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There has been growing concern about the accountability and procedural safeguards surrounding the economic regulation in privatised utility industries (telecommunications, gas, airports, water and electricity). In the paper, the source of the problems is identified as the overreliance on the discretion of regulators, the absence of consistent and strong procedural protection which would ensure that decisions are explained, and weak and highly ambiguous channels of accountability. The arm's length relationship between government and industry following privatisation has made regulation more adversarial and personalised. In order to deal with this new situation, more formal procedures are required which limit regulators' powers and discretion, increase procedural safeguards, and formalise and strengthen the system of checks and balances which operate on regulators. A positive set of proposals which satisfy these requirements is set out by the author.

As both concept and process, privatization possesses ambiguous connotations and multiple meanings. Webster's Dictionary (1981) defines one related noun, privatism, as “an attitude of uncommitment or uninvolvement in anything beyond one's immediate interests,” while another associated noun, privacy, denotes a state of “withdrawal from society or the public interest” (Oxford English Dictionary, 1972). If government is a means of providing a wide range of collective goods, which do not necessarily lend themselves to market exchange, the public sector is naturally a highly visible target.⁴ At the same time, unrestrained public-sector expansion inevitably leads to public policy failure, as problems of communication, coordination, effective cost–benefit control, and revenue satiation accumulate.⁵ Privatization represents a logical reaction.