On 7 January 2011 the Department for Business, Innovation and Skills (BIS) issued a Call for Evidence asking for views on the Government's proposed Principles for Economic Regulation, which it intends to apply across the regulated sectors. The National Infrastructure Plan of October 2010 set out a number of significant challenges for the UK's infrastructure, and the Government hopes that by revisiting the regime for economic regulation, and defining the principles under which the industry regulators must operate, these challenges will be met successfully.

The Principles have been designed to guide the high-level institutional design of the regulatory frameworks rather than the detailed application of regulators' judgments. The Call for Evidence seeks views on how best to apply the Principles across the regulated sectors, and will be of interest to stakeholders and investors in the UK's regulated industries.

The Principles

The Call for Evidence sets out proposed principles for six broad categories, which are set out below together with a summary of the Government's proposed approach:

Accountability

The Government is seeking to ensure that regulators, whilst remaining independent, exercise their functions within the limits of the law and under the supervision of relevant bodies (e.g. Parliament and the National Audit Office), with particular emphasis being placed on the ability of Parliament to scrutinise the regulators' actions. The importance of transparent decision-making and open consultation on the part of the regulators is also stressed.

Predictability

The Government hopes to design regulatory frameworks that prevent unexpected changes and offer stable, credible commitments to investors.

Coherence

The aim under this principle is to implement coherency between the statutory responsibilities of the regulator (i.e. to Parliament) and the need for the regulators to contribute to the delivery of a wider range of Government objectives, as well as the need for ensuring regulators engage with each other to encourage coherent positions on common aspects of their functions (e.g. competition and consumer protection).

Adaptability

The Government is seeking to ensure that the framework of economic regulation is able to evolve to respond to changing circumstances over time (although it recognises the possible tension with the principle of predictability).

Efficiency

This principle makes the point that the interventions of regulators must be proportionate and cost-effective to prevent excessive costs to regulated companies and, by extension, consumers. Regulators should also be efficient and well-run, delivering their outcomes in the least burdensome way possible.

Focus

This principle states that regulators should have clearly defined responsibilities focussed on outcomes, with duties concentrated on economic considerations, ultimately providing clarity to both the regulator and the regulated.

Interested parties have until 18 February 2011 to respond to the questions posed in the Call for Evidence, details of which can be found here.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

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The original publication date for this article was 11/01/2011.