Competition or control? The Green Paper on building societies

The recently published Green Paper outlining a new framework for building
societies provides an interesting opportunity to examine the Government's attitudes towards competition in financial markets while revealing clearly its
ambivalence about free markets. Lack of confidence in the competitive process
finds expression in a desire to regulate. In contrast to the apparent unpredictability which on occasion results from permitting individuals and
institutions to select through the market the most appropriate solution to their
financial requirements, regulation and its consequent restriction on choice provides apparent certainty to the legislator. Outcomes may be predicted with
considerable accuracy and any deficiencies that arise in the course of time can be
corrected by introducing new legislation. Unfortunately regulation may also
introduce new anomalies and distortions in to the financial system reducing
efficiency and growth. Any improvement in the competitive environment is to be welcomed and to this extent the Green Paper must be applauded. This feature article therefore considers whether the competitive path embodied in the Green Paper is commendable and what the UK economy requires.