Memorandum submited by the National Consumer
Council
This memorandum responds to the call for evidence
issued by the Select Committee in connection with its inquiry
into the Better Regulation Executive.
1. SUMMARY
1.1 The main points in our submission are
as follows:
— There is a need for a strong advocate
for better regulation within government, with a role to provide
ideas entrepreneurship and find effective incentives to achieve
real change across the regulatory state. This should seek to break
down regulatory silos and challenge established cultures of regulation—particularly
within government departments, which have not tended to be subjected
to as much scrutiny as sectoral regulatory bodies.
— We are not able to say how effective
the BRE's attempts to change individual regulatory cultures have
been. Our sense is that there has been some progress towards greater
sophistication about what better regulation means, but that this
is very much a journey underway rather than an issue that has
been resolved.
— There is certainly scope for greater
innovation in the way that regulation is delivered, with more
sharing of good practice between regulators. We find that regulators
often believe their own challenges are unique, and are reluctant
to open themselves up to thinking from other markets. The BRE
is well-placed to tackle this mistaken approach.
— The BRE will reap far greater dividends
doing this than by focusing on the quantity—not quality—of
regulation.
— The BRE has demonstrably started
to open up the often closed world of regulation to different perspectives.
It has for example recently engaged more actively with consumer
issues. It has engaged a broad range of stakeholders in its work
and immersed itself in the real world experiences of business,
enforcers and consumers.
— There is a danger that these welcome
moves could be undermined by political rhetoric which tends to
equate better regulation with deregulation. The decision last
year to relocate BRE within BERR—which has the stated aim
of being the "voice for business" within government—may
hinder the promotion of a sophisticated better regulation agenda.
2. ISSUES
Impact of the Better Regulation Executive
2.1 The National Consumer Council (NCC)
supports the need for a strong advocate for better regulation
within government. The Better Regulation Executive (BRE) is the
key institution charged with delivering the aspiration of the
new Government in 1997, highlighted in the National Audit Office
briefing paper for this inquiry, to shift the focus away from
deregulation towards better regulation.
2.2 The BRE must do two main things to deliver
this ambition. First, it must provide ideas entrepreneurship to
improve thinking about best practice in regulation. Second, it
needs to find the most effective mechanisms and incentives to
ensure that departments and regulators change their approach and
embrace this new thinking. Part of this challenge is to unlock
the silo mentality within regulators and break down entrenched
cultures, in order to share learning and deliver a coherent and
effective approach to regulation across government.
2.3 The NCC is not in a position to judge
the extent to which the BRE has achieved, or even has the levers
to achieve, its task within individual departments. However, our
sense is that things are heading in the right direction and we
are encouraged by some recent initiatives, including projects
which have seen a greater focus on the impact of regulation on
consumers. Below we comment on recent BRE initiatives and the
political context within which it operates.
BRE initiatives
2.4 There is evidence of innovation, both
in terms of new ways of thinking about regulation, such as modernisation
of the sanctioning toolkit and proposals to reform the UK consumer
protection regime, and practical initiatives to deliver change
on the ground, such as the Retail Enforcement Pilot.
2.5 We are pleased that the BRE has demonstrated
a willingness and ability to engage a broader range of stakeholders
in its work. A recent example is partnership working with the
National Audit Office (NAO) in the Hampton Implementation Review
process. The BRE also initiated a joint project with the NCC looking
at consumer information remedies and its Chief Executive chaired
an NCC seminar on consumer engagement. Working in partnership
adds value to the BRE's work in those individual projects, but
it also represents a very welcome attempt to open up the closed
world of regulation.
2.6 The BRE should also be commended for
its efforts to engage with the real world experiences of these
stakeholders. It regularly conducts visits with businesses and
the enforcement community. In its current project on cutting public
sector bureaucracy, the BRE has asked frontline staff to help
them identify areas for reform. More recently, the BRE has carried
out research directly with consumers to inform its policy development;
we encourage the BRE to continue in this direction.
2.7 An example of where the BRE has made
an effective contribution towards consumer-focused regulation
is its recent collaborative project with the NCC on regulated
information requirements, which has been well-received by a wide
range of observers (see Appendix). The project is an interesting
case study on a number of grounds. First, it examined a generic
regulatory issue of relevance in all consumer-facing sectors.
Second, it attempted to tackle poor regulation at source, rather
than after the event. Third, the project culminated in a practical
tool—a guide for policy-makers on when to use information
remedies and how to maximise their effectiveness—that has
the potential to deliver real benefits for consumers and business.
Political support
2.8 The ability of the BRE to achieve its
remit depends on it being able to define clearly the better regulation
agenda, communicate this effectively and drive it throughout government.
The way in which the regulation debate is framed in the political
arena can make this task easier or harder—the BRE needs
to be able operate with the confidence of having real political
backing for the change agenda.
2.9 The BRE has, with others, gradually
developed a relatively sophisticated vision for what better regulation
means in practice. However, NCC has been increasingly concerned
to hear some of the current political rhetoric around regulation,
which appears to equate better regulation with deregulation. This
is not helped by the ambition of the Department for Business,
Enterprise and Regulatory Reform (BERR) identifying removal of
burdens on business as a top priority, as one element of its self-declared
aim to be the "voice for business" within government.
This framing does not sit comfortably with the more nuanced approach
to better regulation and risks both sending mixed messages to
regulators and weakening the power of the BRE to drive change.
2.10 There is undoubtedly logic to exploiting
the natural synergies between effective regulation and creating
the conditions for economic success. However, these benefits could
be undermined if the modern thinking on regulation developed by
BRE were to be drowned out by a political rhetoric that is over-concerned
with deregulation and/or advocacy for business.
2.11 Locating BRE within BERR may hinder
the promotion of an effective better regulation agenda, given
the Department's present aspiration to be the voice for business.
It may also reduce the opportunity for BRE to influence the role
of regulation in other areas, such as public services and administrative
burdens on citizens.
Impact of the better regulation agenda
2.12 The second half of the Committee's
inquiry relates to whether the better regulation agenda is delivering
results on the ground. As far as we know, this inquiry represents
the first attempt to consider this question in the round. The
focus of evaluations that have taken place consider the benefits
to business of the better regulation agenda. This has prompted
the NCC to launch its Rating Regulators project, which will identify
the essential characteristics of a consumer-focused regulator
and measure a selection of regulators against these criteria (see
Appendix).
2.13 The NCC is not in favour of keeping
unnecessary regulation; indeed, we often campaign for the removal
of rules that shut down consumer choice, against the vested interests
of business. Consumers do not benefit from over-regulation, which
they ultimately pay for and which reduces innovation.
2.14 However, regulation sometimes is necessary
to protect consumers from harm and to make markets work. In fact,
regulation can equip consumers with the confidence and means to
fulfil their economic role to drive competitive markets and fuel
growth—ultimately benefiting business too. The key is to
know when and how to regulate.
2.15 The Regulatory Enforcement and Sanctions
Bill is an example where the objectives of legislation—which
are designed to improve the consistency of local authority regulatory
services and modernise the sanctioning toolkit—are framed
largely in terms of benefits to business. NCC believes that some
measures could hamper the ability of the enforcement community
to protect consumers from harm, and we have sponsored a number
of amendments that would put the interests of consumers at the
centre of the reforms.
2.16 Some tools used to measure the impact
of the better regulation agenda are over-concerned with the quantity
of regulation, rather than the purpose and quality of regulation.
An example is the annual simplification plans, which include targets
for achieving net reductions in administrative burdens. While
reducing the overall stock of regulation is the correct direction
of travel, this "balance sheet" approach risks creating
a focus on outputs rather than outcomes—the very antithesis
of the Hampton agenda. In fact, a focus on more or less regulation
misses the point. Instead, there is a need for less regulation
in some areas, more regulation in other areas, but better regulation
in lots of areas.
2.17 We welcome recent changes to the impact
assessment regime, following scrutiny by the NAO which found that
Regulatory Impact Assessments were not always used in the right
way and the quality of assessments was variable. It is too early
to assess the impact of the reforms, but we welcome the BRE's
intervention to address these problems, and support the intention
behind the changes to increase transparency and embed this sort
of analysis in policy making from the earliest stage and post-implementation.
2.18 Ultimately any assessment of regulation
must be whether it makes markets work and/or prevents harm. In
our evidence to the House of Lords Select Committee on Regulators
in February 2007, we concluded there has been some progress as
a consequence of regulation, such as increased switching levels
in most markets, but the culture of many markets has not fundamentally
changed. Too many consumers are still being let badly down and
there remain substantial issues to tackle. This position still
holds true today, although we recognise that culture change does
not happen overnight. In order to achieve the step change in market
practices which is needed, we believe regulators must adopt a
consistent consumer focus in all their activities and reconsider
their approach to the job of regulation. This is not the opposite
of the better regulation agenda, or even parallel to it; rather,
a consumer-focused approach should sit at the heart of better
regulation and in the work of the BRE.
2.19 We consider there is more scope for
innovation in the way that regulation is delivered. NCC supports
initiatives such as the Financial Services Authority's "Treating
Customers Fairly" reforms, where a principles-based approach
puts the emphasis on bottom-up cultural change to improve business
practices instead of ever-larger volumes of detailed rules. Another
example of innovation is the Food Standards Agency's "Scores
on the Doors" initiative to publish restaurants' food hygiene
inspections, which uses the influence of business reputation on
consumer choice to provide an incentive for firms to comply with
the rules. However, these encouraging examples are relatively
few and far between, and there is little evidence that other regulators
share good practice or are applying these new ways of working
in their sectors. We are for example surprised by the lack of
an established and shared body of knowledge on business and consumer
behaviour and how these are influenced by different elements of
the regulatory toolkit. There is an opportunity for the BRE, along
with the NAO, to intervene here to make a real difference, helping
regulators to understand what works and what doesn't.
APPENDIX
THE NATIONAL CONSUMER COUNCIL'S RECENT WORK
ON REGULATION
The NCC has led the consumer contribution to
regulation policy over many years. We have pioneered new thinking
about regulation and influenced regulatory policy in practical
terms by shaping our regulatory institutions and devising regulatory
solutions to problem markets.
POLICY IDEAS
We have developed some core principles on regulation
policy in a series of "fresh thinking" pamphlets and
other reports that challenge the status quo in consumer policy,
drawing on the NCC's unique insights to advocate new ways of thinking.
Consumers and regulation (2005)
Cutting through the "regu-waffle"
from vested business interests that condemn all regulation as
bad, our pamphlet points out that consumers—not business—ultimately
pick up the tab for over-regulation. The focus of the deregulation
debate should be to ensure regulation is used sparingly and with
a clear sense of purpose.
Regulation and reputation (2006)
We challenged regulators, complaint-handling
organisations and professional bodies to provide consumers with
more details of the performance and compliance records of businesses.
Two core ideas underpin the pamphlet. First, we defend the consumer's
right to know when the behaviour of a business has cast serious
doubts on its integrity or competence. Second, regulatory organisations
should harness the power of reputation to change markets, by enabling
informed consumer choice and by giving providers an incentive
to comply with the rules.
Better regulation: the consumer contribution (2007)
We examine how consumer needs, experiences and
expectations should drive regulatory decision-making, through
direct dialogue. Supported by the then Department of Trade and
Industry and the National Weights and Measures Laboratory, we
chose weights and measures regulation as the testing ground for
a new approach to regulatory decision-making. NCC brought together
policymakers, regulators, enforcers and consumers in a collaborative
dialogue, so that all the key players could for the very first
time hear each others' views and develop a common agenda about
what is needed—and what isn't.
Warning! Too Much Information Can Harm (2007)
This was a collaborative project with the Better
Regulation Executive examining the effectiveness of government
requirements on business to provide information to consumers.
Consumer research found that many information remedies were failing
to have the desired impact. Much of the information provided with
products and services is rejected by consumers because it is unhelpful
or presented in a complex or unappealing format. Our findings
inspired a guide for policy-makers on when to use information
remedies and how to maximise their effectiveness.
Engaging people in healthcare regulation—a
route map for action (2008)
People are often the best, and sometimes the
only, judges of the services they use everyday. NCC has developed
a route map for action, to help a new generation of regulators
turn the rhetoric of people-focused public services into practical
action that delivers tangible benefits. Our route map puts forward
key areas for action, each of which is underpinned by detailed
recommendations.
Rating Regulators (forthcoming)
A major new project will identify the characteristics
that consumer-focused regulators should exhibit in their activities
and working methods, and measure how far a selection of regulators
is performing against these criteria. An independent external
panel, consisting of senior figures in the fields of regulation,
business and consumer affairs, is advising NCC on our methodology
and conclusions. The project will provide a self-diagnostic tool
that all regulators can use to identify strengths and weaknesses
and identify lessons that will influence future regulation policy
and practice across the economy.
POLICY PRACTICE
The NCC has influenced the framework in which
regulators operate and pursued regulatory solutions to tackle
intractable consumer problems in a variety of sectors. For example:
— We argued successfully for the creation
of the Food Standards Agency and shaped the legislation creating
regulators such as the Financial Services Authority and Ofcom.
— In professional regulation, reforms
to the General Medical Council and the General Dental Council
were influenced by our self-regulation audits. We were influential
in shaping the Legal Services Act, which should give this sector
a much stronger consumer focus.
— In our submission to the Cave Review,
we called for a single regulatory body for social housing, which
needs to operate with a consumer focus and a clear mandate to
champion the transition towards a more effective market.
— We are spearheading a self-regulatory
solution in the car servicing and repair market, where mystery
shopping evidence suggests 51% of garages provide unsatisfactory
work at an annual cost to consumers of £4 billion.
— We supported moves to deregulate
the conveyancing and optical services markets. Last year, we launched
a campaign to remove locally-imposed quantity restrictions on
taxis.
ABOUT THE
NATIONAL CONSUMER
COUNCIL (NCC)
The NCC makes a practical difference to the
lives of consumers around the UK, using its insight into consumer
needs to advocate change. We work with public service providers,
businesses and regulators, and our relationship with the Department
of Trade and Industry—our main funder—gives us a strong
connection within government. We conduct rigorous research and
policy analysis to investigate key consumer issues, and use this
to influence organisations and people that make change happen.
Check www.ncc.org.uk for our latest news.
March 2008
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