View from City Road: Regulators caught in a political pickle

Richard Caborn, the Labour chairman of the Commons trade and industry select committee, has scored a bull's-eye with his cogent and damning criticisms of the regulatory apparatus that has grown up around the UK's utilities. The present regime is rapidly discrediting itself, both on moral and practical grounds.

Morally, because the collection of academically inclined individuals heading Ofwat, Offer, Oftel et al are unelected and unaccountable. Their decisions are essentially political, though dressed up as technical. They have presided over the creation of anti-democratic empires that enforce a limited form of price control mixed with the promulgation of a particular species of competition, often so limited and artificial that it ends up as a cost, not a benefit, to the consumer.

Practically, because they do so with ambiguous and inconsistent mandates, and with no yardsticks against which their performance can be measured.

As Mr Caborn says, what is striking about recent criticisms of the relationship between the Ofgas head Clare Spottiswoode, British Gas and the Department of Trade and Industry is that no framework or guidelines exist against which that relationship can be tested.

The reason is simple. The creation of nominally independent regulatory offices was an afterthought to privatisation, fostered when the Government realised such supposed 'watchdogs' could be made to carry the can for unpleasant but unavoidable political decisions.

Mr Caborn would like to see the Government broaden and deepen the policy burdens on regulators. He believes that would help to deal with situations such as the recent pit closure debacle. On that occasion Richard Littlechild, the electricity regulator, made it clear he was under no compunction to consider the broader picture - which might have saved the coal industry.

Technically, he was right. Given the intimate relationship between the viability of coal and the price paid for it by the electricity companies, however, this narrow interpretation of his brief in effect subverted key political decisions on long-term energy policy.

Mr Caborn makes a very valid point, but it would clearly be equally unacceptable for an unaccountable civil servant to be wandering further into territory that should properly belong to elected politicians.

Ancient Rome was the scene of many debates as to how the ruled can best control their rulers. One might have thought that a classically schooled Tory government, fresh from the fields of Eton and the best universities, would have been quicker to grasp the problem. Quis custodiet ipsos custodes?, as they say in Barnsley.