Leading Article: Labour misses the point again

Margaret Beckett missed an opportunity yesterday. As Labour's new Shadow Trade and Industry Minister, she has acquired responsibility for the famous BT deal, launched with such fanfare by Tony Blair at the Labour Party conference. The plan involves British Telecom offering free connections on the so-called information superhighway to public institutions such as libraries and schools in exchange for BT being allowed access to the home entertainment business by 2002.

Yesterday the telecommunications regulator Don Cruickshank joined in the Independent's criticism of this deal, arguing that Labour will only succeed in encouraging BT's monopoly, which the regulator has spent the last decade trying to counter. Better to allow rival companies to service the public sector as well: competition produces better service and keener prices. It was Mrs Beckett's chance to state that New Labour is not interested in flashy, Wilsonian deals that distort the market, but the construction of sound industrial policy based on an appropriately regulated market economy. Instead she savaged the watchdog.

It is not that there are no sound arguments for allowing BT into the home entertainment market in 2002. By then the competing cable TV companies should be established as a serious force in the UK industry. Perhaps Oftel could require all cable and telecoms companies to connect their systems free to public institutions. That is one way to avoid confining the less well-off to a slow lane on the superhighway.

But for Mrs Beckett to argue that Labour is encouraging competition by allowing BT into a new market misses the point. BT is easily the dominant corporate player in the UK communications market and probably will still be so by 2002. Government's job is to ensure that a regulator working at arm's length is given an appropriate set of powers to protect the consumer against market domination by any player, rather than to make lunges in favour of one company. It is all a question of balance.

The principles of such an approach were well set out by Gordon Brown, the Shadow Chancellor, in bold speeches during the summer. Mr Brown presented Labour as the party of competition, the consumer's and therefore the people's friend. This route is rich in promise for New Labour, but it requires the party to resist the old corporatist temptations of trying to run companies from Victoria Street.

At the same time, Labour has embarked upon a wide-ranging discussion of the way that regulation of the privatised utilities should be organised. Should there be a single regulator for telecommunications and broadcasting? Since the industries are converging, almost certainly, yes. Should the one-person regulator give way to a panel? Less clear-cut. Is the British way of regulation, whereby prices are controlled by the imposition of formulae linked to inflation, still the best? On balance, probably it is.

But Labour will not achieve sound regulation in any sphere if it conveys the impression that ministers would be phoning the regulator every five minutes about some brilliant plan cooked up with another captain of industry. Mrs Beckett must show she grasps this. So must Mr Blair.