Ian, first off welcome.
The licence is free to apply for once you have a pass certificate or candidate number that the exam center confirms is a pass.
The exam costs as does any course or practical assessments should a candidate wish to study for the exam outside of a regulated course. The foundation licence course and exam does not cost much, mine was £50 which included 6 evenings tuition and the exam fee.
Why do you need a licence ? Basically the hobby uses frequencies that are shared by the MOD and other services on a secondary user basis. If you have a licence it is assumed you know enough to be where you are allowed and also know when to stand aside for users that have a priority user standing. Also, our hobby is different from CB as most Hams that progress to the Intermediate level should understand radio and antenna components and fix the thing when it goes POP. You are working with currents that can be lethal and thus the licence shows competence. Radio is a prep in my opinion and to fix a prep is also a prepping skill !
The hobby may be a daily or periodical thing but when on air it is great fun be it chatting with known or regular stations or just seeing how conditions make the days radio play go (different atmospheric conditions open some bands and close others with contact areas being different on different times and days).
There are rules that in the mundane radio world we must comply with. Politics is frowned on as is swearing or racism. There is also rules that would stop you using the amateur bands for advertising your business and some real stupid rules that would stop you giving directions to a venue, even if it's a radio club or field day (Personally I think OFCOM should have a think about that one if the hobby needs to attract new blood).
The hobby becomes a passion and having a body which can remove your right to use radio for transmission is a fair way to keep standards up and stop the hobby gravitating into sewer.
After the course and exam costs of each of the 3 levels of licence the licence is free if registered on-line. There is a licence condition that licenses must be renewed by notification within a period not greater than 5 years, this too is free if again done on-line.
Who regulates amateur radio ? well in the UK it is OFCOM but the Radio Society of Great Britain work in hand with OFCOM to make our hobby as fluid as it can be (looks at all the Hams rolling on the floor at that last one)
Also why we need a licence, as part of our radio conditions we give the service users the right to call upon us to use our equipment or to pass on messages on their behalf. CB or PMR do not have the registration we have and thus in an emergency our licence gives the service users an idea of where amateur stations are that may be called upon to help.
I've saved this for last regarding the who regulates the hobby. In short, we the amateurs regulate it on the most direct and personal level. The standards asked for from the amateur is a way to keep our hobby that we enjoy. Idiots are ignored and regular idiots tend to have a run in with Ofcom. I believe the fine for illegal use of amateur bands and equipment is up to a £5000 fine and/or 6 months in prison, I stand to be corrected on that though ?
Now if you have a radio which can transmit on any amateur bands but just use it to listen you're committing no crime. If the SHTF then would OFCOM have the time and man-power to worry that much about a licence, I'll leave that for you to ponder
Anyhow, hope that made some sense, but if it didn't then ask away, there's plenty on here that will be more than able to fill in the bits I've forgotten.
Wulfshead