An alternative to regulation


Some interesting themes were bubbling under the surface at a seminar organized by the Centre for the Study of Regulated Industries in Westminster this week. The group was a mixture of regulators, government officials and academics, plus me as the lone representative of competition. As you'd expect, there was much quoting of Adam Smith's famous remark about businesspeople never getting together without the talk turning to some new price-fixing conspiracy against the public. If only people would read on – in the next paragraphs, Smith explains that it is regulation that causes businesspeople to behave in this way. Only through the powers of the regulators can they actually make price-fixing stick.

But one underlying theme I picked up was that everyone's finding government intervening more and more in regulation. For example, utility prices are no longer left to some RPI-X formula. Politicians are demanding that prices should be 'fair' - that pre-payment meter customers, say, should pay the same as those who pay by direct debit. Of course, that ignores the commercial basics like cost (direct debits are far, far cheaper to administer). But it's typical of how politicians want to interfere and push the market to follow their agenda, until in the end they have completely destroyed the market.

And of course, ministers are rarely in a post for more than a couple of years, so they have to produce scores of such initiatives just to appear dynamic and so promote their careers. So their interventions come one on top of another until the whole structure becomes very complicated – a world away from RPI-X. And that's the second theme I found coming through, even from these stalwarts of regulation: perhaps it's time to reconsider our regulation system afresh, to find something new without 25 years' worth of barnacles on it.

May I suggest, as an alternative, competition?

The Rotten State of Britain by Eamonn Butler (Gibson Square Books) is published in March.