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Lord Elton: My Lords, the report and this debate cover a huge field. Many have gone ahead of me with their sharp sickles and I come behind as the gleaner. However, I shall start by joining others in thanking my noble friend Lord Norton of Louth for leading us through what was really a very complicated inquiry in which the danger was that everything was so diffuse and diverse that we could come to no conclusion. My noble friend expertly brought us to several trenchant conclusions which have been forcefully endorsed in your Lordships' Chamber this afternoon.

It is a vast field, and I had not realised quite how vast it is until I began to look at some of the figures. For instance, the Financial Services Authority employs 3,000 people with an annual budget this year in excess of that recorded in the evidence in our book which covered the previous year of £215.1 million. The number employed by those regulators whom I was able to telephone yesterday, 11 of them, produced a payroll of 26,069 people. The volume of material that they produce is ever growing, as evidenced by my noble friend Lord Northesk. So we are looking at something which is, in a sense, a parallel state. Indeed, our report is fitly called The Regulatory State and rightly asks whether it is properly held to account. At present, the answer to that question has to be a pretty equivocal one because the conclusion is that this work has to be done and must be done better.

As I say, I come as a humble gleaner at the end of the reapers and will point to only one or two things, points in effect drawn to my attention by looking at the
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other activity that has overlapped with our own and which came to light only after our report was produced, in the form of the DTI report, produced in conjunction with the Treasury and published last July, Consumer Representation in Regulated Industries, and the National Audit Office comparison of Energywatch and Postwatch.

Starting with that, it is clear that a principal requirement of any regulatory system is to protect the consumer. A healthy consumer means a healthy market, while a healthy market should mean healthy producers. We have to have regulators either because markets are inefficient or monopolies exist. However, consumer interest should bind very hard on producers through the agency of the regulators. In the original statutes setting up most of these bodies, it is notable that consumer interest did not actually have priority.

The DTI report suggests that consumer representatives within regulated organisations are not actually doing as good a job as they should. It states that they,

If that is the tendency of government thinking, it may be necessary to start recruiting a different sort of consumer representative. I say that because these are major commercial questions that are being addressed and not the response to individual complaints en masse, which is a large part of the customary job of consumer organisations. The report goes on to say that consumer bodies should address themselves to,

Underlying our main concerns, I have a lesser but none the less relevant concern that the nature of the representation of the consumer interest in regulatory bodies is changing, or it is the intention of the Government to change it. Looking at the intentions of government, I turn next to the frustration which both my noble friend and members of the committee felt at the difficulty of coming across any fixed point in government which has the authority to answer our concerns or to voice future intended policy. In that context it is interesting to note the announcement in paragraph 11 of the report:

So they have a proactive role on the agenda. If there is no focus at present, it seems to me that that ought to be it, and that a standing committee of the two departments should be set up and be answerable within government for this area of policy. It should comprise the people who fill the Box when the Minister has to reply. For the record, since it is not evident through print, I should point out that the Box is now tenanted; it has had a fluctuating tenancy over the past hour or so. That is comforting to us but, I suspect, most of all to the Minister who is to answer the debate.

I was interested in the anxiety expressed by my noble friend Lord Blackwell about parliamentary supervision. However, I am concerned about the way, if I understood
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him right, he intended to meet that anxiety by seeking to avoid expert Select Committees getting into a professional cosy with the regulated bodies by setting up some third party in between. We have enough parties here already. We have invented a quasi-government and a huge quasi-Civil Service of the vast numbers I have mentioned outside Parliament. It is at arm's length; it is there to do something that the Government have to ensure is done. The Government ought to be answerable—and it is to Parliament that they should answer.

A Joint Select Committee of both Houses would reduce the number of supervisory bodies by getting both Houses to act together. I can assure my noble friend that membership of these bodies is not particularly constant. Members of the other place come and go involuntarily and we rotate voluntarily—and some of us may be rotated out of this place inconsequentially as well. So there is no danger of that kind of cosiness being bred up. I thoroughly endorse the conclusions to which my noble friend has so ably led us.

Lord Roper: My Lords, I follow many others in congratulating the committee on such an excellent report. As has been said, it is not only excellent in content but it is also a joy to read—which is not always true of all the reports of your Lordships' House. It is not only a good report but, together with the oral and written evidence, it is an extraordinary basic document for the study of this subject. I am particularly pleased to see that the oral and written evidence is included as a CD Rom, together with the full report. It is a particularly good and helpful idea.

As has been said, the role of regulators is one of the most difficult questions in a democratic market society. The interface between the economic and the political mechanisms is a central question of political economy. As we heard from the noble Lord, Lord Blackwell, this is a continuing debate at a serious level, and it should continue to be so. It is almost the essence of politics in our societies.

As has been said also, there is the question of the accountability of the regulators. "Who regulates the regulators?" goes back to one of the classic questions of political science. We need to examine this issue, and the committee has helped us enormously by pointing out the problems.

One question which has not been addressed—perhaps the Constitution Committee will be able to come back to it—is how the Freedom of Information Act will affect the role of the regulators. How much further information will there be? Will that ensure that they will become more answerable and more easily accountable in the future than they have been in the past? It is a point that we may wish to consider.

To have an overview of the problems of regulation set out in one place will be extraordinarily valuable. Like others, I congratulate the noble Lord, Lord Norton of Louth, not only on his role in leading his committee to produce the report, but on what he
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has done in developing the work of the Constitutional Committee over the past few years. It has shown the value of developing such a committee in the House. Indeed, when we consider further Select Committees as discussed in the report, this one certainly has been a useful addition to the range of committees in the House. Indeed, the report has shown the value of Parliament having an opportunity to consider this particular problem.

As others have done, I turn now to the Government's response to the document. Although one always looks at the matters with which the Government do not agree, it is important to say that the report is good because the Government have agreed with a large number of the issues in the report and have made rather positive statements about them.

But there are three points—to which reference has already been made but to which I must turn—where the Government disagree with the proposals in the various boxes. I refer, first, to one which has been referred to only in passing in the debate so far—that is, box 13 at page 14 of the Government's response. The recommendation of the committee was that regulators should have a statutory duty to have regard to the principles of good regulation and effective accountability. In response, the Government said that they did not see the general case to ensure the principles of good regulation in statute; that it ought to be looked at on a case-by-case basis.

The Government may have a point, but it seems to me that at some stage there may be a case for re-examining the committee's position that an overall responsibility should be built into a statute. We may need at some stage to consider a statute dealing with regulation in general into which something of this kind could be included. I shall return to that point at a later stage.

The second issue, which was referred to in some detail by the noble Lord, Lord MacGregor of Pulham Market, is the question of the National Audit Office's access to all of the regulators. I regret that I have not had a chance to discuss this with my noble friend Lord Sharman. He, of course, had a good deal of experience in dealing with the issue in his own report. The precedent of the problems of the National Audit Office's access to the BBC is interesting when considering the questions of the FSA and the CAA, which have been set out so well. I feel that the answers that the Government provide as to why there should not be NAO coverage—and therefore the opportunity for PAC scrutiny—of the FSA and CAA are not powerfully argued.

I turn, thirdly, to the Government's comments on boxes 18,19 and 20, the three sets of recommendations dealing with appeals. As someone who has not studied the evidence in detail, I find this a particularly difficult issue. I am not persuaded by what I have heard. No doubt I may be persuaded by the noble Lord, Lord Triesman, when he replies to the debate, but I am not yet persuaded of the Government's case for rejecting the recommendations of the committee. This is an issue to which we will need to return to examine the situation. As has been pointed out, it is interesting
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that in a number of recent cases the Government have accepted rights of appeal. Again, one may want to look at that matter from an overview position as well as on a case-by-case basis.

I turn finally to the recommendations in paragraphs 199 and 200 which deal with parliamentary scrutiny. Obviously the House should consider these matters; they are issues with which we have considerable difficulties. It will be for the Liaison Committee of the House ultimately to consider the balance between requirements and resources in looking at further Select Committees. Certainly, by showing the issues that need to be considered, the report itself makes a very good case for further parliamentary consideration of the issue. As with the Joint Committee on Human Rights, there is a case for this being a committee which could usefully have representation from both Houses.

However, given what one knows about the pressures on Peers and others in staffing Select Committees, I am not yet convinced—this is something that we will need to explore—whether we need a Standing Select Committee sitting permanently or whether this is something that could be reviewed, let us say, on a quadrennial basis, where a Select Committee every four years could look at the matter.

Let me give a parallel. In the legislation dealing with the discipline of the Armed Forces, there is the quadrennial Armed Forces Discipline Act. Whenever the Bill comes to the House of Commons, instead of being considered by a Standing Committee it is considered first by a Select Committee, which looks at the range of problems linked to service discipline. It is particularly useful every four years to have an overview of the set of related problems.

It may well be that the two Houses will find that there are resources for a Standing Joint Committee dealing with the question of regulators but, if that were found to be difficult, at least one alternative—which might be much better than not having a committee at all—would be to look at a solution parallel to what is done in the case of Armed Forces discipline so that every four years there could be an overview of the kind described in the report.

I am not persuaded one way or the other on this issue, but I thought it worthwhile to air the range of options that might be considered when looking at the question of further Select Committees.

In closing, I repeat my congratulations to the committee on having served this House—and not only this House, but the nation—so well by providing such a useful study of it. I give my thanks to the noble Lord, Lord Norton of Louth, for all that he has done and my good wishes to my noble friend Lord Holme of Cheltenham as he takes up the challenge of chairing this committee.

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