So do regulators really have too much power?

Industry watchdogs' role needs redefining, writes Graham Ball
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The Independent Online
IS IT too much responsibility for one person? The unwelcome wave of speculation that has swept over the bespectacled figure of Peter Davis, the Government-appointed overseer of the National Lottery, has raised serious questions concerning the role of the regulators, the new industry watchdogs.

They are solitary figures with huge powers. But should publicly unaccountable individuals have so much power over consumers? Is it reasonable to expect a single regulator to be the arbiter of enormously sensitive and complex decisions?

And is it fair to expect the solitary heads of watchdog authorities constantly to withstand the subtle assault from cash-rich firms who can deploy the cleverest consultants to argue their case?

Mr Davis, the director-general of Oflot, the Lottery regulatory authority, was flown around America in a private plane belonging to the GTECH company, a big player in the UK's Lottery operating consortium, Camelot.

His much-criticised acceptance of hospitality has thrown open a debate on the powers and pressures surrounding the small but influential group known colloquially as the Ofdogs.

They regulate the vast privatised public utilities - water (Ofwat), electricity (Offer), gas (Ofgas),telecoms (Oftel), and the soon-to-be privatised railways (Ofrail).

Their director-generals are appointed by the secretaries of state and report to parliament. But they are independent of ministers, are employed on fixed-term contracts, and can only be removed on the grounds of incapacity or misbehaviour.

Their role was to introduce free-market economics into the old monopoly industries, but they also have to look after the interests of consumers, while ensuring healthy competition thrives among the now hugely profitable new enterprises.

Yet some think the burden imposed by such diverse responsibilities is too much for one person, and that they may be in danger of what the American business community has termed "regulatory capture" (when a watchdog regulator appointed to safeguard the public interest ends up in the camp of the group he is supposed to be policing).

"In America," said Don Corry of the Institute of Public Policy Research, "stockbrokers and their analysts target the weakest regulators, and steer their investments into the industries they control. They call it regulatory arbitrage.

"It is dangerous to have a single regulator; there are huge profits at stake and industries can afford the best PRs. The regulatory bodies have limited resources so it's an unfair contest. This is particularly the case where there is no competition, as in the Lottery, there's a constant war going on," said Mr Corry.

The UK Consumers' Association acknowledges that the watchdogs have made progress in defending the interests of consumers but say that it's been inconsistent and slow to arrive.

"Some regulators have been better than others but the trouble is the diversity of their approach," said the association's Barbara Harvey. "There is a general lack of clarity about their decision-making. When Ofgas made a big decision about a price increase, there was not enough disclosure of information for us to make a judgement of whether or not it was fair."

She went on: "One of the problems is that so much is dependent on individuals and how they relate to the industries they are concerned with. When a regulator changes there is often a whole new approach to the way they conduct their business."

The key players

Oftel

Office of

Telecommunications

1984

Don Cruickshank

53

circa pounds 120,000

160

Accountant who first came to prominence in 1984 when appointed MD of Richard

Branson's Virgin Group. Ran NHS in Scotland on a pounds 3.4 billion budget. Now decides how much BT can charge for calls and oversees the burgeoning mobile phone business.

Cause of sleepless nights for Sir Iain

Vallance, boss of BT. Got his company to abandon peak rate calls and institute per second charging.

The nonsense that was Phoneday - last year phone codes changed in such a complex way that some callers had to dial the city code to ring their neighbour.

Offer

Office of Electricity

Regulation

1989

Stephen Littlechild

52

pounds 102,500

215

Worked for six years on the Monopolies and Mergers Commission. Previously Professor of Commerce at Birmingham University. As

regulator promotes competition in generation and supply, protects the interests of consumers, efficiency in use of electricity.

Cursed by power companies for shaking up the way they buy and sell within the electricity pool. Littlechild's aim was to cut prices by pounds 500m over two years.

Criticised for being too lax in the way he set his price formulas and allowed electricity companies to pile up cash.

Ofwat

Office of Water

Services

1989

Ian Byatt

63

pounds 81,381

168

An expert on the regulation of public utlities, his previous post was deputy chief economic adviser to the Treasury, a position he held for 11 years. Now keeping checks on prices and service of water and sewage companies.

Being seen as a consumers' champion when share-holding

institutional investors criticised his moves to devise a price capping formula for bills, after rises of 60% in 5 years.

Accused of abusing his position by giving jobs on consumer protection bodies to friends or contacts in the

industry.

Ofgas

1986

Office of Gas Supply

Clare Spottiswoode

42

pounds 90,000

75

Cambridge-educated economist, her career includes stints at the Treasury, running a small business, founding a computer firm and the London Business School. Ofgas is now preparing to issue licences to private suppliers to compete for domestic supply.

Being a woman

immediately raised the profile of Ofgas.

Endless speculation about her personal life which no other regulator has had to endure. Ranged from interest in her relationships to her 22% pay rise.

Oflot

Office of the National

Lottery

1993

Peter Davis

54

pounds 84,225

30

Oxford-educated accountant, was deputy chairman of the Abbey National, and worked in the Lloyds insurance market. Regulates just one company, namely Camelot, and supposed to ensure the maximum amount of money possible goes to good causes.

Taking free flights around the United States, paid for

by GTech, part of the Camelot consortium.

The uproar after he told a Public Accounts Committee that he had taken the trips.

Ofrail

Office of the Rail

Regulator

1993

John Swift

55

pounds 131,000

75

Oxford-educated QC who, prior to taking on his present job specialised in competition law. Issues and enforces licences to operate trains, networks, stations and light maintenance depots.

Promotes competition and protects interests of users.

Introducing a regime

of capping fares.

Incurring the wrath of every trainspotter, rural Tory and Labour when he revealed a plan to cut number of stations where through tickets could be purchased.

Still unclear

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