Policy Exchange

About the Project

Dr Simon Less is Senior Consultant to Policy Exchange on Regulatory Policy. Simon has many years of experience in relation to regulated sectors and government policy-making, as a Senior Civil Servant, a regulator, a consultant, and as a research director in Policy Exchange. Separately from Policy Exchange, Simon advises public and private sector bodies on a range of regulation and policy issues, and is a member of expert advisory panels at Ofwat and at the Office of Rail Regulation. Previously, Simon served as Head of Policy Exchange's Environment and Energy Unit. He has been a Director at Ofwat, leading market reform in the water sector, and has held a number of Senior Civil Service positions in the Treasury, including leading on competition and economic regulation policy, and in the Ministry of Justice. Simon is vice chairman of ReStore Community Projects, a furniture reuse charitable business. He has a PhD from Cambridge University in chemistry, and an MBA from Imperial College Business School.

New blog: Simon Less and Ofwat Chief Executive Regina Finn discuss the range of ways sectoral regulators suffer 'capture'. You can read the blog here.

Policy Exchange’s Regulatory Policy Project aims to improve understanding of effective regulation of markets. It focuses on the ‘regulated sectors’, where government has a particularly profound impact through economic regulation and through its wider policy objectives.  Regulated sectors include the electricity, water, rail, gas, airports, legal services, waste, healthcare, telecommunications and postal sectors. 

Such regulated sectors constitute a substantial proportion of the UK economy, as well as providing services fundamental to the functioning of society.  Government and regulators have a responsibility to develop policy and regulation in ways that ensure these sectors perform and innovate, consistent with society’s wider objectives.

Many regulated sectors face economic, technological, environmental and social pressures challenging the status quo.  At the same time, government and regulators are pursuing or proposing a broad set of policy and regulatory reforms across sectors.  The Regulatory Policy Project aims to critique proposals and develop policy recommendations, to influence debate on design of effective regulation.

Events programme on regulated sectors

The Policy Exchange events programme on regulated sectors brings together leading politicians, policymakers, experts and opinion-formers to highlight and drive forward debate on policy issues affecting each regulated sector.

Possible future events topics include, but are not limited to, the following:

• The Energy Bill and electricity market reform
• The airport infrastructure strategy for the South East
• Water supply security, metering and regional interconnection
• Ensuring fair and effective competition in the energy retail market
• The long-term strategy for the railways, competition, franchising and the ‘universal service’
• Competition and collaboration in healthcare
• Water supply market opening in England and Wales
• Applying the economically regulated sector model to roads
• End-to-end competition and the Royal Mail universal service
• Regulating and pricing water abstraction
• Legal services regulatory arrangements, five years on from the Legal Services Act and as the first Alternative Business Structures develop.

If you are interested in supporting the regulated sectors events programme, or the Regulatory Policy Project more generally, please contact Simon Less on  or 0207 340 2650.

General approach

The avoidance of monopoly decision-making should be a principal objective in policy on the regulated sectors.  Monopolies (whether public, private or political) lead to higher prices, capture by sectional interests, limited information processing capacity, weak performance incentives and concentrations of undeserved power.  Where feasible, regulation ought to facilitate competitive market processes.  While market processes are often messy and outcomes can be both inefficient and unfair, they are very often the least bad of the alternatives. In a changing and uncertain world, competition is the most effective, known discovery procedure.

Yet markets are currently on the back foot, in part as a result of the poor regulation of financial markets.  The potential benefits from markets, and how to exploit them effectively, are misunderstood across markets from energy to health services.

Effective competitive markets need well-designed and continuously adjusted framework of rules.  Government may regulate to address ‘market failures’ or to secure specific policy objectives.  But how government chooses to set the rules and regulate markets is crucial.  Interventions can easily, albeit inadvertently, damage both effective competition and achievement of policy goals.  Regulation of markets needs to be targeted, proportionate and intelligent.  Regulation that attempts to specify markets’ precise outcomes is likely to have high costs. It is all too easy for government and regulators to replace market decision-making with – their own – monopoly decision-making.

The process of regulation, and of policy-making affecting markets, attracts lobbying and the risk of capture by partial interests. It offers temptation to politicians to act in response to such pressures.  Effective institutional arrangements are needed to combat such pressures, to ensure objective, stable and rules-based regulatory arrangements.

Recommended Reading