Select Committee on Constitution Minutes of Evidence

Memorandum submitted by Sir Christopher Foster

  My background relevant to the Committee's Inquiry is first practical:

    —  While temporarily on the BT management board from 1985-1988, it was among my duties to handle its regulatory business with Sir Bryan Carsberg at Oftel;

    —  Before and after that as a partner at Coopers and Lybrand I was concerned in advising on the regulatory arrangements for airport and electricity privatisation. In particular I advised Powergen during and after privatisation;

    —  I was a special advisor to John Macgregor on rail privatisation as which I advised him on setting up the Office of the Rail Regulator and on OPRAF which became the SRA;

    —  I also advised the then IBA on their regulation. The issues raised were far wider than most utility regulation;

    —  I organised a utility regulators' dining club in the early 1990s at which we discussed many matters of common interest; and

    —  As a member of the Railtrack board from 1994-2000 I took a special interest in regulatory matters.

  I also have written on utility regulation, particularly a book:

    —  Privatisation, Public Ownership and the control of Public Monopoly, Blackwell, 1992, in which I discussed legal, political and administrative ideas as well as economic ones.

    —  I am currently writing a book on constitution and government. Our seeming failure to develop legal mechanisms to relate public bodies, including regulators, to parliament and central government is a theme in it.

  My professional background is as an economist and administration specialist, not a lawyer or currently an administrator. Therefore I am not the best person to give legal or otherwise detailed answers to your questions.

  However, both in my book and subsequently I have developed strong views on several of them. In particular:

  1.  I believe the legal basis for utility regulation has not proved adequate. From one standpoint regulators' obligation to secure quasi-market conditions in their industry needs strengthening and their independence safeguarding. But the relation between their economic and social duties need clarifying. In the process the very different considerations affecting the second need clearer statement.

  2.  Quantitative measurement of regulators' performance is rarely feasible. Some decisions could be subjected by them to Cost Benefit Analysis in advance, and backchecked.

  3.  I have views on when a single regulator is appropriate and when he or she should be supported by a board and what relations between them are sensible.

  4.  What I believe regulators' objectives should be is mostly covered by 1 above. Similarly for instances where they have gone wrong.

  5.  There should always be rights of appeal against regulators' decisions, but arguably in different directions on economic and social matters. I believe there is now a stronger case for a further right of appeal to the courts.

  6.  To some extent my views on accountability are covered by what I have already said. But it is important to distinguish between accountability and responsibility.

  7.  I have some further observations on the limits to transparency.

  8.  On economic matters I am not sure that accountability directly to the public should be a relevant consideration. At least it should be limited to specific matters on which I can elaborate.

  9.  I have no recent experience of public consultation by regulators.

  10.  These are complicated issues. I do not believe the second sentence ("are regulators instruments of Government or representatives of the public") expresses the choice before us.

  11.  There could not be a more important or difficult issue than the independence of regulators from Government. On economic and some other issues I believe they should be independent of the government. On most social matters I believe their relations should be arm's length. But there must be adequate arrangement for appeal and comprehensive but plain descriptions of their powers and duties.

C.D. Foster

21 March 2003

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