Select Committee on Regulatory Reform Minutes of Evidence

Examination of Witnesses (Questions 80-99)


29 APRIL 2008

  Q80  Judy Mallaber: Have you talked to them about consumer protection and that part of their remit?

  Mr Brooker: They have shown greater interest in consumer issues recently. We did a joint project on regulated information, as Philip mentioned earlier, and that is a good example of the BRE being prepared to open up to working with new organisations. I think that is a sign of maturity and a welcome approach to open up the closed world of regulation. They have worked with us on the information project and Jitinder Kohli chaired a seminar that we hosted on consumer engagement last year and they did work with the National Audit Office on the Hampton Implementation Review. They are prepared to open up to new ways of thinking. The next big test is going to be the Consumer Law Review and the sorts of proposals that come out of there. That is going to be jointly promoted by the Business Minister and the Consumer Minister, so we will be interested to see how those natural tensions are resolved.

  Q81  Judy Mallaber: Is it legitimate for them to "interfere with other departments". I see in the evidence we have had from the Department, it has Public Sector as one of the headings, which I can imagine creating a few tensions with some of the big spending departments. Should that be part of their role? Are you concerned about them engaging in that?

  Mr Cullum: The role of the BRE must be to be cross-cutting and to look at all sorts of regulation. I mentioned earlier the extent to which we find regulators operate in silos. In fact one regulator only last week was expounding enthusiastically on why the challenges they face are completely different from the challenges that everybody else faces, and we find that regulators and, indeed, other organisations tell us that all the time, but in fact there are far more similarities than there are differences and there are lessons to be learned. The idea of making the BRE much, much narrower would be a real mistake. Certainly that would be a problem if being a part of BERR resulted in that. The National Consumer Council is a non-departmental public body, our sponsors are BERR, and our interests go way beyond just business. We look at sustainability and public services. There are quite a lot of issues which fall out of the BERR patch. I am not sure they enthusiastically embrace the idea of us doing all that stuff, but we are independent and we get on with it. I guess that is the challenge as to what extent the BERR corporate push will narrow the focus of the BRE rather than allowing them to make independent decisions about where they look at in terms of better regulation.

  Q82  Chairman: You have mentioned your own sponsoring department there. Does the fact that you are there not undermine the reality that there is not really an appropriate place, because the Cabinet Office is not seen outside as having the necessary teeth to do the job?

  Mr Cullum: That may be true. Certainly we have grappled over the years as to what would be the most appropriate place for the National Consumer Council to be. We operate as a very independent body. Our governance is through an independent board, so the relations with BERR are sometimes quite helpful in having a look into government, but which part we belong to is not really a major influence on what we do. My concern with the BRE would be if they have taken over the regulatory side of BERR's work, which I understand they have, then there is a corporateness which is sort of different. I would agree with the general point that there is never a perfect solution.

  Q83  Chairman: So it is what they do rather than where they are?

  Mr Cullum: I am not sure this is the ideal place for them but if everybody behaves in the right way, you could make it work.

  Q84  Judy Mallaber: If they are the home department for business, employment, consumer protection, you can argue that that is quite a bit swathe of what they should be involved in and any other department would have difficulty because they do not cover those areas. Would that not be the case?

  Mr Cullum: I can see the argument for saying that if it were going to be in a department which is an issue-focused department rather than a cross-cutting department then it might be one of the better choices.

  Q85  Chairman: Just explain what you mean by "ideas entrepreneurship" in your paper, if you would.

  Mr Brooker: I suppose the warning "Too much information can harm" was an example of ideas entrepreneurship. There is a kind of assumption in government that giving consumers more information is always a good thing. That is an assumption we wanted to challenge. We found in our research an information overload; information that is presented in an unhelpful way; and information that is written by company lawyers to protect businesses from liability rather than helping consumers to use a product safely or to exercise their rights in the market-place. This points to the BRE holding the ring across the regulatory state, taking an issue that affects all of us in our lives and is relevant not just to BERR but to the Department of Health, the Department of Transport, other government departments, and coming up with a practical tool kit, a Guide for Policymakers, on when and how people should use regulated information, which we hope has the potential to make a real difference to the way in which these sorts of issues are addressed in future.

  Q86  Chairman: What incentives do you think would make real change?

  Mr Brooker: That is one question that is open for us: Does the BRE have the levers to force through the change agenda across government? We are not in a position to judge whether that is the case or not but that is certainly a pertinent question that we have and which this committee could provide some answers to.

  Mr Cullum: When we worked on the information report with them, there were effectively two outputs from it, as Steve has alluded to. One was a classic policy report, of the type that we would publish (setting out our research, analysing the issues) but the other was a Guide to Policymakers which I think was a rather good piece of work, in terms of trying to help people who do regulate think about when information tools are appropriate and how they might work. The bit of the story we are less aware of is what has happened to that and how the BRE plays that into the right bits of helping the departments. From the outside, it is quite hard to tell on that. One of our comments in our written evidence—which I think you may be alluding to—is that there may be scope for the BRE to do a bit more of an annual stock take: How do they perceive the overall picture in terms of better regulation? And a little bit in terms of their own accountability: What difference have they made to regulatory behaviour?

  Q87  Dr Naysmith: Mr Cullum, I was intrigued by the NCC memorandum that referred to "some progress towards greater sophistication about what better regulation means" and to the need for less regulation in some areas, more regulation in others, and better regulations in lots of areas. What would a more sophisticated approach to better regulation look like? I must apologise, first of all, if this has already been mentioned because I did have to pop out.

  Mr Cullum: Better regulation is looking at the diverse types and objectives of regulation, taking a hard look at what is working and what is not working and either improving the stuff that is not working or getting rid of it. It is often seen as a very stereotypical debate, in which business is always arguing for better regulation and we are always arguing for more regulation, but it is much more complicated than that. Businesses, certainly individual businesses, will often argue for more regulation if they think it will protect them from competition; we will sometimes argue for less regulation or different regulation if we think that will benefit consumers. We have produced a list of things in the past where we think consumers face an absurd regulatory burden and they should be got rid of. It is trying to understand the nuances of that a bit more and taking a more balanced approach to what are the benefits and are the problems with regulation.

  Q88  Dr Naysmith: How would you define better regulation? Could you define it or does it require all these things you have just been talking about?

  Mr Cullum: It is something to do with regulatory cultures and how people who are regulating or might regulate think through: When is it appropriate and what is the tool kit? What is the behaviour change that we are trying to achieve, either amongst consumers or amongst businesses? One of the things we observe often with regulators is that, although they may often require other organisations to produce metrics on how they are doing, they quite often do not have very many indicators themselves on how they are doing. When they introduce individual bits of regulation, it is sometimes rather vague about what it is they are really trying to achieve. Yet, if you try to nail what you are trying to do and what change you are trying to bring about, there is an opportunity for people to scrutinise and say: "Did that work?" If there are further changes to the consumer law regime, what is the underpinning of that? What is the ultimate objective? What does success look like? The Financial Services Authority, I think have done that a bit with their Treating Customers Fairly initiative, where they have said, "We've gone for this much more principles-based approach. It is less rules-based but here is our vision if all these comes off. This is what the world would look like." We think that is quite a good thing in terms of being clear about ambition.

  Q89  Dr Naysmith: Sarah, the TUC referred in their evidence to the assessment of the impact of regulation by the "crude measure of quantity" rather than by a consideration of how regulation actually works". How would you make it more sophisticated?

  Ms Veale: It would certainly be a more difficult exercise to do, but I would get rid of the rather crude indicators that they use, which are tempting obviously for the officials who are trying to do these kind of exercise of more or less weighing things or looking at the sell-by date on them because that is not necessarily going to indicate whether a piece of regulation is fit-for-purpose or necessary. I think you need to do far more at the beginning of the process to work out a system for assessing whether or not you need regulation at all—and that would involve some quite sophisticated conversations with those affected by the regulation, those who had to apply it—and a look at whether there are alternatives, because quite often there are other ways of achieving the same goal without having to put something on the statute book. It is doing all that intelligent research work before you ever get to that stage.

  Q90  Dr Naysmith: You really need to know what you are trying to achieve before you set out.

  Ms Veale: Precisely. I think there is a lot of common ground between us on this. When it comes to looking at existing stock, the last thing you should do is look at the volume or the sell-by date on it. You have to talk to people who are affected by it but, also, weight the responses you get. Obviously if you talk to a particularly lobby group, they have an end in mind, and they will use evidence quite cleverly to suggest that something is a burden, when, if you look at it from someone else's perspective, it might not be. The BRE needs to get better at talking to the right people and getting different groups in the room at the same time and developing some sort of synthesised thinking about things. Often, in dialogue, something will emerge from the Third Way (if I might put it like that) or some other possibly consensual way of doing something.

  Q91  Dr Naysmith: And that does not happen at the moment?

  Ms Veale: We have suggested this. Again in fairness to them, they have held consultation sessions on consultation in how they can do things better. I hope they will absorb some of the thoughts that were coming out of that process and the contributions made, but there is quite a long way to go with that. I am not saying it is easy. The other thing we are particularly concerned with is the fact that they tend very much to look at the costs—to business usually or to anybody else—without having any sophisticated tools for measuring the benefits. We give in our evidence the example of the national minimum wage, which obviously is a cost in two ways to employers. If you look at the social good, the good to the economy, and now—and they will admit it themselves—the good to employers that has done, that is a very good example of not having knee-jerk reactions and looking rather more adventurously at organisations that you would not straight away think of, who have benefited enormously. Consumers are an obvious example: they do not necessarily have an articulate voice at any particular time (with the greatest of respect) on one issue but do have very strongly held views. It is getting into that and not doing it through the prism of the Daily Mail as well but getting some proper feedback from people on the ground. It would take an awful lot of time and energy to be able to do that. I can see why officials more easily resort to rather cruder indicators.

  Mr Cullum: One of the areas we are both agreed has a rather malign influence on the debate is the British Chamber of Commerce's burdens' barometer, which is a bizarre way of looking at how to better regulation issues, particularly because it is cumulative. It is a bit like saying it was 15° yesterday and it is 15° today, so the temperature is 30°. It is extraordinary and, actually, quite unhelpful in terms of the push across government to change, because if you start with billions of pounds of previous regulation on the stocks, a little bit more is not going to make very much difference. As a cultural force, that way of thinking is really unhelpful. I do think, as Sarah says, there is an opportunity for a more sophisticated debate. We know from talking to colleagues in business organisations, particularly in businesses rather than necessarily their representative organisations, that there is more sophisticated thinking about it but it is just a question of drawing it out.

  Q92  Gordon Banks: The questions I have to ask you are really about your experience of working with the BRE and some of these issues have been touched on already, but does the BRE have the right focus? Does it have the right people? Is it well organised? Linking back to the last question: Does it have enough new ideas? How well does it communicate between itself and the two organisations? How could these communications be improved, not just to you but also to the business and individuals that the regulation impacts on? That is an issue that I do not think is done particularly well, the dissemination of information to individuals or to businesses of how different regulations may impact on their walk of life.

  Ms Veale: Possibly one legitimate criticism businesses have is in the area of communication. I think things could be done much better in terms of describing how a set of regulations will work and, again, how to manage the regulations. One particularly good example of that is that small businesses got very anxious about the written statement of employment particulars, which is a small EU requirement on businesses: every employee has to be told six simple things; for example, how much they will be paid, when they will be paid. They decided this was an enormously costly burden on them, but it turned out there was nothing burdensome about the requirement; the burden on them financially was that they all went and got employment lawyers to advise them on every single written statement. If the Better Regulation Executive had got its act together on that, they would have said, "You do not need a lawyer. This is how you do it: five facts and that is that." If that had been communicated to the small firms, I think the sting would have been taken out of that particular issue. I am sure there are many, many others where you could say the same thing. Another thing they are not doing terribly well is communicating the views of other organisations to the loudest lobbyists. We are told—and I suspect the NCC is told—what small businesses think, over and over again, and why we cannot have this and why we cannot have that, but small businesses do not have it explained to them in a very convincing way what all the benefits are going to be and how other organisations see it. When I have suggested putting us all into a room, the suggestion is met with,. "Yes, that's a good idea" with a terrified look at the same time. I wonder whether they ought to be a bit more adventurous and let the grown-ups have a chat to each other.

  Q93  Gordon Banks: So communication might not be a strong point.

  Ms Veale: Precisely. Communication might not be a strong point—exactly that. In fairness—and we see them as an outsider, so I have never sat in there and watched a group of them doing a day's work—I get the impression that they are well-organised, they are well managed. I share Philip's respect for Jitinder who has done and is doing a good job in a fairly difficult situation. My worry is that, although they clearly do have their support in BERR, I am not really sure how much buy-in they have managed to acquire in some of the other government departments. I do not have any proof of this, but you get the impression that civil servants regard interventions by the BRE as being rather a crude necessity, which they do not really think their way through, that if you can just get rid of them, satisfy them that something is going on that will produce better regulation—I am not sure they are allowed in actually or that they have managed to have the level of engagement they need with senor officials elsewhere. That is speculation, I cannot prove that, but you get the impression back from other departments you deal with that their view of the BRE occasionally is that it is a bit of an irritant that is going to have to be dealt with because there is a politician in a fairly senior place who thinks it is all a good idea. I hope that is not the case, because I am a keen supporter of better regulation. Certainly the trade unions have suffered very badly from very old, appalling regulation, which we keep on trying to persuade the BRE needs to be looked at. We are no fans of excessive regulation at all; we want good, fit-for-purpose regulation, also, primarily, to protect employees. It does not do employees any good to have bad regulation in an organisation that is not doing its job properly, because, in the long run, employers will then say, "This is rubbish regulation, I can get around it," and it starts not doing what it should be doing and being avoided. That is the last thing we want.

  Mr Cullum: We have had two close-up experiences. One is the information project which we have both alluded to; the other was the Hampton Implementation Review process. I was on the small team which looked at the Financial Services Authority. That was a joint BRE/National Audit Office initiative. From both those things we have been very impressed with the quality of the people, not just at the Jitinder level but throughout the organisation. They were very, very effective and good. The model that they seem to operate, which is to have people for a relatively short period of time and then move on to other things and other government departments, seems like quite an interesting way of getting a bit of diversity of experience and a bit of—

  Q94  Gordon Banks: Filtering in.

  Mr Cullum: -- an alumni network of better regulators across government. As to how well they are organised: like Sarah, we are not really close enough to the internal machine to know the answer. As to the right focus: Sarah and I were both members of the Better Regulation Commission, me more briefly than her, and are now members of the Risk and Regulation Advisory Council, and, from my brief sight of it, I never thought that the relationship between the BRE and the BRC was the right one. The BRE bent was very much on the weighing, on the simplification plans, admin burdens, with a bizarre definition of what an admin burden was. Some of the things alluded to, under no commonsense view at all would count as an admin burden. There were policy decisions about things, but some of those exercises were a bit odd and the way that they wanted to use the BRC to scrutinise some of it was a bit strange, so I am pleased that they moved away from that. Some of the more sort of "ideas" stuff that we talked about is a good move. On communications, I suppose there are two parts. One is the relationship with departments. I agree that in some departments you hear rather sniffy comments about them from time to time; on the other hand, I think that is consistent with what we know about the people who regulate, which is that they are quite happy to dish it out but they maybe do not enjoy being subject to anybody else's scrutiny. That may just be part and parcel of what they do; on the other hand, it does go back to the point we were making earlier about the leverage and it is really important that it feels like the BRE have some sort of backing at the high level within government so that they can go in and influence so far as possible and be a little bit heavier if necessary. The final thing I would say on communications is not so much just in the BRE's patch—because I do not think it is really their responsibility—but there are issues about the communication of regulation and the extent to which businesses and consumers who are affected by regulation or, indeed, employees are ever told about it. The great example at the moment is the Consumer Protection Regulations which come into effect on 26 May, introducing the duty not to trade unfairly, which is something for which the National Consumer Council has argued for about 20 years. We are huge supporters of this initiative, but, until last week, BERR had not done any press work at all and seemed to have done little or no work with businesses behind the scenes. This is quite a fundamental change and a very new style of regulation where it is much more principles-based, sweeping away lots of detailed statutes. There are two things. One is that, hopefully, there will be a big success story to tell about a more sophisticated approach and a less burdensome approach to regulation for everybody, but, also, just to make it work, people will need to know that it is there. You need to be able to march into your local shop and say, "You're not allowed to trade unfairly and you are. I know what my rights are" or companies need to be able to prepare for it. If you do not tell them, it is not going to work.

  Q95  Gordon Banks: This question is for the NCC. How is the BRE working on your rating regulation regime with you? When will that be published?

  Mr Brooker: Jitinder Kohli sits on the advisory panel for the Rating Regulators project, along with representatives from the NAO, academics and a couple of our board members. We hope to publish that towards the end of this year. The whole reason for doing this project—which really goes back to what we were talking about earlier—is that the focus of the better regulation debate is too much on the benefits to business of regulation, and of course Parliament set up these regulations to do the job of protecting consumers in the market-place. We will look at the seven regulators: the two FSAs, Ofgem, Ofcom, Postcomm, Ofwat and the Water Industry Commission for Scotland. We are going to identify the essential DNA, if you like, of a consumer-focused regulator and then measure those seven regulators against those criteria which cover areas such as the legal framework, organisational culture, the way they understand the consumer interest, do they intervene proactively in markets or are they too passive. We hope that will be a tool kit that all regulators can use as a self-diagnostic check but, also, organisations like the NAO or even select committees can use to inform their assessments of whether these regulators are serving consumers well.

  Q96  John Hemming: There is of course a retail enforcement pilot, which potentially has the ability to improve protections for consumers. The question is whether it has achieved any of its potential objectives or made life easier for businesses whilst either improving or not losing safeguards for consumers.

  Mr Brooker: We welcome what the retail enforcement pilot is trying to do, which is trying to change the culture from one of top-down enforcement to encouraging compliance based on education and advice. We also welcome an approach which tries to join up different inspection regimes, which will hopefully lead to an improved consistency in the way that consumer protection is enforced locally and which can only benefit consumers. We have not seen any evaluations of whether that has really had that effect on the ground. We have heard of some figures around savings to business which are around the £10 million mark—which, in our view, is really quite a low figure if you are talking about quite huge investment in that project. I would say it is too early days to tell whether it has had the effect it was designed to, but we support the aims.

  Mr Cullum: We were very surprised by the figure that came out. Sarah is still a member and I was a member of the BERR Better Regulation Ministerial Challenge Panel—a longwinded title—looking at better regulation initiatives across BERR and it had a number of presentations from the retail enforcement pilot team. We have met the team a few times and have been very impressed with the leadership of the team. It is certainly a very well intentioned initiative, but I am very surprised that it was perhaps only going to save £10 million. It seemed like a drop in the ocean and, I guess, an interesting example of where sometimes the rhetoric around "burdens on business" is not really justified by the facts in terms of how much regulation is costing business.

  Q97  John Hemming: How do you assess estimated costs? It is a very complex process. Is there a TUC angle on this one?

  Ms Veale: I was similarly impressed, as a novice in this area, at the challenge power on the presentation, and I think instinctively we ought to go along with that, but it is not an area that I confess to know a huge amount about.

  Q98  John Hemming: The NCC did talk about "regulatory silos". Where are these most obviously found? I suppose retail enforcement is a good case.

  Mr Cullum: It goes back to the point I made right at the start, when talking about some of the good examples in terms of openness, or principles-based regulation, or how to analyse particular issues which are common to sectors, in that they do not seem to have spread. I am still waiting for the second regulator to have its board meetings on podcasts, as the Food Standards Agency does. People do not seem to have engaged much with the idea of principles-based regulation, even though Treating Customers Fairly has now been in place for a while in the financial services industry and the Consumer Protection Regulations are about to be introduced. It is surprising that other regulators are not learning from some of these sorts of tools in some of the areas of consumer engagement. There are some particularly good examples and then there are a lot of rather mediocre examples, and we are surprised that the regulators are not rather enthusiastically searching out what would be the interesting things to do.

  Q99  John Hemming: How do you think the major regulators could share best practice more effectively? Do you give any examples of obvious failings because they are not sharing best practice? Should the BRE get involved in that?

  Mr Cullum: There is a role for somebody to try to create a forum in which regulators can exchange ideas more. We are aware of the mission of the Joint Regulators Group but our sense is that it does not encompass all regulators by any means and does not have that sort of ideas exchange. If it is, it is clearly not working, because they are not exchanging their ideas.

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