Getting
Results. The Better Regulation Executive and Impact of the Better Regulation
Agenda
Regulatory Reform Committee Inquiry -
March 2008
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 per cent
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.