Adam Smith Institute

Dr Harry Bush CB, head of economic regulation for the UK aviation industry, was our guest at a Power Lunch in Westminster this week. He spoke to the theme of the impact of the EU on regulatory policy in the UK.

Less than benign, I would say. If we're going to have regulation, then I can see that there are some things done better internationally. It might be better to have a common system of airspace regulation, for example, rather than lots of different countries doing their own, unrelated things. That being said, the 'Single European Sky' policy that has emerged is an over-regulated mess.

The airlines of most European countries started as national 'flag carriers' and public ownership of them is still rife. The whole sector, airports and all, has long been regarded as something that governments should own and run, or at least take charge of. The idea that airlines and airports can run in competition – or even that air traffic control might be contracted-out to competitive providers – or that regulation should be independent of government – ruffles no feathers in the UK any more, but is still thought to be pretty nutty in the corridors of the Berlaymont.

The Treaty of Rome is a surprisingly pro-competitive document, though its execution has largely been the opposite. For some years, with the Irish commissioner Charlie McCreevy in charge of competition, though, even the UK government has been forced to bring competition into its public industries, like mail delivery, so let's be thankful to that. But in sectors like aviation, where governments have been deeply involved for years – and, with terrorism, the climate change agenda and immigration, there are more calls for them to get even more deeply involved – I think the UK could end up with less competition, rather than more.

Across the country Santa's magical sleigh ride has been grounded because of health and safety, but the immediate culprits are not who you think. It seems a number of insurance companies are worried that the combined effort of riding through towns and villages while waving to children will cause the old man to tumble out of the sleigh and hurt himself. In West Midlands, Santa now must harness himself into his seat. In Northumberland, the town of Alnwick has been forced to forgo the sleigh altogether in favour of a bus. Usually, we blame these kind of frustrating and paternalistic policies on the government and Health and Safety. This time, two private insurance companies demanded that the two towns make the changes or face such high premiums that the event couldn’t go on. The companies held their ground, claiming the restrictions "protect him from the speed of his own sleigh," which, incidentally, runs at about 5mph.

This may seem odd, until we remember that it's only because of government regulation that the towns have to have insurance in the first place. The insurance industry is now taking cues from a government that encourages a culture of protectionism. The government operates under an ethos of paternalism, that it is better to keep the children indoors than let them outside to skin their knees. Out of this comes a society required to have insurance against hazard and more likely to sue when things to do go wrong. The growing philosophy of people, beginning in America and working its way over here, is that when something goes wrong there must be someone to blame and some financial compensation owed. Because of this, people expect some government or organization to hold them up when they fall, therefore more people buy insurance, more people make claims on that insurance, and premiums increase. And eventually, the regular enjoyments of life, like Santa and his sleigh, become regulated literally harnessed beyond recognition.

Alistair Buchanan, head of the UK's electricity and gas regulator was our Power Lunch guest this week.

Nice man, and he answered all our questions fully and frankly. But I still think he should pull his finger out. When electricity was privatized, it took a while to build up competition. Then for a while, competition was very active. But is it now? I don't think so, and neither did some of our experts round the table.

Too many political issues I guess. Government's desire to be seen to 'do' something - on insulating ourselves from Putin's gas, carbon reduction, more cuddly windfarms, 'sustainability' - has given us an energy market driven by rules, not competition.

Meanwhile, if you really want to make money in this sector, don't try to generate electricity cheaply. Build a wind farm and pocket the subsidies.