The latest long reads and in-depth articles

How has regulation changed in the last six years? Oxera Director, Mike Toms, looks back at recent regulatory developments, and considers how his advice to company executives might now have a different focus in terms of markets, customers and regulators

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Controversy around doping was rife in the run-up to the 2016 Olympics and Paralympics. Insights from the economics literature on optimal punishment mechanisms show how penalties can be set so as to deter doping—at both the individual athlete and team level. The credibility and consistency of penalties are key to effective deterrence

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A central component of incentive regulation is determining an efficient level of future capital expenditure (CAPEX), which is rarely a straightforward exercise. This article, the first in a series on the issues surrounding CAPEX regulation, focuses on what regulators and regulated companies can do to set reasonable CAPEX allowances in the face of considerable cost uncertainty

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Martin Cave, Visiting Professor, Imperial College Business School, presents his views on the state of UK economic regulation. In doing so, he focuses on three core issues: regulatory independence, competition, and innovation. How can regulators assert their independence; what forms of competition are most promising in different sectors; and what does digitalisation mean for networks?

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In the UK—and several other major economies—productivity growth has fallen below its long-term trend. One likely culprit is an increasing gap between the most productive firms and the rest. Patrick Nolan, Principal Advisor, New Zealand Productivity Commission, discusses whether the problem is a slowing of the pace at which innovation spreads throughout the economy or, as the OECD puts it, a ‘breakdown of the diffusion machine’. He also asks how the diffusion of innovation might be encouraged

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Originally published in January 2010. 2015 commentary by Mike Toms It is now increasingly common for sectoral regulators to review periodically their organisation and process for determining price controls. But with regulation being the biggest single determinant of profitability in most regulated industries, shouldn’t companies also think hard about their management of the regulatory process? Mike Toms, Non-executive Director of Oxera, and former Planning and Regulation Director of BAA, gives his views on how regulated companies should organise themselves to respond to the regulatory process

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The landscape of passenger aviation has transformed since the dawn of the industry 100 years ago. While it is clear that the sector will continue to change, it is less clear how it will do so. Oxera and PA Consulting have considered some of the issues affecting passenger aviation and how the industry is likely to evolve over the next 20 years, and have developed four future scenarios

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On 13 October 2014, the Royal Swedish Academy awarded the Nobel Prize in Economic Sciences to Jean Tirole ‘for his analysis of market power and regulation’. Tirole made a significant impact in demonstrating how economics theory can be applied to the world of regulation. Here we provide an overview of his contribution

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The regulatory asset base (RAB) is a key aspect of infrastructure industry regulation in the UK and elsewhere. Jon Stern, Honorary Visiting Professor at City University, London, argues that the most important feature of the RAB is the process by which it is reassessed and revised, and that this provides considerable evidence on the consistency and transparency of regulatory regimes

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In 2010, Oxera Non-executive Director, Mike Toms, wrote a series of Agenda articles setting out principles for best practice for regulated companies in price reviews, based on his long experience and observations as a regulation executive. Since then, he believes that companies have become better organised and regulators more sophisticated. New issues have arisen, and excellent examples of best practice have emerged—but also new mistakes. He now asks: how should these guiding principles be revised and expanded?

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The regulated sectors are central to the UK economy, so the government is naturally interested in how they are regulated. However, the independence of regulators is vital for the achievement of public policy goals, including consumer protection, competition and investment. Cathryn Ross, Chief Executive of Ofwat, the economic regulator of the water industry in England and Wales, analyses this relationship between government and regulators and asks how economic regulation might best be used for the benefit of the UK economy and society

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In May’s Agenda, Mike Toms looked back on the huge—and, in some respects, unintentional—consequences of Margaret Thatcher’s mission of privatisation. Graham Mather was an influential figure in Thatcher’s inner circle, first as Head of Policy at the Institute of Directors, then as Director General of the Institute of Economic Affairs, and latterly as a Member of the European Parliament. He shares his personal perspective on why and how the privatisation programme emerged and grew.

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On April 8th 2013, Baroness Margaret Thatcher (UK Prime Minister 1979–1990) died. Recent obituaries and commentaries have focused on the Falklands War and on her role in breaking the trade unions. However, her greatest and most lasting legacy may have been her programme of privatisation of state-owned industries. Now that the mourning has subsided, Oxera Non-executive Director, Mike Toms, asks whether this programme delivered the changes and the benefits she envisaged.

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The Turks and Caicos Islands government asked Oxera for advice on developing a new framework for electricity regulation. The Oxera study found that regulation should be tailored to the specific geography, population, skill sets and fuel distribution channels faced by small jurisdictions. Moreover, given resource constraints, it needs to focus on the most important issues. The findings are highly relevant for regulators in other small-island jurisdictions.

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New Zealand was among the first countries to implement wide-ranging microeconomic reforms to improve the performance of infrastructure-intensive industries, and light-handed regulation was chosen as the preferred regulatory tool. Although other forms of economic regulation now exist, light-handed regulation is still important. Tobias Maugg, economist at the Commerce Commission, New Zealand’s main economic regulator and competition agency, explains how this form of regulation is used in airports and electricity distribution networks.

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Economic regulation, and the role that it created for economics consultancies such as Oxera, has changed considerably since the first UK privatisations in the 1980s. Professor Colin Mayer, one of Oxera’s founding Directors, looks back at 30 years of economics consultancy and Oxera’s place within it, and asks what lessons the past can teach us about future economic policy.

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Profit is typically the incentive that motivates good performance in private sector firms, but the same does not apply to companies in the public sector. Given the pressure on such companies to deliver value for money, is it possible to build in alternative forms of motivation for not for profit entities, using organisational incentives instead?

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Introducing competition into regulated parts of the economy, or, where this is not possible, trying to mimic the competitive outcome, has been the dominant policy for utilities and infrastructure over the past 40 years. Fod Barnes and Mike Toms argue, however, that recognising when we have reached the end of this road towards more competition may be the key to getting the future of utilities and infrastructure right.

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There is a growing body of opinion in the UK that sectoral regulators should involve consumers more fully in their price control reviews, with a view to improving both the effectiveness and the legitimacy of their decisions. While the objectives of consumer engagement are fairly uncontroversial, less attention has been paid to the precise institutional arrangements that are necessary to deliver them, or the possible repercussions on the regulators' independence. Peter Bucks, Oxera Associate, explores some of these difficulties.

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Grocery retailers play an important role in our shopping patterns, with grocery sales representing around half of all retail sales in the EU. A significant proportion of these sales are supplied by large grocery retailers, some of which sell goods under their own-brand labels. Various government, regulatory and industry organisations have expressed both positive and negative views about the impacts of own-brands—here we explore some of the issues around them, and attempt to correct some common misconceptions.

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In the January 2010 issue of Agenda, Mike Toms, Non-executive Director of Oxera, proposed a number of guiding principles for the effective management of regulation by regulated utilities. These were based on his experience as both the Regulation Director of a large company and an adviser to regulated companies. Agenda readers challenged him to do the same for regulators, taking account of his experience of their work, and advice given to them from time to time. The temptation proved irresistible, and what follows is a personal view of the principles of best practice for regulators.

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