Page 2: The nature of regulation
Over the past thirty years, UK governments have come to realise that in order to control an industry they do not need to own it. Successive UK governments have reduced the state’s direct involvement in UK industry. Many industries that were previously owned and run by the state have been privatised eg steel, railways, water, gas and electricity. One major advantage to the government is that, by not owning an industry, it ceases to be directly responsible for the risks that go along with ownership, including raising capital for investment, recruiting labour, finding markets for products, maintaining good industrial relations, keeping consumers happy and taking most of the blame when things go wrong. It came as no surprise, therefore, when the government decided not to run the National Lottery itself.
However, governments are reluctant to set industries entirely free. With the National Lottery, the UK government took steps to ensure that it retained extensive control, with a view to protecting the interests of players. Regulation involves the government setting down rules and then making sure that these rules are observed by appointing a regulator to monitor companies’ activity. Regulation is a means of safeguarding consumers and the vulnerable in particular, and ensuring fair competition. Industrial regulation covers many areas, including requiring operating companies to:
- guarantee a minimum level of service to all consumers eg water supply, letter delivery
- seek permission for price increases eg electricity companies, train operators
- observe health and safety regulations eg oil industry, food industry
- submit to regular inspection eg restaurants, abattoirs, nursing homes
- meet set performance standards eg Camelot having to resolve at least 90% of complaints within 10 days - although the company does very much better than that
Not everyone agrees that such regulation is either necessary or desirable. Some argue that, for as long as an industry is competitive, rivalry between the firms within it will safeguard consumers’ interests, because firms will strive to offer the best products at the cheapest prices. By this line of argument, all that a government needs to do is to ensure that companies within an industry remain genuine rivals and that no one firm comes to dominate the market.
In the case of the National Lottery, regulation involves making sure that competitions are managed fairly, honestly and that focus is maintained on raising funds for the Good Causes. The UK has one of the strongest regulatory regimes among all of the world’s lotteries.