Regulation in the post-privatisation era has been described as ‘holding the fort until the competition arrives’. Regulators have tried to encourage new market entrants while preventing dominant players from exploiting their position.

As a result, regulation is often seen as a polarised battle between companies acting in their shareholders’ interests and regulators acting on behalf of the consumer. But what about the public interest?

In most regulated sectors such as utilities or financial services, companies are not just delivering a product. They are providing financial security in old age, warmth for our homes or a sustainable environment for our children.

These multiple objectives are hard to balance and therefore cannot easily be reduced to an economic calculation. That’s why regulation is now increasingly regarded as an issue about public value, not just economic value.

But because public value is hard to quantify, regulatory regimes have tended to focus on things they can quantify – such as price. Increasingly complicated regulatory regimes are emerging as a new rules are created to solve existing problems.

This reduces trust between regulators and regulated companies, who may be encouraged to indulge in ‘creative compliance’ – obeying the letter rather than the spirit of the law.

This report argues that rather than playing cat-and-mouse, regulators and regulated companies could be encouraged to be play ‘the long game’, where trust develops and opportunities to create public value are encouraged.

‘Regulation has achieved a fundamental transformation of Britain’s economic landscape, but its continued success depends on regulators having the courage to embrace new relationships with firms, and identify approaches that will allow these relationships to flourish.’