Frontier Economics

Frontier Sectoral Interests

Frontier Economics have a wide and diverse array of interests. These are

• Energy
• Financial Services
• Healthcare
• Media
• Post
• Retailing
• Telecoms
• Transport
• Water
• Competition
• Public Policy
• Regulation
• Strategy
• Contract Design and Evaluation
• Dispute Support

They say that they 'blend economics with innovative thinking, hard analysis and common sense. This helps us home in fast on market dynamics to create powerful arguments and robust strategies'^[1] To help grasp what is actually meant by this seemingly innoccuous statement one needs to examine their activities in their different sectors.

For example in water they say

• 'Frontier's water practice combines an in-depth knowledge of the water industry with the ability to apply advanced economic techniques to provide analysis to companies, investors and regulators.

• Frontier's staff members have been advising water companies from the beginning of privatisation in the UK, preparing companies for the regulatory regime and advising them on tariff setting and regulatory strategy, including preparing submissions at price reviews, advising on mergers and acquisitions and analysing tariff design issues.

• Outside the UK we have advised on industry restructuring, the design of regulatory frameworks, the assessment of the financial viability of reform programmes and the welfare impact of such reforms.

• The expertise we have developed enables us to provide an unparalleled depth of insight into the economic issues relevant to water industries'^[2].

- In their brochure for water they give - 'Examples of work carried out by Frontier staff

• The preparation of long-term policy for the urban water and sanitation sector in India. This involved assessment of the potential efficiency and financing gains from increased private sector participation, and the means to achieve this.
• Providing advice to the EBRD on the implementation of their recommended strategy for the rapid introduction of private sector participation into water services in Eastern Europe.
• Developing a strategy for restructuring the water services industry in Bulgaria. This included development of a corporatisation plan and corporate governance arrangements, tariff and environmental regulation, and investment appraisal.
• Assisting with the development of plans for the transfer of the operations and responsibilities of the current public utility to the private sector in Trinidad and Tobago (1998-99)'^[3].

In the same brochure they proclaim how 'The successful development of the water and waste water industry in any country revolves around the following issues:

• how the private sector should be involved;
• the right industry structure; and
• the way in which it should be regulated.

The members of Frontier’s water practice have played a central role in the evolution of the regulatory regime in the UK, shaping the debate on many issues and analysing and improving aspects of the regulatory framework. This range of experience has underpinned advice given in many countries where regulatory and institutional reform were undertaken, possibly as part of a privatisation programme or private sector participation'^[4]

They seem to be saying here, and their examples of action around the globe support their assertions, that they believe privatisation of water, or at least private involvement in water, is a prerequisite for a successful water industry. Reading between the lines they also seem to be saying that they can help advise their clients, private water companies, to help shape a regulatory environment conducive to their interests. This is especially interesting when one considers that the senior associate at Frontier Economics in their water section is Sir Ian Byatt, the current Chairman of the economic regulator for Water in Scotland, this is known as the Water Industry Commission (WIC). A water utility which, incidentally is still publicly owned. This is a situation that does seem to suggest that Sir Ian Byatt has a conflict of interest through his involvement with both the (WIC) and Frontier Economics.

Controversies

Public Policy

According to Frontier they have 'worked for most government departments in the UK. Our focus is on helping policy makers through the provision of practical, policy focused advice and analysis. Our work covers the full spectrum of policy analysis, including:

Cost benefit analysis;

• Policy impact assessments;
• Market studies;
• Public sector procurement; and
• Public sector choice and competition.

We pride ourselves on providing high quality advice and analysis that is both timely and accessible to a non-technical audience. We are used to working closely and sensitively with stakeholders, and regularly present our work at the most senior levels of government' ^[5].

It is pertinent to question if the regular presenting of their work, presumably - at least occasionally - on behalf of private clients, is successful for those clients in terms of public procurement contracts. Sir Ian Byatt is a senior associate in the Frontier Public Policy team.

Water Industry Commission for Scotland

Frontier Economics were appointed the financial advisors to the Water Industry Commission for the non domestic sector which was opened up to competition in the (20040 Water Services (Scotland) Act. It is not clear how open the tendering process for this role. This is particularly relevant given that Sir Ian Byatt has a role in both these organisations, the public body giving the contract and the private Frontier Economics gaining the contract.

FoI Report

The recent report undertaken by Frontier Economics on the workings of Freedom of Information (FOI) and commissioned by the Department of Constitutional Affairs is deeply controversial. If carried out it will hugely decrease the effectiveness of the FOI and as such the openness of government. If the proposals by Frontier Economics on FOI are introduced then the notion of open government promoted by the current government will be seen to be nothing more than rhetoric. Unfortunately there does appear to be a move by the present government through Lord Falconer at the Department of Constitutional Affairs to curtail campaigners, journalists and others from accessing information.

It was said recently that

'A cabinet paper leaked in July showed what Falconer was up to. In a bid to throttle the FOI infant in its cradle, he decided many requests would in future be rejected as too expensive to process. To head off critics, he would commission a cost-benefit analysis. This would then give him a "solid evidence base" to make the changes. The consultants, Frontier Economics were paid £75,000 to come up with the figures ^[6]. The firm's directors include Sir Andrew Turnbull, the former Cabinet secretary - although Frontier Economics says he was not directly involved in the report'.

This article on the threat to FOI and the questionable methodology and figures used to justify changes to FOI is in the references below ^[7].

People

• Gus O'Donnell, former permanent secretary at the UK Cabinet Office
• Sarah Hogg
• Andrew Turnbull, former senior civil servant
• Ian Byatt
• Michael Ridge
• Dan Elliot

References

1. ^ Frontier Economics home page .
2. ^ Frontier Economics Water Sector
3. ^ Frontier Economics Water brochure
4. ^ Ibid
5. ^ Frontier Economics Publicy Policy Section - Overview
6. ^ Frontier Economics FOI report Commissioned by the Department for Constitutional Affairs
7. ^'Cabinet confidential' The government's plan to restrict Freedom of Information requests from the media is not an efficiency drive but brazen censorship, argue David Leigh and Rob Evans