Memorandum submitted by Christopher Hood
has attracted increased attention in contemporary public administration
as other policy instruments (notably state ownership) have declined
in importance in the western countries. So it is not surprising
that over the last twenty years the search for ways of achieving
"better regulation" and of assessing the quality of
regulation that has become central to the policy agenda in the
UK and numerous other states.
2. The UK's "principles of good regulation"
as announced in 1998
represent a valuable first attempt to spell out desiderata for
But those principles, and their application, are limited in at
least three ways.
(i) The "principles" (transparency,
accountability, targeting, consistency and proportionality) as
currently formulated have a proverbial character. That is, they
tend to clash with one another at the margin and cannot all be
satisfied at once. For example, the much-criticised Dangerous
Dogs Act of 1991 was a case where consistency and targeting, and
transparency and targeting, came into conflict.
We need ways of scoring regulatory regimes to ascertain design
by sacrificing another.
(ii) Difficult issues remain as to how to
factor risk into regulatory assessment, notably in the "precautionary"
problem of trading off Type I and Type II errors (broadly, errors
of over-regulation and under-regulation in the face of uncertainty),
on which the principles offer no guidance.
(iii) Until recently, the emphasis on assessing
and monitoring regulation was almost exclusively laid on the regulation
of business by government, but the regulation of public sector
bodies by arms-length overseers is also of increasing importance,
with major compliance costs at stake. The Cabinet Office Regulatory
Impact Unit has now begun to give attention to regulation of public-sector
bodies, but its work is in its infancy and much more remains to
be done in this field.
3. Indeed, the whole question of how to
develop design principles for the burgeoning regulation of public
sector bodies deserves to be a central question for the next government,
and there is a case for establishing a Royal Commission or similar
body to investigate the matter in depth. There are at least three
reasons for making such a recommendation:
(i) Regulation of public-sector bodies has
grown substantially over the past twenty years under both Labour
and Conservative governments. Staff in oversight bodies for public
organisations rose approximately 90 per cent over two decades
in which both the civil service and local government service were
(ii) There are few coherent principles governing
its operation, with markedly different styles by different oversight
bodies and no clear ways of assessing the effectiveness or value
for money of such bodies.
(iii) There are important managerial, organisational
and even constitutional issues (relating to the placing of overseer
organisations within the parliamentary and government system)
at stake in the design and operation of such regulation.
4. Regulation of both the public and private
sectors is closely linked to the management of risk to organisations
and their stakeholders (including overall levels of risk exposure,
risk distribution and risk/risk trade-offs). Business risk management
has become increasingly salient in the private corporate sector
in recent years, as a result of experience with high-profile system
failures, more regulation and litigation, and developments in
corporate strategy. Similar issues arise in the management of
the public sector, where organisations must handle major policy,
business and systemic risks7.
5. In principle a business risk management
approach can make a constructive contribution to public-sector
management, to assist with balanced judgement over risks and help
public managers to steer the difficult course between casual risk-taking
and excessive caution. However, private-sector approaches cannot
be carried over wholesale to the public sector, or at least key
parts of it. That is because private-sector business risk management
approaches tend to be focused on a single organisation or profit
centre, measure risk largely in terms of shareholder value and
do not place the main focus on systemic risk.
6. A public-sector-specific approach to
business risk management would need to focus on regimes or policy
delivery systems rather than single organisations alone, on systemic
risk as much as risk affecting one organisation, and on encouraging
intelligent deliberation rather than mechanical routines. Developing
such an approach is a major challenge for the future management
of public services.
1 All Souls College Oxford and Centre for Analysis
of Risk and Regulation, London School of Economies and Political
Broadly denoting control of individuals or organisations by sending
rules and standards and attempting to secure compliance with those
See Better Regulation Task Force, Principles of Good Regulation
1998 (http://www.cabinet-office.gov.uk/regulation/1998/task-force/principles.htm. Back
See Industry Forum in Association with the Smith Institute, Empowering
Government: Reforming the Civil Service, London, Industry
Forum 1999. Back
See C Hood, R Baldwin and H Rothstein, "Assessing the Dangerous
Dogs Act: When Does a Regulatory Law Fail?" Public Law
Summer 2000: 282-305. Back
See C Hood, C Scott, O James, G W Jones and A J Travers, Regulation
inside Government Waste-Watchers, Quality Police and Sleaze-Busters,
Oxford, Oxford University Press 1999; C Hood, O James and C Scott,
"Regulation of Government has it Increased, is it Increasing,
Should it be Decreased?" Public Administration 78
(2) 2000: 283-304. Back
See C Hood and H Rothstein, "Business Risk Management in
Government: Pitfalls and Possibilities" Appendix 2 in Report
by the Controller and Auditor General, Supporting Innovation:
Managing Risk in Government Departments. HC864 1999-2000,
London HMSO 2000: 21-32. Back