (e.g. banking).
Dr. Cable reminded the audience that the abuses of competition by governments have to be tackled. Some of the biggest distortions in the markets are practiced by the states, so the competition authorities have to be strong enough to deal with those. The other crucial issue is to increase vigilance over network monopolies (e.g. in telecoms or energy). In the UK, the sector regulators often overlooked issues of competition and there is evidence in these sectors of increasing regulatory capture. As a result, under the new competition regime more powers will be given to the sectoral competition authorities to crack open network monopolies. Ultimately, he highlighted his powers as Business Secretary to remove competences from the regulators and transfer it to the competition authority. He also emphasized the importance of employing overseas experts in developing competition policy.
Cable also emphasized the need to strengthen consumer protection legislation parallel with the reform of competition enforcement in the UK. To make sure that consumers are properly informed, a new legislation was presented to the UK Parliament to strengthen the role of consumers. He mentioned the example of digital markets where the previous regime had failed to protect consumers effectively.
He calculated that the newly introduced legislative changes would liberate around 4 billion in annual benefits to consumers.
The Secretary of State did recognize, however, that much of this activity would have to take place in the European Union context. The single market does not only have to be sustained but it also needs to be developed further under the leadership of the next European Commission. He looks to Europe to deal with big competition issues like the dominance of Google or Gazprom because these cannot be properly dealt with at the national level. He wants to see the EU state aid rules reinforced with the reforms of the state aid modernization that Mr. Almunia has brought forward, and he is determined to see more effective competition law enforcement at the EU level to ensure that the single market actually works.
In his closing remarks, Vince Cable returned to his previous point about the crisis of capitalism. He emphasized that Europe must find a way out. He said that ‘We know that there is no way back through the model of Eastern Europe’. He argued that we have to make sure that capitalism works and we have to restore public trust in our economic system. He closed his speech with referring to the key thought of Adam Smith according to which business will not naturally compete, but it will try to stop competition. But there is nothing wrong with that, because business must be made to compete by authorities at the national and the European level. If we are going to rebuild faith in the European capitalist system, we have to have strong rules on competition and on state aids.
The views expressed above belong to the author and do not in any way represent the views of the HAS Centre for Social Sciences.