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By Baroness Fox
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Urgent reform is needed to improve accountability and performance of UK regulators

(Alamy)

4 min read

The United Kingdom has around 90 regulators. They play an important role in society, setting the rules for huge swathes of activity and monitoring whether they are observed.

Usually power is delegated to regulators, and away from politicians, in order to guard against lobbying and support long-term decision-making, separate from the electoral cycle. During a recent inquiry by the House of Lords Industry and Regulators Committee, witnesses were clear that independent regulation boosts business confidence.

But in some areas, it can be difficult to separate regulatory issues from political ones, as shown by the heated debate around balancing the need to keep bills affordable with the need to invest in our energy and water networks. Our report, just published, found that regulators can legitimately make decisions on such issues, but only if they are given clear enough guidance by the government and Parliament on what they should prioritise.

Parliament needs to be able to turn over enough stones to spot problems before they happen, rather than after

Unfortunately, some regulators have been given long lists of duties and objectives which can conflict with each other, and with little sense of how to balance them. When the government gives guidance to regulators to help them through this muddle, it too often fails to resolve trade-offs that are ultimately political. In some cases, the government instead seeks to micromanage the regulator’s day-to-day operations, as we found in our work on the Office for Students.

The government should make sure that any regulator facing political or distributional issues is given clear, high-level guidance on how to prioritise between objectives, and should not duck or unduly delay decisions on which it should give a view.

The government can also influence regulators through its appointments of their chairs and chief executives, and in some cases through its control over their resourcing. We are concerned at the resulting potential for politicisation and recommend that the government grant more regulators the ability to raise their own resources. Parliament’s select committees should play a greater role in scrutinising appointments, to reaffirm their independence.

Having chaired the Industry and Regulators Committee for nearly three years, I know that select committees play a fundamental role in scrutinising regulators’ performance. However, current practices in parliamentary scrutiny are flawed, with a tendency to react to scandals rather than monitoring performance or highlighting problems early on. The limited time and resource available to committees, and the sheer number of regulators, has led to a growing vacuum in the latter’s accountability. Given the power wielded independently by our regulators, it is crucial that Parliament’s role is strengthened. 

Existing bodies do valuable work that aids the scrutiny of regulators, such as the National Audit Office’s oversight of value for money, and the National Infrastructure Commission (NIC)’s work on infrastructure delivery. The government should put the NIC on a statutory footing and give it greater freedom to examine settled government policy, but giving either body greater responsibility for scrutinising regulators would complicate their roles.

We believe that a fresh approach is required. The government should create a new, independent statutory body – the Office for Regulatory Performance – to support Parliament in holding regulators to account on a more thorough basis. This would provide the resources and expertise necessary to examine regulators’ performance, while maintaining Parliament’s pivotal role in accountability. We also draw committees’ attention to a potential precedent established by the Treasury Select Committee following the global financial crisis, when it embedded its own advisers into a regulator to review its work.

The regulatory trio need to find their tune. The government needs to resolve the political issues facing regulators, and then leave them to do their jobs. Regulators need to provide a stable, predictable basis for businesses, consumers and society to succeed. And Parliament needs to be able to turn over enough stones to spot problems before they happen, rather than after.

 

Lord Hollick, Labour peer and chair of the House of Lords Industry and Regulators Committee

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