The government is exploring how innovation can be encouraged in heavily regulated sectors, like energy and water.

The Treasury issued a consultation paper, alongside Monday’s (29 October) Budget, looking at how regulators can strengthen innovation amidst the technological changes engulfing the sector’s relationship with its customers.

It says: “Where appropriate, government wants regulators to be agile in allowing for the implementation of modern methods and proactive in looking to encourage new innovations, in order to further improve consumer service.”

It says this could include giving regulators statutory innovation objectives to “fundamentally hardwire” thinking to encourage innovation into their work.

The study will explore whether companies are incentivised to innovate as part of efforts to cut consumers’ bills.

It will also examine steps regulators can take to support and promote innovation in heavily regulated sectors like energy, water and telecommunications.

Areas that the consultation seeks evidence on include regulatory barriers to further innovation within the utilities and why some sectors perform better than others in terms of uptake of new technology and investment for research and development.

And it will probe whether regulators have sufficient in-house expertise on the implications and opportunities thrown up by new technologies, such as artificial intelligence and the smart use of data, as well as the right tools to respond to these challenges.

The consultation is being run alongside a wider review of the utility regulators, which the National Infrastructure Commission is carrying out on behalf of the chancellor of the exchequer Philip Hammond.

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