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.
1.1 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.
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.
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.
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.
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.
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.