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Urgent reform needed to improve independence, accountability and performance of UK regulators

8 February 2024

The Industry and Regulators Committee has raised significant concerns over the role of UK regulators, their ability to operate with genuine independence from Government, and how they are held to account.

In its report, ‘Who watches the watchdogs? Improving the performance, independence and accountability of UK regulators’, the Committee concludes that a fresh approach to overseeing UK regulation is required, calling for the creation of an ‘Office for Regulatory Performance’ to investigate and report on regulators’ performance and support Parliament in holding regulators to account.

Key conclusions

The Committee found that:

  • Some regulators are being overloaded with objectives, without clear guidance on how they should prioritise between them;
  • The waters have been muddied between regulatory and political issues, resulting in the Government’s strategic guidance effectively ducking decisions on which it should give a view;
  • There is a perception that some regulatory leaders have been appointed on account of their political loyalty rather than their experience and capability;
  • While some regulators can raise their own revenues through levies and charges, others depend on the Government for their funding, which inevitably influences their ability to carry out their functions independently;
  • Regulators face a challenge to recruit and retain more specialised staff due to the higher rates of pay available for the same skills in the private sector, particularly in areas of rapid change such as digital and technological skills;
  • It is crucial that regulators are held to account for how they use their powers by Parliament, but currently parliamentary scrutiny of regulators is reactive and piecemeal, rather than systematic and routine.

The Committee is calling on the Government to:

  • Streamline regulators’ duties and objectives and provide prioritisation in the event of conflicts;
  • Provide guidance on how policy priorities should be decided, for example on matters of social or economic policy, such as the size of bills, and give regulators’ boards the power to seek explicit guidance on such decisions;
  • Allow Parliament to play a more prominent role in scrutinising appointments to regulators, and provide a public explanation if it chooses to make an appointment that has not been endorsed by the relevant select committee;
  • Consider allowing relevant regulators the power to raise their own revenues;
  • Allow regulators greater discretion to move outside of current payscales to attract the necessary staff;
  • Ensure the consumer view is properly heard by regulators, by expanding statutory provisions for independent consumer advocacy;
  • Provide Parliament with the resources necessary to establish a new body, the Office for Regulatory Performance, to support its scrutiny of regulators.

Chair’s comments

Lord Hollick, Chair of the inquiry, said:

“Our report raises concerns about the functioning of the three-way relationship between the regulators, the Government, and Parliament, particularly the role and performance of regulators, their independence, and their accountability. We are especially concerned at cases where the Government has failed to resolve political or distributional questions facing regulators, and instead interfered in their day-to-day workings.

“Independent regulators must have the confidence to tell the Government and the public about the serious problems facing their sector and be able to set out proposals to meet them with clarity, efficiency and transparency.

“Ministers and Departments responsible for specific regulators should be subject to scrutiny alongside these regulators. We were therefore disappointed by the limited engagement in our inquiry by the Department for Business and Trade, particularly when transparency and accountability to Parliament were a central theme of our work. The Department did not provide the Committee with oral ministerial representation, despite ample notice, and its written submission was brief and lacked detail.

“If the integrity and legitimacy of the UK’s regulatory system is to be preserved, the findings and recommendations in our report must be addressed by the Government, regulators and Parliament.”

Further information

Image: By Brian Jackson