Reform UK’s head of policy, Zia Yusuf, has given the clearest indication yet of how the party would approach economic regulation and competition policy if it were to win power at the next election.
At its heart seems to be a much more limited role for the regulators focused on certain specific case decisions that should be taken independently e.g. the five-yearly price controls for the monopoly utility networks or enforcement action against alleged breaches of competition or consumer protection law.
Other regulatory functions might be returned to ministerial control completely e.g. conduct regulation in domestic energy markets or digital markets. And in other areas regulators might still have a role but operating under a more direct ministerial policy steer e.g. I imagine merger control might fall into this category.
Overall, it’s reasonable to argue that the functions of independent economic regulators have expanded beyond their original rationale (i.e. the rectification of a time inconsistency problem) and that this raises a democratic accountability challenge. Regulators today do create policy and this may not always be consistent with the policy of the elected government.
The current government is trying to address this through giving much clearer strategic steers on how regulators should deal with policy trade-offs. Reform UK is looking at something more radical.
Theoretically, this should be relatively straightforward in areas where Reform proposes to do a straight lift-and-shift of functions from, say, Ofgem to DESNZ. However, this would mean making ministers directly accountable for decisions that over the years they have found politically convenient to delegate e.g. in balancing the interests of investors and consumers. It will become hard for a minister to bat away a question at the despatch box on the grounds that “that is a matter for Ofgem”. (I guess Yusuf would argue that is exactly the point.)
A bigger challenge may be in the areas where regulators are supposed to retain some or all responsibility. External stakeholders will test the boundary between ministerial and regulatory control. They will look for signals e.g. when a minister is asked about something that is supposed to remain Ofcom’s responsibility, do they simply say it is a matter for Ofcom or do they opine anyway?
The financial markets will also look at the practical tools by which regulators can protect their independent decision-making e.g. do their leaders have fixed terms or can they be removed at will; and do they have multi-year funding settlements or must they go cap in hand to the Treasury or their sponsor department each year? Independence is much more strongly protected in the former than the latter.
If you are interested, I have written in more detail about Reform’s likely approach to competition policy here.
