A group of Conservative MPs, including former ministers and a previous chair of the Competition and Markets Authority, have called for greater parliamentary accountability of the UK’s regulators.
The group, known as the Regulatory Reform Group, has published its demands in a new report — "The purpose of regulation" — that appraises the UK’s regulators responsible for key economic sectors including energy, housing, and financial services.
The report has identified a number of systemic issues covered by four main categories:
- A lack of strategic direction to and by the regulators.
- Strained regulatory relationships, both between industry and regulators, and between regulators themselves.
- Incomplete lines of accountability around the objectives set for regulators and the measurement of regulatory performance.
- The need to build up greater skills and knowledge within regulators and support them with sufficient resourcing.
The report says it is essential for powerful parliamentary accountability to be imposed across the regulators for the UK to realise its long-term growth ambitions.
Chair of the RRG, Bim Afolami MP, said: “Unaccountable regulators are directly hindering the UK’s growth prospects. Regulators have the potential to be key drivers of the government’s long-term ambitions for the UK, not to mention enablers of economic growth, but without adequate oversight from parliament, this potential has been lost.
“This report is not proposing that regulatory reform holds all the answers to unlocking growth in the UK, but it is certainly a start.”
Building back better
The report seeks a new blueprint for regulatory oversight that deals with the immediate issues faced by consumers as well as long-term aims for the UK such as boosting prosperity and tackling challenges such as international competitiveness.
But slash and burn deregulation is not on the agenda, say the authors, rather “a smarter, and more democratically accountable approach to overseeing regulators to deliver better outcomes for British people and the British economy”.
The report highlights examples where this has been achieved, arguing for a similar approach to be implemented systematically across the regulatory landscape.
It also highlights where it is not working as well. Regulators interact with industry, yet “the regulator-to-regulated relationship is not always collaborative and can be defined by mistrust, deterring innovation and leading to an excessively risk averse culture”, says the report.
A cross-sectoral business advisory council has been formed and is chaired by Tracy Blackwell, CEO of Pension Insurance Corporation.
Blackwell said of the RRG report: “We need to be smarter about how our regulatory regime can best benefit the economy, communities, households and individuals across the country.
“As businesses we really do need to ensure stability and growth across the entire economic cycle.”
Blackwell suggested that the advisory council would complement the work of parliamentarians in the RRG “by identifying common regulatory issues across sectors, providing specific examples of breakdown, but also helping with an overall, systematic appraisal of our regulatory system — where it works well and what can be improved”.
Seeing the bigger picture
A key recommendation is a new committee of both Houses of Parliament, dedicated to standing scrutiny of the UK’s regulators. Rather than duplicate the work of existing select committees, this committee would “take a holistic view of the regulatory environment and understand the impact of regulatory performance on a series of overarching goals including consumer protection, growth and competitiveness, ESG, market stability and risk”.
Former secretary of state Robert Buckland said: “It is important to note that this project is by no means an ideological ‘race to the bottom’ in terms of regulation.
"All we are seeking is a more transparent and proportionate approach to regulation where, crucially, regulators are held accountable against the objectives they are mandated to deliver.”
Whereas Richard Fuller, former economic secretary to the Treasury, said the UK regulatory system has been undermined by a democratic deficit that has not been addressed since Brexit.
“After leaving the EU,” said Fuller, “we’ve handed our regulators huge powers over really significant parts of our economy, with little to no democratic oversight of how they are exercising these powers, or way of measuring their performance.”
Redefining regulators’ roles
The report also recommends establishing a clear definition of what a regulator is to enable better scrutiny and a dedicated Office for Regulation within the Cabinet Office, tasked with managing and improving regulatory performance,
It also suggests that an open, two-way dialogue on regulatory implementation and performance should begin, alongside a new "accountability framework", to establish a standardised set of metrics to measure the performance of the UK’s major economic regulators.
Finally, it recommends an outcomes-based approach to future regulation.
Former chair of the Treasury select committee and ex-chair of the Competition and Markets Authority, Andrew Tyrie, said: “All of us are now much more vulnerable to rip-offs across regulated industries. Part of the problem — and part of the solution — lies with parliament.
“Too many decision taken by powerful, anonymous quangos, and affecting millions of people, go scarcely scrutinised and are inadequately explained.
“Parliament must now do more, much more, on behalf of the public, to challenge regulators to perform better.”
At the very least, a committee dedicated to regulators should be formed, said Tyrie, and parliament should name and shame those regulars that fail to fulfil their statutory obligations and duties.
He added: “An era of increasingly anonymous and powerful quangos, often underperforming, has to end.”
People in glass houses
The government is said to have welcomed the report, and Andrew Griffith MP, city minister, said: “This is a timely report which clearly sets out the opportunities from getting regulatory systems right. In financial services, the government is — via the financial services and markets bill — already taking steps to align regulators objectives, improve their accountability and to focus more on outcomes.
“The authors rightly remind us that for the economy to succeed, wider culture needs to acknowledge that risk has to be sensibly managed rather than avoided.”
Steve Webb, partner at LCP — and a former pensions minister, himself — said that it is parliament itself can assist regulators by setting its own house in order.
“Regulators are an easy target, especially when things go wrong,” said Webb. “But in most cases regulators are operating within a framework set by parliament, and MPs need to take more responsibility for monitoring whether the regulations they create are fit for purpose.
“There is a real risk that regulations are ‘done and forgotten’ as the political debate moves on to the next topical issue, but more time needs to be spent reviewing whether regulations have had the desired effect.
“By all means let us call regulators to account, but let us not use this as an opportunity to ‘pass the buck’ when the real problem was the rules passed by parliament in the first place.”
