Select Committee on Deregulation Minutes of Evidence



Examination of witnesses (Questions 26 - 39)

TUESDAY 30 JUNE 1998

MR CHRISTOPHER HASKINS, MR GEORGE KIDD and SALLY PICKLES

Chairman

  26.  May I welcome you, Mr Haskins, to this meeting. In doing so I would like to congratulate you on your life peerage which has recently been announced. I know you have not yet taken up the position but the congratulations of this Committee too on that appointment. Can you introduce your team to the Committee, and then if you want to make a few opening comments about the work of the Task Force and yourself you are most welcome to do so before we ask you a few questions.
  (Mr Haskins)  George Kidd is Deputy Director of the Unit. He spends I suppose 50 per cent of his time working for the Task Force and 50 per cent of his time on the Deregulation Unit's internal activities. Sally Pickles works for me I suppose 80 per cent of the time on Task Force business. I am Christopher Haskins, Chairman of Northern Foods and of Express Dairies, and I am spending about two days a week on this activity, unpaid. This activity has been in existence, as you will all know, for a number of years. Under the previous Government it was known as the Deregulation Task Force and the new Government changed it to Better Regulation, but a lot of the principles which guided the previous Task Force apply now. Having said that, when we got into business last October we found, much to our surprise, that nobody had ever written down the basic tests and principles of good regulation, which we did. We produced a document which has been a best seller. We have issued about 20,000 of them, which could not be better and I hope we are going to make it better later on. This document tried to establish for Departments certain basic tests and principles of good regulation, first of all identifying policy objectives behind regulation (of which there are six or seven); secondly, identifying alternatives to state regulation, like Stock Exchange intervention and voluntary regulation; thirdly, pointing out to Ministers, particularly very ambitious Ministers, the pitfalls of over-regulation and over-enthusiastic regulation, of which there are many; and fourthly, discussing the very difficult issues relevant to your work here of redundant regulation. Regulation basically is about giving citizens proper protection from market failures and from various other hazards: public safety, environmental protection, and also about promoting the rights of citizens. The factors that concern us are the issue of proportionality and risk in the way regulation applies across the spectrum, problems of enforceability, consistency of enforceability; practicalities of enforceability—many regulations may be well thought out but they are totally unenforceable when it comes to it; and accountability of enforcers. Many times this seems to be a problem. Half of the members of the Task Force come from small businesses. There are eight small business representatives, two from larger businesses if you include my small business as a large business, two consumer group representatives, two enforcers (we have a policeman and a trading standards officer), a Think Tank representative and a trade union person. We are very interested obviously in small business exemption and where regulation affects them. Regulation seems to us particularly to impinge on small businesses rather than large businesses. Large businesses rather like regulation as a way of creating competitive advantage. The tension is between small businesses who want to be under-regulated and consumer groups who clearly want regulation. Our job is to get that balance right. The purpose of the Task Force is for me to bring those conflicting interests together and the credibility of the Task Force is based on getting those conflicting interests to agree a common line on a particular issue, so therefore you can get a group of consumers, a group of trade union people, and enforcers and business people saying, "This is a proper course." We think that has a lot of public credibility in the way we do our job. We are also particularly interested in interdepartmental issues. If you take the issue of child care for example, which we are looking at, three Departments see it in three different ways. The Department of Health's primary interest is regulations to protect the welfare of the children. The Department of Education's primary interest is to get them all to get `A' levels, and the Treasury is purely interested in getting their mothers back to work. These are three different objectives which have to be reconciled, and we think those are quite interesting. There are constant conflicting objectives and regulations. Take the issue of my own industry, food. On the one hand citizens rightly want safe food and that particularly applies to well-to-do citizens. On the other hand poorer citizens want affordable food. There can be a balance. You have to take a practical line between safeness and affordability. On the issue of redundant areas, of which there are many, there are still in many areas wartime legacies of regulations which might have been appropriate when the state was controlling everything, but in my view lack relevance now. Food again is an example where there are lots of wartime regulations which really do not apply now. There is a legacy of regulation going back to Victorian times where the state thought it very proper that it should tell us how to behave on Sundays, a moral regulation I think. The previous Government has done quite a lot in that respect but I think we must keep pressing on getting rid of old-fashioned moral regulations. We are looking at areas like licensing for example and trying to modernise the approach on that, and finally of course, there is the issue of Europe, which is a constant concern, that Europe is creating new regulations, which is almost inevitable as part of a single European act and a single market. Are we getting rid of regulation to compensate because an awful lot of European legislation it seems to me supersedes the regulation which is already there. This Government in my view has been slow to use the deregulation process, partly because they have got big manifesto commitments and therefore the Departments are very keen to use their parliamentary time to get the new business through, and therefore it has not been a priority. We did have a meeting with the Prime Minister in March and I raised this issue with him and he was very interested in it. There was a technical problem (nothing to do with me) about speeding up the process of deregulation but I know he is interested in that and we shall certainly be pressing him to see if we can speed up the process.

  27.  Obviously one of the reasons we are seeing you this morning and having a session with the Chancellor of the Duchy of Lancaster is exactly that, that we would like to see some more use of what we can do in this direction. Having been in the position now for nearly a year, what do you see as the impediment to better regulation?
  (Mr Haskins)  The impediment to better regulation seems to me to be to an extent departmental. I am amazed how little control of the day to day running of Government the Prime Minister and the centre have over Departments. Departments are notoriously vertical in their approach towards regulation rather than horizontal. This is a weakness of the British system. Therefore, treading on the toes of Departments from the outside and saying to them, "Are you sure you have taken into account the consequences of what you are doing in that Department against what might be happening in another Department?" is a difficulty. Departments are notoriously loath to abandon old regulation. Campaigning Ministers have always tried to make a reputation for themselves by introducing new regulations to ban this and ban that, and it has always been a way of getting headlines, but pushing regulations out quickly without the test of proper consultation and without the test of the principles can create bad regulations and there have been examples of that in my view. There may be good policy reasons for regulations being introduced but that is not our job. Our job is not to comment on policy. Our job is to comment on whether the regulations a good one or a bad one.

  28.  You have indicated a number of the principles of good regulation. This Committee has three particularly key areas that we have to look at. One is the question of whether we believe there has been adequate consultation, with which we found one or two problems in the previous Parliament, then whether there is necessary protection for both consumers and affected bodies, and of course where there is actually a burden being removed by any proposals that have been put to us. Do you see any way in which the principles of better regulation are at odds with and clash with the purpose of this Committee which was of course established as a result of the Act?
  (Mr Haskins)  No. We should be about better regulation. Having said that, better regulation is a combination of transferring regulatory burdens from one group to another. That may be an effect which may not actually reduce the regulatory burden, but it may introduce better regulation. My own instinct all the time is to ask Departments, "Why are you doing that?", in other words to challenge the inexorable drive towards regulation. Whilst I would not say I am a deregulator I would say I am a challenger of regulations to make sure that before people move the quality of the regulation is okay. I see regulation as being not all bad. Regulation delivers goodies to people in the social security world and all that sort of thing. Regulation delivers good outcomes in terms of the environment. Regulation produces good outcomes in terms of public safety. We are not talking about whether we should have regulation or not have regulation. We are talking about the degree of regulation. Once you get into the degree of regulation the only way you can judge that is on a qualitative basis.

  29.  So perhaps to some degree even prior to the change of Government the reality is that as the previous Government started to deregulate they actually at times were moving towards better regulation because they found they could not just scrap regulations; they had to put more appropriate, sensible regulation in its place.
  (Mr Haskins)  I think so. It is for others to say but I think the previous Government's aspirations to deregulate were aspirations more than achievements. My impression is that the Departments were quite effective at beating off the deregulators, as you know. That is for others to comment on.

Mrs Lait

  30.  You referred to your review of child care. I just wonder whether you are finding a conflict between giving local government powers themselves to run their own regimes in areas like child care and rest homes, and the principles of better regulation that you would wish to see and whether you think it is better for democracy for local government to be able to make these decisions or whether you would wish to see such regimes dictated from the centre. I do not want to put it in quite such emotive terms but I am sure you know what I mean.
  (Mr Haskins)  We know exactly what you are on about. What I should have said is that we have taken four subjects during the year and we are reporting on them, so we will be an accountable quango. In other words our recommendations will be there for the Government to respond to. We are actually reporting on them. We have already done one on care of the elderly. We are doing one on charities. We are doing one on licensing. We are doing one on child care which is coming out next week and I think it is fair to say that on that particular issue we have expressed concern that local authorities, who offer a service of child care themselves, regulate private child care but they do not regulate themselves. We are saying that is totally wrong, that the provider should also be the regulator. There is actually no regulation over child care carried out by a local authority. We are saying there should be. We are also saying, with some hesitation, that there should be a national rather than a local approach to the issue of child care at any rate. National agencies have the advantage of consistency, that you get a consistent implementation and enforcement of regulation. They have the disadvantage of accountability in my view. This is an ongoing debate as to whether, in terms of accountability, it is much better to have as much regulation as possible carried out at a local level. On the other hand, you are going to get inconsistencies in approach, and one of the inconsistencies is the issue of minimalist standards. Local authorities sometimes say they are going to establish their own standards which are above the statutory standard. We are saying that should really not be. It is terribly important that we have understood, established, basic standards to which everybody is entitled. If anybody wants to add to those on an optional basis, fine, but we do find that there is a lot of inconsistency in the application of basic standards right across the board.

  31.  You have mentioned the various areas that you are about to report on. I just wonder if you could give the Committee any clues other than those you have hinted at already as to what is going to be in those reports.
  (Mr Haskins)  I am sure we can do; I would have to take advice on this. On the licensing issue we are raising the question about whether it is appropriate nowadays to have magistrates issuing licences as opposed to local authorities. That is going to be a contentious issue. I am not saying that we are going to get a great deal of support on that. We have already commented on the consultation process in the Food Standards Agency and we have commented positively about the Government's approach towards the Food Standards Agency. We felt that that approach did meet the sorts of principles that we have established. We were somewhat more critical about the Working Time Directive where we felt that not enough time was given for proper consultation, Both of those are very sensitive areas of regulation, as you can appreciate. We shall be following the Food Standards legislation with very great interest to make sure that issues of proportionality are covered. This is an area where proportionality can go out of the window very easily. It is also an area where Ministers understandably have to be very careful to protect the public interest in getting a proper balance into the thing. We are very concerned about consistency and chaos across Departments about the way they do apply regulations generally. What other ones have we done, George?
  (Mr Kidd)  We have reported on consumer affairs.
  (Mr Haskins)  Yes, we have had some fun and games with that one. We think the British loaf is a bit of an anachronism but I am told by everybody from Anita Roddick onwards that this is totally wrong, that if you did not have the British loaf the old people of Britain would disintegrate.

  32.  Leading on slightly generally perhaps from that and refusing to take up the particular challenge, given that you come up with proposals for deregulation, how do you then persuade Government Departments to bring forward the proposals? Do you have any authority to do so or is it persuasion?
  (Mr Haskins)  The process we have is that we like to take a subject where the Task Force has got some expertise so that if you take charities, for example, we have Sue Slipman who, whatever else she knows, knows a lot about charities. We then decide the approach with the officials. We then talk to the Department initially and say, "This is what we do". We then go away and ask people, we use outside advice and we then produce a report that is agreed by the Task Force and then I go back with the sub-group to talk to the appropriate Minister and to the officials to make sure that what we are saying is accurate. Then we get a bit of tension or maybe not some tension. We then publish. Our recommendations are basically through the Chancellor to the Prime Minister. We have had a very constructive meeting with the Prime Minister and the Prime Minister thinks we are doing the right thing. This, for reasons which mystify me, seems to have a very concentrating effect on the activities of Ministers and Departments. My predecessor had the same thing, that if you do not have the support in this sort of activity from Downing Street, you do not get it off the ground. You really have to have that because otherwise individual Departments just sideline you. It used to be in the DTI for a bit but when Mr Heseltine came from the DTI to the centre he brought it with him. I think that is where it should be, frankly, and I do not think you would have the clout otherwise. At the end of the day we make these recommendations. We would come back six or 12 months later to see when and where the Government moved on those and it is our view as an independent task force that we should comment freely and openly. I talk about issues up and down the country. We are having hopefully a good debate amongst consumers and business people about these issues so that people understand what they are about. You can actually make this rather boring subject quite interesting for people if you try hard. You have to try hard.

Mr McCabe

  33.  I just wanted to return to this issue of child care. I was quite intrigued by the idea that you think it might be possible to have some kind of national regulation there, although I understand the point you make about the variations across the country. I agree that it is probably wrong that the local authorities as providers should also regulate the private sector. It strikes me that this is a complete minefield. No-one is sure whom to regulate, whether we are regulating the private agencies, the nanny agencies, whether we are regulating the private individuals via a register, and the costs and the complexity of that regulation will be enormous. It may be why we have got such wide local variations, because no-one has been able to grasp it centrally. I am curious to know how, in the interests of proportionality and not imposing unreasonable burdens, it will be possible to create a framework for a national regulation. It would take account of both the differences in terms of individuals, small employers, agencies, public safety, which I guess is at the root for demands for this regulation, because it seems to me this is a recipe for an extremely cumbersome and potentially very expensive framework.
  (Mr Haskins)  It is one of the most complicated regulatory areas, as you say, because (a) it is complex and (b) it raises issues of public safety all the time. One of the issues I have found in the public regulation as opposed to company regulation is that it is very important in these areas that you actually give the enforcers some discretion. In all these areas the people who are applying the rules have got to be given some discretion; otherwise they cannot do their job. One of the concerns I have is that because of media pressure one can get into a situation where enforcers are not prepared to use discretion. Not only that. We have for example local authorities where they are giving instructions to many primary school teachers not to touch the kids in their care. One of the things we do know about problems with young boys is the shortage of male primary school teachers. Eighty eight per cent of them are women. We are going to have a hundred per cent women if those are the sorts of rules. This is just making the world completely crackpot. But the local authorities are defending themselves against sueing. Somehow Government has got to try and grasp this nettle and get a balance back. Above all else the key thing is to have regulatory agencies which have a high degree of credibility. One example of a regulatory agency which has a very high degree of credibility is the Health and Safety Executive. That is a particular organisation which we can use as a model. The Environment Agency itself probably has not done that. These are national agencies and this is an issue I have not quite resolved in my own mind, as to whether we should be going down a national approach with this or leaving it at a local level. At a local level it is going to be a lot messier. It partly relates to local government, frankly, but if we need to apply more delegation then we have to have stronger local democracy than we have. One of the concerns one has is that if local authorities are applying national regulations on behalf of national Government, then there is a danger that you fall halfway between. They do not feel fully accountable for the policy as it were.

Dr Naysmith

  34.  I want to go back to what you said earlier on about the Working Time Directive and the lack of consultation. I happen to agree with you and I think you are right in saying there was not enough consultation about it. Yet there was a funny thing. It was of course a piece of European legislation about which for a couple of years there were myths and all sorts of rumours about what it was going to be, and then when it actually came into effect there was very little consultation. How do you think we can do that better in future?
  (Mr Haskins)  There was a specific difficulty the new Government was under because the previous Government had been rather slow and there was a suggestion that the European courts were going to weigh in and start arraigning us in front of the courts. I think the Government felt there was particular pressure to get on with it really quickly. I personally think that the Working Time Directive has been a bit of a bogeyman. It is nothing like the issue that people have made it out to be because there are so many exemptions and so many opportunities for employees to make their own decisions about whether they participate or not, and it seems to me to be rather poor European gesture politics which has the ability to irritate lots of people and at the same time does not really deliver anything significant to potential beneficiaries because of the exemptions. I think the principle has got to be plenty of time to consult. For the most part I would say the Government has done that reasonably well in most of the legislation we have been looking at for the last nine months.

Mr Chaytor

  35.  Could I ask a more general question about the work of the Task Force because, as I understand it, your work so far has been in two parts. One is the establishment of the general principles of better regulation. The second is the investigation of various specific areas which your members thought were worthy of investigation. Given that the Task Force has a fixed life, it has been established for two years, and given that the topics that you have selected for specific investigation reflect presumably the interests or concerns of the current membership of the Task Force, there seems to me a dilemma because there is the issue of how do you more broadly disseminate the principles of better regulation that you have established, and there is also the question of what happens to other specific areas that are in need of investigation once the Task Force is disbanded. You see my difficulty? What I am concerned about is that there is a fairly arbitrary list of topics for investigation which reflect the current members' interests, but at the end of the two years that is the end of it. What I want to know is, where does the responsibility lie at the end of that two years for continuing the investigation into specific areas, and secondly, how are you going to disseminate the principles of better regulation more comprehensively? I suppose a subsidiary question (and this relates to Mrs Lait's point about regulation of local government) is that the assumption at the moment is that central Government is the main regulator. Of course increasingly it is not and what we have not mentioned this morning is the role for example of the utilities regulators. My other concern is how are you setting about the dissemination of good principles of better regulation not only within central Government but also within local authorities and the other arm's length regulators that have been established in recent years?
  (Mr Haskins)  As far as the Task Force is concerned the members of the Task Force are appointed every two years. It is only an advisory task force. The Government can get rid of it any time they like.

  36.  So the life of the Task Force is not fixed?
  (Mr Haskins)  It is not fixed.

Chairman

  37.  You are appointed for three years.
  (Mr Haskins)  I have been appointed for three years, yes, but obviously if the Government does not like us they can get rid of us. They could make us redundant in the next two or three weeks when Sir Richard does his damnedest, you know. It is a very good point, the expertise point. As it happens, we have tended to take major issues of new legislation to look at this year and for the most part we have had expertise. We have been able to bring people in. There is nothing to stop us drafting people in if we do not have the expertise on the Task Force. We propose to do that so that when we get into complicated areas that will be the case. Next year with some of the issues we are looking at we will certainly have to do that. The point you make about the culture of good regulation is a permanent campaigning feature which the Better Regulation Unit has been set up to do. There is activity which I have nothing to do with which George and others are involved in which is constantly pressing the message of good regulation right across the Departments. As far as the utilities are concerned, yes, we have had a look at the Green Paper on utilities. We have commented on that and sent that in. The utilities raise a totally new element of regulation. At one time the milk industry used to be regulated, 20 years ago, and I said it was wonderful. They regulated prices and all that. This was the easiest way of making money in history, taking on Government Departments and establishing prices or whatever. The regulatory element there, which I am interested in, obviously, is the competitive element and how you can regulate a fair slicing of the cake within the utilities. The difficulty with this job is that regulation does take you into policy areas and you can find yourself drifting into a situation where the Government puts down a policy option and you say, "That may be a good policy option but it will not work as a policy option because the regulation will not apply." I think some of the talk that is going on about competitiveness in the utilities is slightly spurious talk. There is a lot of sham competitiveness in that area and the regulatory answers to that may be not as satisfactory as they should be. For example, one of the best ways—taking a totally different point but it is a relevant point—of controlling the utilities' pricing policy and financial policy is to get them operating with a very small equity element and a very high debt element. That therefore leaves less scope for discretion about what the shareholders should be getting out of the pot. That is the big nightmare, dividing the cake between shareholders and consumers. But if you define the shareholders' element of that cake much smaller by financing the utility with much more long term debt, you have less of an argument.

  38.  On the question of the utilities regulator, here we have a set of circumstances where the DTI's Green Paper has been published, which covers a range of issues affecting one of the major areas of regulation in the country. We have the Better Regulation Unit and the Task Force which can respond to that but which have no great power to influence it. What concerns me is that one of the biggest chunks of regulation in the land is almost beyond the remit of the Task Force and the Better Regulation Unit because it has been sub-contracted out of central Government's hands.
  (Mr Haskins)  No, there is no reason why——we cannot actually force Government to do anything. We are only advisory. But we can give the Government advice on a lot of this regulation. You say this is sub-contracted out of their hands. That is why I am quite interested to look at a lot of the private voluntary regulation. We are allowed to look at the Stock Exchange for example, the way it applies voluntary regulation. A lot of the utility stuff is, as you say, below the surface. The police for example are self-regulatory. There is a very interesting subject. The General Medical Council is another area where it is outside Government responsibility. A lot of these agencies of course have got into the famous debate that Mr Michael Howard and Derek Lewis had about who was letting the guys out of gaol. That was a clear example of a not entirely clearcut regulatory process where accountability did not seem to be clear. It is a genuine problem, that if you give these agencies a great deal of accountability in terms of regulation, then democratic questions arise I think. We are only part-timers. I give two days a week to this, so we hit the interesting topics in a slightly superficial way. We are not a Royal Commission. We are doing these things in a very superficial, men and women coming off the streets to ask some awkward questions and then going off and doing certain jobs as we want, sort of way. But if the Government wants to strengthen the activity in the centre, this may be one of the areas where they might have to give it consideration.

  39.  Would it follow therefore that an examination of the operation of the utilities regulator would be a legitimate concern of your Task Force?
  (Mr Haskins)  Yes.


 
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