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New Series

The European Economic Area Agreement: a short introduction

Our aim in this paper is to explain and comment on some of the principal features and implications of the European Economic Area Agreement (EEAA). A number of misunderstandings about the content and operation of the Agreement appear to have made their way into public discourse in the UK. We are concerned about the distorting effect of these, not only on public perceptions, but also potentially on the Government’s position. Our hope is that this paper may help inform a more considered debate about the UK’s Brexit destination.

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Letters and Notes

A new regulatory framework for the Victorian water industry

The Australian state of Victoria will be implementing a new water pricing framework for the
next regulatory price review in 2018. The framework will apply to 16 of the State’s urban
water businesses and Southern Rural Water.
In May 2016, the Essential Services Commission (ESC), Victoria’s economic regulator,
released a position paper setting out a proposed, new pricing approach and invited
submissions on its proposal.3 Based on feedback received through this consultation process,
the ESC released a final report in October 2016 that sets out the water pricing framework and
approach that is to be implemented from 2018.4

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New Series

The market for residency in Fabellia: a quick introduction

In discourse following the UK referendum on 23 June 2016 significant attention has been paid
to the question What does Brexit mean? The answer seems to be straightforward: it means
UK exit from the EU, which requires UK withdrawal from the EU Treaty.
A much more important and challenging question is What next? Central to evaluation of the
options available is another question, a question about the meaning of words: What does the
expression free movement of persons mean? Put more specifically: What conditions need to
be satisfied in order to be able to say that free movement of persons has been established?

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Essays in Regulation

Brexit and the single market

The UK is currently a Contracting Party to the European Economic Area (EEA) Agreement, and exit from the EU does not necessarily imply exit from the Single Market (i.e. withdrawal from the Agreement). Exit from the EEA would require that extra steps be taken, either unilaterally by the UK or by the other Contracting Parties to the Agreement.
There is no explicit provision in the Agreement for the UK to cease to be a Contracting Party other than by unilateral, voluntary withdrawal, which requires simply the giving of twelve months’ notice in writing (Article 127). A commonly held assumption that only EU and EFTA members can be Parties to the EEA Agreement – and hence that the UK has to be a member of one or other of these two organisations to be in the Single Market – is not well grounded, although UK consideration of an application for EFTA membership is an option well worth exploring in its own right.

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Letters and Notes

Privatisation and untoward consequences in water services: the regulator’s role

Privatisation and untoward consequences in water services: the regulator’s role
Utilities were privatised:-
to enable them to finance investment outside public expenditure controls,
to improve choice for customers through greater competition, and
to harness private enterprise to increase efficiency through incentive regulation.
A regulator (Ofwat) was appointed, independent of Ministers, with statutory duties to secure
that regulated companies carry out their legal duties, and can finance them, and to protect
customers from abuse of monopoly power.

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Essays in Regulation

The political economy of markets

The word market is widely used in contemporary economic and political discourse, but usually without any clear sense of what it means or is meant to refer to. In a literal sense, people do not know what they are talking about. The first part of the essay therefore examines the question: what is a market?
The answer is that a market is an economic institution, i.e. a set/system of rules that structures, regulates or governs a particular set of activities involving exchange of goods and services. It encompasses both the system of rules and the activities governed by them and it serves a specific, particular purpose or function, which is to reduce the costs of exchange transactions

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New Series

Banks, monetary policy and competition policy: how do they connect?

This paper considers the banking system from the respective points of view of EU monetary and competition policy, and the issues that arise when excess credit creates an asset price bubble and crash. Banks are subject to competitive pressures, but are interdependent to a higher degree than most firms. Potential competition policy responses to this combination of features could include monitoring by the monetary and competition authorities to see if a concerted practice is involved where there is excessive bank lending; making co-ordinated behaviour between competing banks subject to the normal competition law requirement that it should provide economic benefits in the real economy, and to consumers; and, if it is established that an asset price bubble and crash has resulted from a concerted practice, adjusting the overhang of debt down to the pre-bubble value of the asset.

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Letters and Notes

The OFT’s Higher Education Report: could do better

The Office of Fair Trading’s (OFT) 14 March 2014 report on higher education found that England’s higher education sector is largely “working well”, but it scratched at the surface of the problems that are facing the higher education market.
The OFT launched a call for evidence in October 2013 to examine whether students are able to make informed choices as a driver for competition in higher education; whether students are treated fairly; whether there was any evidence of anti-competitive behaviour between higher education institutions; and whether the regulatory environment protects students and facilitates entry, innovation and managed exit by higher education institutions.

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Letters and Notes

Heuristics and biases in regulatory decision making

In his thought provoking note Applying behavioural economics at the Regulatory Conduct
Authority, 2 Stephen Littlechild has drawn attention to an important set of questions about the
use of behavioural economics in regulation. The Regulatory Conduct Authority of the paper’s
title is an imaginary agency that made a brief, Brigadoon-like appearance on 1 April 2014. Its
hypothetical purpose is to make use of behavioural economics in regulating other regulators.

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Letters and Notes

UK renewables demonstration projects: who pulls the plug?

At the 2013 Beesley Lecture on climate change policy, David Kennedy, Chief Executive of
the Climate Change Commission (CCC), discussed the role of the Commission in providing
support for promising but not-yet-economic technologies. The last CCC budget report identified these technologies as: wind power (especially off-shore wind), tidal range, geothermal, solar and potentially CCS (carbon capture and storage). As described by David Kennedy, current CCC and government policy is to provide support for
these technologies until they can float off into commercial operation without government
support. But, what happens if they don’t successfully graduate? Who will pull the plug? When,
how and on what basis?

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