Speaking at BT's annual general meeting in Birmingham, Mr Vallance demanded clarification of how the regulators themselves are held accountable.
He said: 'We firmly believe that there is an issue of governance concerning the regulators which the Government must tackle if the very real successes of the privatisation programme of the 1980s are not to be undermined in the nervous Nineties.' His remarks come as BT is again locked in battle with Oftel, the telecommunications watchdog, over proposals for a tough new price control regime that could reduce BT's profits by pounds 100m a year.
He said: 'Regulators can be tempted to embark on a course of social engineering or to tinker with operational matters in response to short-term political or media pressures. There is a real danger that regulated privatised businesses may be subject to more state interference than they were as nationalised industries.'
Mr Vallance must decide whether to accept the new price regime or see BT referred to the Monopolies and Mergers Commission.