Inside Politics – The Policy Exchange newsletter (London), 18 April 2008

For reasons unknown there is a persistent prejudice about Britain on the Continent. In Europe they appear to believe that some kind of Anglo-Saxon capitalism is practised on this island. There must be a terrible fog in the Channel which prevents the rest of the world from seeing clearly what is actually going on, but in some respects the UK economy has more in common with Soviet Russia than with free-market capitalism.

One of the best examples of Britain’s misguided attempts to plan her economy has always been the so-called “needs test” for new supermarkets. To date, decisions about new supermarkets are not made by a company, the market or the consumer, but by the state. Unelected planners could decide whether the new retail outlet was really “needed” in their area. Prima facie evidence against the need for new supermarkets was the existence of existing smaller stores. These may have offered a smaller range of products and they may have been more expensive than bigger supermarkets. Nevertheless, the simple fact that people shopped there seemed to suggest that they were popular. That this was sometimes only happening thanks to a lack of cheaper and better alternatives often escaped the planners’ attention.

But now after decades of “needs testing” the Government has announced that it wishes to abolish the test. Little wonder that the owners of small shops do not fancy the idea. Nobody likes competition after all. Yet there is still hope for them. Buying some fine Italian beans in a small whole foods store in Regent’s Park, David Cameron declared that the campaign to save the “needs test” had his full support.

This nicely demonstrates the problem. There is a difference between those who can afford hand-picked, organic beans and others for whom every little helps. At a time when ordinary families feel hard-pressed because of rising mortgage costs, escalating fuel bills and skyrocketing food prices, having a Tesco near you where you can get potatoes at 20p a kilo can make a big difference.

In his speech to Policy Exchange on Monday, Shadow Chancellor George Osborne left one in no doubt that the Conservatives wish to be on the side of hard-working families. But if the party were really serious about this, it should be supporting the Government’s move to abolish the “needs test”. It is an oddity in any case that Labour statists want to get rid of this bit of central planning while the Conservatives pledge to keep it.