Defining a Price

One of the basic roles for a government is to set rules.

Rules that stop people hurting each other, but also rules that make life run smoothly.

Governments define what a litre is, and what Unleaded petrol is. So when I see unleaded petrol at 96.9p per litre, I know that this is better value than unleaded petrol at 97.9p per litre. Without these rules, we might find that a Cheapco litre was only 97% as big as a Shell litre, and we would need our passenger to carry binoculars (to read the details of how big their litres were, and what octane their unleaded fuel was) and a calculator to allow us to compare the various deals on offer along the highway.

It's about time that the UK government defined what a "price" is. As in "the total amount of money that the purchaser has to pay to obtain the product or service offered". If an "extra" is compulsory, then it goes in the "price". If the customer is truly free to take it or leave it, then it can be excluded from the price as long as there is a ready way of establishing what is in the price and what isn't - every time the price is mentioned.

As retailers and service providers have got more creative, so the gap between headline price and actual price has become bigger, and the hassle for the citizen bigger. We have to bring up children never to believe that they will be able to obtain an offer at the advertised price - to teach them to decode the small print and the nasty tricks that make up the gap between the "price" that is offered and the true cost.

When I buy a pair of boxer-shorts I expect the price to include not only the cloth, but also the cutting out, and sewing together of it, its transportation to the shop and its packaging. I don't get asked for a "sewing machine replacement fee" or a "rear seam overlocking charge". The boxers cost £2.99 and that price includes all the odds and ends that go into making them available to me. Nice and simple. (Note to film industry - the label includes a mercifully short list of credits. Imagine the size of the label if everyone involved got their own mention as at the end of a film).

Airlines are particularly high-profile users of the compulsory "extra". Travel from Norwich airport, and there is an extra £3 "Airport Development Fee" to be paid by the departing passenger at the airport. It is not an option that some people will choose and others decline. Whatever the operators want to call it - everyone has to pay it, so it is part of the price.

You don't need to get too fancy with the rules about prices. The rule simply needs to specify that the prominence and positioning of all compulsory elements of a price must be the same, as must the total compulsory price. So if an airline wants to list flights from London to Paris at "£10", then they are free to advertise "London to Paris: £10 fare + £13 airport departure fee + £10 government tax + £0.40 minimum payment fee = £33.40 total price" - as long as all the type was in the same block, in the same font, size and weight. I think they would soon find out that passengers aren't terribly interested in the breakdown of the price, and that simply showing the total price would work best in their advertising.

Similarly, a restaurant applying a 10% compulsory "service charge" would have to show the service charge and total cost against each item. They would be completely free to do this, but they would probably find that customers preferred a smaller menu showning just one figure for price - the amount that they have to pay in order to buy the item.

If the current government won't take up this simple legislative change, wouldn't this be a nice, cheap, popular move for an opposition party to promise? It would cost virtually nothing to implement and it would help ordinary people get on with their lives with just a little bit less hassle.