Note of discussion meeting 27 June by
Phil Kirby, Specialist Adviser:
OFCOM and the Future of Regulation
The Committee was joined for breakfast by Lord Currie,
Dean of City University Business School, Nick Lovegrove, Partner
at McKinsey & Co, and Damian Tambini, of the IPPR and Oxford
In the discussion, the following points were made.
- A risk with new regulators is that they are given
responsibility over everything, but power over nothing; scope
creep should be avoided.
- OFCOM needs to be a strategic body, able to act
in a timely, not rigid, fashion.
- The process of creating OFCOM would be critical
to its success - any further delays to the legislative process
would complicate the transition to the new regulator, during which
the existing regulatory bodies would become very hard to manage.
- Maximum clarity amongst OFCOM's duties was essential;
although there would unavoidably be multiple objectives (and indeed
some doubt was expressed about the record of regulators with a
single principal objective), the promotion of competition should
figure prominently as a mechanism for meeting other objectives.
- The language and approach in EU Directives was
very different to British legislation, so their translation into
the Bill clauses could cause confusion about where ultimate authority
- Experience suggests that regulation by means
of legal instruments and fines (for example the railways) did
not work: regulation through structures and incentives was preferable.
- The existing regulators had very different cultures,
and very different understandings of the "same" concepts.
- It could not be left to the new Chief Executive
to meld the regulators into one new culture and make critical
early decisions about a range of policy issues; there should be
different public accountability arrangements for this early period,
such as a special report on progress.
- The status of the Towers Perrin report was obscure
(and its proposed management structures unworkable); a genuinely
independent new "Towers Perrin" exercise could help.
- There should be an opportunity for whoever takes
the Chair of OFCOM to take rapid advice on the legislation and
press for any changes necessary to make the job possible.
- There needed to be at least three executive Members
of OFCOM, suggesting that, in order to keep a majority of non-execs,
the overall Board would need to be bigger than the six currently
- Any references in statute to an aim of "light
touch" regulation was a hostage to fortune, and would lead
to more judicial review cases; OFCOM needed to be able to come
down hard where necessary - an analogy would be a football referee,
who needed to be able to establish control of a match through
early decisive action
- "Withdrawal" from sectoral regulation
was possible - for example, retail prices controls in energy markets
had been abolished - but it was important to note, not least for
presentational reasons, that normal competition regulation still
remained, and that sectoral regulation could also be reapplied
- An incentive for the regulator to withdraw was
the sheer complexity of regulation, though this might not be strong
enough to overcome a certain natural tendency for regulatory bodies
to maintain or expand their activities.
- Proportionality was relevant across all areas
of OFCOM's responsibility, but some areas, such as media ownership,
were not amenable to full withdrawal of sectoral regulation.
- The "future-proofing" of the Bill was
at its weakest in the area of media ownership; although as a rule
a thumb a minimum of 3 "voices" (in any media, not necessarily
just radio) for a local area was seen as desirable, it was difficult
to turn this into a workable general definition of plurality.
- There was a risk that if the Bill left too much
detail to secondary legislation, special pleading would mean the
eventual decisions would be very different to what was envisaged
at the time of Royal Assent - the Act should have "teeth"
in it from day 1.
- OFCOM should be required to explain its decisions
in as much detail as possible.
- The US system had a stronger anti-trust tradition,
which ensured that any drift towards corporate interests was periodically
reversed by a reassertion of the public interest; the Competition
Act and Enterprise Bill might signal that the UK was developing
in the same way. It was suggested that OFCOM might set up its
own powerful specialist competition unit.
- More attention needed to be paid to how OFCOM
would work with self-regulatory bodies: an accreditation system
could be introduced to ensure their activities were meaningful
and taken seriously; they could also be required to report periodically
to Parliament on their activities.