Select Committee on Transport Minutes of Evidence


Examination of Witnesses (Questions 465-479)

MR RICK HAYTHORNTHWAITE AND DR MARK THATCHER

25 JANUARY 2006

  Q465 Chairman: Good afternoon, gentlemen, you are most warmly welcome. Could I ask you to identify yourselves for the record, please?

  Mr Haythornthwaite: My name is Rick Haythornthwaite and I am the Chairman of the Better Regulation Commission.

  Dr Thatcher: I am Mark Thatcher—no relation I should add!

  Q466 Chairman: It never crossed our minds and it is only accidental that you were going to have a hard time!

  Dr Thatcher: Not here, I hope! I am a Reader in Public Administration and Policy and I have worked on regulation and independent regulated agencies in Britain and elsewhere in Europe.

  Q467  Chairman: That is very helpful. Mr Haythornthwaite, could you just tell us the most important conclusions and recommendations you have made to independent regulators about better regulation?

  Mr Haythornthwaite: I think the most important really relates to the governance of the independent regulators first and foremost. The independent regulators do need to have a very clear idea of their objectives. They have to have a very clear sense of their governance to ensure that there is an appropriate governance, preferably with a separation of chairman and chief executive, that there is a mix of executive and non-executive board, that they have a clear commitment to the governance principles of consultation, they have clearly accessible and affordable means of appeal, that they are committed to impact assessments, and I think therefore, Madam Chairman, the process of the independent regulators is important but also the way they conduct their business in terms of spirit is equally as important. It is no good being independent unless you really have the support not only of those on whose behalf you regulate but also the regulated community. Therefore the way the independent regulators conduct their business, the relationships they adopt, the transparency with all of the communities is as important to their licence to operate as the governance that they have in place.

  Q468  Chairman: How have they responded in general to the seven recommendations?

  Mr Haythornthwaite: The Task Force (before it became the Commission) did go back and have a look at how the response had been during the course of last year and actually the response has been positive. There is far more consultation than there used to be. There is more practice of impact assessments, although there are still very considerable questions about the quality of those impact assessments.

  Q469  Chairman: And presumably differences between one regulator and another?

  Mr Haythornthwaite: It is very variable, yes indeed. We have not looked at the CAA and the aviation industry in particular, although one can say, looking very briefly at the sponsorship statement, there are many of the aspects we would wish to see in there, not least the commitment in any primary and secondary legislation to impact assessments, and to driving down the administrative burden, which is very encouraging. In the corporate plan of the CAA I think the words we read about adhering to the principles of better regulation and about the adoption of the principles of the enforcement concordat, all of that is very positive. We have also found in the meetings that were started in 2004 that were convened by the National Audit Office and the Task Force, and now the Commission, where we brought independent regulators together, there is no doubt there is a strong commitment to drive better regulation through, although it is very noticeable that quite often they are quite hidebound by the founding statutes, so often when quite simple areas of deregulation are desired they are not always easy to push through.

  Q470  Chairman: What happens when the regulators fail to follow your recommendations?

  Mr Haythornthwaite: First of all, we make our recommendations to the Government and the Government has, by and large—

  Q471  Chairman: Well then, put it another way, what has the Government done to encourage regulators to take up your recommendations?

  Mr Haythornthwaite: The Government so far has done it first of all by very willingly and rapidly accepting the recommendations that we make. The most important sets of regulations were around the regulators as a whole and certainly by endorsing those there was a strong degree of pressure put on the regulators, even though they are independent, to adopt them. There was really a why explain?" tone to it and certainly most of them have responded. Now it is an important time in the evolution of this because the Less is More Report and the Hampton Report laid out quite clearly some challenges for simplification, making sure that any new regulation was accounted for by a net reduction in the existing stock of regulation and by a very thorough process of administrative burden simplification being adopted by the departments. Now there has to be visible evidence, I think, that the independent regulators are picking up the tone and spirit and the process that we are seeing in departments.

  Q472  Chairman: Are you rather implying that that has not happened totally yet? Is that the burden of your argument?

  Mr Haythornthwaite: No, it is just very early days. The departments are really in the earliest stages of measuring their administrative burden. One has to say that we see the right words in most quarters, but from the standpoint of the Better Regulation Commission we are only interested in outcomes and until we see real outcomes we will retain a tinge of scepticism. However, there is no hard evidence as of today that they are not being adhered to.

  Q473  Chairman: You did identify in the 2003 Better Regulation Task Force report a number of examples of good practice particularly in relation to accountability and answerability (horrible word). Have you seen any evidence of the CAA adopting that best practice?

  Mr Haythornthwaite: I think from our standpoint, bearing in mind we have not beyond that initial report (where we did look at the economic side of the CAA and compare it to Ofgem and Ofwat) looked at it in any detail.

  Q474  Chairman: You mean you have not looked at the CAA in detail?

  Mr Haythornthwaite: The CAA in detail.

  Q475  Chairman: But you have looked across the board at this?

  Mr Haythornthwaite: We have looked across the board and in terms of accountability and answerability, yes, we have seen improvements in quite a number of departments. I think if one takes an independent regulator such as the Financial Services Authority, the Financial Services Authority has made significant strides in moving towards a principle-driven regulatory environment, consulting widely with the stakeholders, and there is a transparency and accountability that is being built up, and there are other examples throughout, but it remains patchy.

  Q476  Chairman: Who apart from you evaluates the performance of regulators?

  Mr Haythornthwaite: There is no hard and fast systematic evaluation of the regulators as far as we see it. Obviously each regulator is accountable to the Secretary of State of the relevant department, just as the CAA is accountable to the Secretary of State for Transport, and one would hope that they would be judged against the sponsorship statement and their performance against that. Moving forward, the only other areas are really what we see through the Independent Regulators Conference where we are able to make an assessment of the direction in which that is moving, and one hopes that this current simplification exercise will expose poor performance and poor levels of commitment to better regulation, but there is no other systematic process that I see to judge the independent regulators.

  Q477  Chairman: To be mildly unfair for a moment, since you found there were differences between the different regulators has it not occurred to you as a group that possibly one thing that you could do would be to create your own set of rules for evaluating the performance of regulators? Is that something that is happening?

  Mr Haythornthwaite: I think there is a set of rules.

  Q478  Chairman: Not the ones that you originally laid down. I am saying do you have any way in which you can evaluate the gaps between what you have asked them to do, what you think they ought to do, and what they are doing?

  Mr Haythornthwaite: Bearing in mind that what we asked them to do represents only a proportion of what the day-to-day job of the regulator is, and therefore I think one needs to be mindful of that, I think we can lay down, as we have, the basic principles of better regulation and a clear goal that we wish to see a net reduction in administrative burdens and regulation as a whole. Against those areas we have the right to scrutinise and vet and we stay in contact with people. Do we have a hard and fast measure that we can throw back in the faces of the regulators? No, we do not, but does that mean that we cannot influence through the various methods you talk about, yes we can, and that is the way we choose to operate.

  Q479  Graham Stringer: I think that meant that you do not believe there should be a regulator of the regulators? Is that what you are saying?

  Mr Haythornthwaite: You are referring to the Commission as a regulator of the regulators.


 
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