Examination of Witness (Questions 240-253)|
WEDNESDAY 26 MARCH 2003
240. Here again I am asking for a general comment.
You have given us a list of all the regulators in the various
countries. The United Kingdom is the only one without any empty
squares. Is that as a result of political decisions or of economic
(Dr Thatcher) I think that there are a variety of
factors as to why Britain differs. One is political leadership.
When you have single-party majoritarian governments in control
of your legislation, it is much easier to set up a regulator.
If you compare that with Italy, it took them years to set up a
regulator in telecoms and media, because there was not a stable
majority. In part, it reflects state traditions. Britain has much
more of a tradition of independent bodies than, say, France or
Italy. In part, it reflects degrees of learning. Britain tends
to learn from the US and so it has been more, I suppose, willing
and open to import from the US than, say, continental European
countries. We have different traditions. We have traditions of
a unitary state, for instance, in France. So it has taken quite
a long time to accept that there are going to be these independent
bodies. They have had to think about how that affects their view
of the state. But, yes, Britain is certainly a leader in creating
241. You have said that we are more willing
to learn from America than from the Continent, which is a very
interesting remark. Can you say what the overall effect on our
regulatory system has been of that preference?
(Dr Thatcher) We have imported these bodies perhaps
earlier. We have also perhaps learned positively from the United
States. I would be interested in Sir Christopher Foster's comments
on this. The whole process of long, drawn-out hearings, nominees
being knocked down, people's private lives being analysed in front
of the Senatethat was avoided. I think that the particular
emphasis on competition is undoubtedly a neo-liberal, Anglo-Saxon
philosophy. It has been much more tempered in other countries.
If you look at France and Italy, you have well-established doctrines
of public servicewhat they call service public or
servicio publicowhich balances. They are therefore
looking to balance the public interest, the general interest,
which they see as involving things like universal service, protecting
the poor, protecting certain regions, with competition. In Britain
the emphasis has been much more on competition. These other elements
have been seen as secondary and they have been seen as a problem.
There were comments earlier about economic regulation versus social
regulation and how on earth can we deal with social regulation?
We do not really like social regulation; we do not know how to
handle it, whereas in continental countries I think that it is
seen as part and parcel of regulation. There is competition where
there are other objectives to be pursued as well.
242. Most members of the Committee want to ask
questions but, before we leave that one, I have one which is probably
asking the same question from a slightly different perspective.
The point you made at the beginning from your Table 1 was that
the British regulators were generally set up before the others
with which you are comparing them in the European countries. I
suppose that raises the question, related to what has just been
discussed, of what then has been learned from our experience by
those countries you have studied. In most of the tables it is
clear that there is not a great deal of difference in many respects;
but in one or two areas there are differencesfor example,
the background from which regulators are drawn. I wonder if the
differences are a consequence of essentially the point you were
just making, about state tradition and the culture of those particular
countries, and therefore it is natural for them to go in that
direction, or is it the case that they have looked at the British
experience and decided that they do not want to go down that route?
(Dr Thatcher) British experience is generally seen
very positively, with the exception of the railwayswhich
are, I am afraid, generally very negatively regarded. Policymakers
have therefore tended to want to import the British model of an
independent regulator, and that has then been tempered by those
state traditions. Oftel, for instance, is very highly regarded,
and has been for a long time. One can see a process of importation
and then politics and traditions come in. Oftel was clearly copied,
for instance, by the Italians; but then the politics came in as
to how would you actually set up the body. Because of issues about
Berlusconi and so on, they then had a long fight and set up a
very different type of body: one that covers media and telecoms;
one which has nine members, who are elected by the two houses
of parliament. That was really a political division, if you like,
amongst the political parties. They could not allow an Oftel-style
or even an ITC-style, independent regulator. Broadcasting was
too political for them to let go of.
Baroness Gould of Potternewton
243. Would you tell us whether the regulators
in the other countries to which you have referred have the same
sort of structure as here, where many of our regulators have parallel
consumer bodies, which are allied to them but which are completely
independent and which are, in a sense, representative of the consumer
but also do independent research and challenge the regulatory
body? Is that sort of pattern followed through, or is this just
a British phenomenon?
(Dr Thatcher) It is very much a British
phenomenon. It is one of the points of institutional difference
between the countries. They have not incorporated that.
244. Is that a good or a bad thing?
(Dr Thatcher) That is a bad thing, I
think, because the voice of the residential consumer is one that
is the most difficult to hear. The subjects are technical; your
gains and losses are so small as a residential consumer; you have
difficulties of organisation. So I think it is rather a bad thing.
245. How do they actually get the voice of the
(Dr Thatcher) More through politics
than anything else. There is a greater level of political intervention
in decisions than there is in Britain.
Lord MacGregor of Pulham Market
246. In the earlier part of your presentation
you drew attention to the importance of thinking more and more
in terms of the supranational regulators. So far, we have only
looked at the UK regulators. I want to ask you this question in
relation to the EU, and only the EU, and thinking in terms of
them in a regulator role rather than initiating regulations which
are then applied nationally in individual Member States. Am I
right in thinking that the main regulatory influence so far is
in the competition authorities and not in some of the others,
or is that wrong? To what extent do you think that we need to
start thinking about their role?
(Dr Thatcher) The general competition
powers of the Commission are the exception, not the rule. In general,
what happens is that the Commission issues, usually directives,
sometimes regulations, and then it is up to Member States to transpose
them and enforce them.
247. Yes, exactly.
(Dr Thatcher) So competition is very
much an exception and, as you probably know better than I do,
there is a long debate at the moment about which powers should
be delegated back to the national competition authorities and
which should remain with the European Commissionwith a
great deal of worry that the Commission is stronger than national
bodies and you cannot trust the national bodies. There are two
things I would add. One is that the effectiveness of European
law depends on having both a strong and effective regulator and
strong and effective courts. In general, legal action is slow
and difficult. It is very much a second-best. That is very important.
If you have had to go off to the Italian court, it will take you
years before you actually get anywhere. The second point I would
make is that the process of creating European regulation is a
highly complex one. There is the formal process, but actually
that only captures part of what we have. What is often very important
is what happens right at the beginning, in terms of setting the
agenda of what the Commission wants to dowhich itself is
constrained by resources and so on. This is where Member States
and these independent regulatory networks play a crucial part,
saying, "This is a priority. This is what we think you, the
Commission, should be doing". The Commission is very sensitive
to the wishes of Member States and national regulators.
248. I am making the distinction between the
creation of regulations and the regulatory body itself. I am more
interested in the second, because I fully understand the point
you make about the first. On the first, the impact you are drawing
our attention to is that a lot of regulations can be developed
at the European level, but have to be implemented at the national
(Dr Thatcher) Absolutely.
249. So it is the regulatory body. You heard
the earlier discussion we had, with Sir Christopher Foster saying
that he thinks that we should be thinking in terms of some further
method of appeal through the courts or whatever, on regulators'
(Dr Thatcher) Yes.
250. Have you anythingapart from the
delays, which I fully understand because I have seen some of themthat
you think we can take into our own thinking, developing from that,
from the European Commission competition bodies?
(Dr Thatcher) I think what you are aiming
for, if you have some kind of super body, is a body that sets
principles rather than having to deal with every case. Let me
give you the example of the German telecoms regulator, where every
single case has been taken to court in Germany. That is not helpful.
It is expensive; it is slow; it creates uncertainty. It is really
not what you want. I suppose that, if I were being blunt about
it, I think that looking to the courts all the time isto
put it in one waya "cop out", because you are
asking them to do jobs for which you have governments and parliaments.
You cannot do that. You need to be clear where responsibility
lies. There is a more general point I can make here, which may
be controversial, but I think that problems of accountability
and transparency apply not just to the regulators but at the European
level, and perhaps most of all to ministers. There is a sense
in which there are some things which you cannot, and certainly
should not, hand over to judges; rather, they have to be placed
with those whom you elect.
Lord Jauncey of Tullichettle
251. I entirely agree with your last proposition,
that a lot of these matters are not really appropriate to hand
to the judiciary, because they are not equipped and do not have
the experience necessary to deal with detailed questions of economics.
The question I ask is in relation to (Table 5), where the figures
of cost and the number of employees as between the various states
are very disparate. Are you really comparing like with like there,
or is it because in Britain we are much more heavily regulated,
or even over-regulated, than they are in those three continental
(Dr Thatcher) You are absolutely right
that the bodies are not always the same; they have different powers.
For instance, it is not surprising that the Conseil de la Concurrence
in France, a general competition body, has many fewer staff and
a much smaller budget. It has many fewer powers. In terms of us
being over-regulated, I think that the continentals would be amused
by that suggestion. In France and Italy they generally see themselvesand
in Germanyas being highly over-regulated in terms of constraining
rules and legal rules. What may be the case is that in Britain,
because the regulators have been around longer and because they
have therefore developed a greater range of activities, more regulation
is done by the independent regulators than by government ministries.
There has therefore been a shift from government to regulatorsa
shift that has not happened to nearly the same extent in other
252. Does that not tie in to what I was saying
earlier? That in fact we regulate a lot of things that the others
do not regulate at all, such as water, railways, the environment
and food safetyaccording to your second table.
(Dr Thatcher) We have independent regulatory
bodies, but I do not think that I would characterise it in terms
of we regulate it and they do not. They regulate it in different
ways. They regulate it through public ownership; they regulate
it through ministries; they regulate it through contracts; they
regulate it at the local level rather than having a national body.
253. The fact that you are studying independent
regulatory agencies does produce a rather unfortunate acronym.
(Dr Thatcher) Indeed!
Chairman: Dr Thatcher, you have covered a great
deal of material. It has been extremely helpful for our purposes
because, as you know, a comparative study helps us sensitise to
particular features of our own systems we would otherwise not
be aware of. That has been extraordinarily helpful for our purposes.
There may subsequently be particular points that we would like
to pursue with you in the light of our discussions, given the
very valuable data that you have placed before us. Thank you very
much indeed. We are very grateful.