Regulars in a regulators' club: A pattern is emerging in the backgrounds and careers of watchdogs over utilities

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The Independent Online
IAN BYATT, director general of Ofwat, the water industry regulator, robustly defended himself against allegations last week that he had abused his position by giving jobs on consumer protection bodies to friends or contacts in the industry.

But an Independent on Sunday scrutiny of the regulators reveals the extent to which a career culture has sprouted, featuring cosy cliques of former university contacts.

'It's very much a case of jobs for the boys, although there aren't very many boys who could do the job,' says one utilities analyst. In fact, there is also one woman, Clare Spottiswoode, the new director general of Ofgas, the gas regulator. But, sex apart, she shares many of the traits of her fellow watchdogs.

All trained as accountants or economists, and most have also spent some years in academe - mainly Birmingham University, the London School of Economics and London Business School.

'The number of people in public policy circles is quite small. Moreover, you need sharp analytical skills of the sort economics provides,' says one regulation expert.

Nevertheless, such is the influence some of the watchdogs have wielded that they have virtually defined their jobs.

A key figure in this regulatory mafia is Professor Michael Beesley, a former professor of economics at LBS. Professor Beesley's illustrous academic career began at Birmingham University, where he lectured in commerce in the 1950s, before moving to LSE in 1961.

His star undergraduate was Stephen Littlechild, now director general of Offer, the electricity industry regulator. Professor Littlechild studied commerce at Birmingham under Professor Beesley before reading for a PhD at the University of Texas, Austin. He returned to Birmingham in 1975 as professor of commerce and head of industrial economics and business studies.

He stayed there until 1983, co-authoring a series of papers on privatised utilities with Professor Beesley, including The Regulation of Privatized Utilities in the United Kingdom, published in 1989. He was also responsible for a key study of price-capping in the telecommunications industry.

In 1983, Professor Littlechild left Birmingham University for the Monopolies and Mergers Commission, where he presided over the 1987-88 Monopolies Commission report into British Gas. In 1989, he resigned to become watchdog of the electricity industry, which was then privatised as he had recommended. In the meantime, he had been joined at the Monopolies Commission by Professor Beesley, who sat on last year's inquiry into British Gas.

An equally long-standing relationship exists between Mr Byatt and Sir Bryan Carsberg - the first of the watchdogs and the man who set much of the tone for regulation of the utilities. Sir Bryan was director general of Oftel between 1984 and 1992, before moving to the Office of Fair Trading.

He trained as a chartered accountant and went to LSE as a lecturer in accounting in 1964. He spent the next four years there, and simultaneously studied for a master's degree in economics. It was there he first met Mr Byatt, an LSE lecturer in economics from 1964 to 1967.

He shared an interest in cost accountancy with Mr Byatt, who left LSE in 1967 to become senior economic adviser to the Department of Education and Science. Mr Byatt took several civil service posts and also sat on the Committee on Water Services' Economic and Financial Objectives. Then, in 1972, he moved to the Treasury, where he was deputy chief economic adviser from 1978-89.

There he chaired the Advisory Committee on Accounting for Economic Costs and Changing Prices in 1986. In this capacity, he again had dealings with Sir Bryan. 'It was Byatt who masterminded the doctrine of the rate of return in the nationalised industries. He would be everywhere within the government machine,' says one former civil servant.

The apparent outsider in this cosy little circle of erstwhile academics was Sir James McKinnon, director general of Ofgas from 1986 to 1993. A Scottish accountant of humble origins, Sir James was finance director of Imperial Group for many years. But he, too, was part of the magic circle.

Sir James was president of the Institute of Chartered Accountants of Scotland from 1985-86, and a member of the Financial Reporting Review Panel, a sister body to the Accounting Standards Board on which Sir Bryan sat until March.

'Both men have played a prominent role in the improvement of financial reporting,' says an ICA spokesman.

Sir Bryan's successor at Oftel, Don Cruickshank, represents a rare break from tradition. A successful businessman and head of the Scottish National Health Service, Mr Cruickshank is also an accountant.

But he was almost certainly appointed for his experience of breaking into markets dominated by monopoly suppliers. As managing director of Richard Branson's Virgin Group, he helped to breach monopolies in condoms, music and airlines.

Mr Cruickshank has tried to break the mould with an internal inquiry into Oftel. But it is being conducted by Colin Scott - an LSE lecturer.

(Photograph omitted)

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