Dr Hannah White.

Q1 The Chair: Welcome to this meeting of the Industry and Regulators Committee, which will focus on parliamentary scrutiny of regulators. I extend a warm welcome to our witness this morning, Dr Hannah White, who is the deputy director of the Institute for Government. I should declare that I was a governor of the Institute for Government for six years. Dr White has before her a declaration of members’ interests. The session is being broadcast on parliamentlive.tv. A full transcript is being taken and will be made available shortly after the meeting in order to allow any necessary corrections to be made. I will start by asking a general question; how effective is Select Committee scrutiny?

Dr Hannah White: There is no single answer to that question. It depends very much on the committee and on the entity being scrutinised or, indeed, the individual. I am pleased to be here today and that you are asking me this question, because it is a question that committees do not necessarily start by thinking about. They have a tendency to plunge into a scrutiny role without considering what makes for effective scrutiny. Generally speaking, it is very possible for parliamentary scrutiny to have big impacts on scrutinised entities, but it depends on how scrutiny is conducted. One of the key considerations is about the relationships that a committee builds and the extent to which it understands the bodies and the individuals it is trying to scrutinise and the extent to which they are understood by those entities, because scrutiny does not work well when it is a very combative relationship. It works best when people understand and respect what each other is up to and trying to achieve. That is both in terms of the general principles of what a committee might be trying to do and its specific interests and, indeed, the interests and concerns of the people being regulated. I can talk in more detail about some of the specific ways in which scrutiny works, but I do not know whether that is of interest.

The Chair: We will probably come on to those. Have ever been able to identify any common characteristics or behaviours that actually increase the likelihood of effectiveness?

Dr Hannah White: Do you mean behaviours on the part of the committee or on the part of the people they are scrutinising?

The Chair: First, the committee.

Dr Hannah White: Parliamentary committees start with the advantage that they are parliamentary committees, so if you compare them with lots of other entities that might try to scrutinise government or anything else, they have that status. They also have certain powers and can think about how they utilise them in terms of talking to people, calling for records and so on—but the most effective committees do not just rely on being parliamentary and having powers. Even though it is tempting to think, “We are a parliamentary committee and we are special, and therefore everyone will listen to us”, you are actually operating in a very crowded marketplace and there are lots of people to listen to.

Why anyone should listen to a committee is a question which requires further consideration. As I have already said, the most effective committees build effective relationships with Ministers, with senior civil servants and, in your case, it will be with people leading regulators and people involved in the regulated industries. That is crucial. Effective committees build their expertise. This is something where Lords committees often have an advantage, and I am sure that you all have a great deal more expertise than I do in the field of regulation. My expertise is more on the scrutiny side. Having and demonstrating your expertise is important if you want people to listen to you. It is about ensuring that you are always aware of what the issues are in the area that you are scrutinising, being out there talking to people and then selecting the right questions to inquire into and, when conducting inquiries and evidence sessions, asking the right questions. That is how people will determine whether what you end up saying is worth listening to. Lords committees often tend to be good at this because the House of Lords is full of experts, but it can sometimes be more of an issue with House of Commons committees if they do not appear to be focusing on what the real issues are.

Effective committees are not afraid to collaborate. Sometimes it can be tempting to operate in isolation as a committee and to get into your own world. I certainly experience that when working on committees in the House of Commons, but often there are other people, bodies, research organisations, academics and people such as the NAO whose scrutiny and work can enhance yours and can save you effort in some ways, avoid you reinventing the wheel and enable you to increase your purchase as a committee. Finally, it is about communication and talking about what you do. If you produce amazing recommendations but they remain hidden at the back of a burgundy tome, they will have much less influence than they might if they are well communicated and you think about who you are trying to communicate to and how those people will best receive communications.

Q2 Baroness Donaghy: Good morning. How could accountability via the Select Committees be improved? Do you have any specific suggestions about what this committee could do to enhance scrutiny? Several of the reports that have been produced over the last 20 years have a cyclical tone to them. You sometimes say, “That was done in 2007 and the results are still valid”, and yet nothing has really changed. How do you think you could get out of that particular cycle?

Dr Hannah White: That is definitely a perennial issue for committees. Currently, at the institute, we are doing a totally different piece of work on scrutiny of legislation where we have looked back over 30 years of recommendations, and it is remarkable how much they recur. To date, until the Lords saw fit to set up this excellent committee, scrutiny of regulators has tended to be patchy. It has depended very much on the interests of committees into whose remit regulators could be said to fall—for example, the Treasury Committee in the House of Commons. Many of the departmental committees in the Commons tend to treat regulators and other non-departmental public bodies as a scrutiny responsibility that they fulfil by occasionally getting the chief executive in to talk to. They tend to be less good at thinking in particular about cross-cutting issues, which might affect a number of regulators, because they are only looking at the one that sits in their space; and issues more generally affecting those regulators. They might have a general accountability session once a year, then stop thinking about that regulator and come back to it maybe the following year, which is not necessarily as effective. By implication, one valuable thing this committee could do is to have that cross-cutting look at regulatory issues.

In terms of being effective, one of the best things you can do is think about what expectations of scrutiny you want to set up with the people you are scrutinising. Scrutiny is less effective when it is a bolt from the blue and the committee suddenly decides that it is going to look at CMA, for example, and then the body has to mount a response at that stage. If the body knows that once a year—or every six months or every two years—it will be having a session where there are a set of issues that the committee is interested in and that it will be returning to those issues and requiring a progress report, that has a much more systematic effect within those organisations. Thinking about whether you want to establish some sort of expectations in that regard would be worth while. It is then about building relationships, as I have said.

It is also important to return to work you have done before. This is something you obviously cannot do yet, but do not just make your recommendations and then leave them and move on to the next thing. Come back to them and make sure that the people to whom you are making recommendations are aware that you will be doing a six-month or one-year review and that they cannot just say to you in their response, “Oh, yes, this is very important and we are going to do something about it” and just leave it there. Regularly come back to it. That is something that the Defence Committee in the House of Commons has always done very well. It has always had an expectation of a six-month review of its recommendations, and the MoD has built that into its expectations of what happens in terms of scrutiny.

Committees can also be more effective in their accountability if they seek to evaluate their own work. Do not just finish an inquiry, send it off into the blue and move on to the next thing. At an appropriate moment, go back and think, “Did we achieve what we wanted with that inquiry and, if not, why not?”. Talk to people about it. You will have lots of relationships and people who will talk to you spontaneously, but go out, ask people’s opinions and iterate your approach so that you think, “If it didn’t work when we did it this way, how could we do it differently?”. That is something that some committees try to do, but it tends to be a failing of parliamentary committees. They assume they have a general sense of how they are doing and therefore do not go out and actively ask their stakeholders how they are doing. Those are the sorts of things I suggest you focus on.

The Chair: Lord Trefgarne and Lord Cromwell have supplementary questions.

Lord Trefgarne: Is not the effectiveness of these parliamentary scrutiny committees very much assisted by their direct access to Ministers? The Ministers, of course, have powers, including those of hire and fire in the worst case. I suggest that the parliamentary committees are much assisted by their direct access to Ministers.

Dr Hannah White: That is absolutely true, and it can be an issue for Lords committees and harder sometimes—partly because of their often more cross-cutting remit—to persuade Ministers that they should attend, because Ministers feel they have a more direct accountability relationship with a committee which is directly scrutinising their department in the Commons. My understanding is that it can be harder to get Ministers to come and give evidence directly, but that is not the only way in which you have access to Ministers. Many of you will have relationships and connections with the relevant people and can go and talk to them, and I urge you all to see that relationship building as part of your responsibility. When you have the opportunity, talk to Ministers so that you can understand the issues that are worrying and concerning them and so that they understand what you are trying to achieve through the committee. But that is a question of who you all know and how you are able to build those relationships.

Lord Trefgarne: My experience of a Lords committee is the Minister ringing me up and begging to come and talk to us.

Dr Hannah White: Excellent. That is great.

Lord Cromwell: Good morning and thank you. This is very interesting. You referred to cross-cutting analysis and scrutiny, which is something we are looking at doing across a range of regulators, but how do we avoid the trap of that becoming a very generic set of conclusions that you cannot follow through or implement in practice? There is a danger of the burgundy report having things we would all sign up to, but nobody takes responsibility for implementing them.

Dr Hannah White: That is an important question and one we wrestle with at the IfG as well, because we try to do work which cuts across lots of government departments. In seeking to say something universal, there is the risk that you end up with the lowest common denominator and a straightforward thing to say. That is an important check to have on yourselves. If it is more productive to choose a narrower subset—the financial regulators, or whatever—or to look at a particular issue, I would do that rather than seeking to have something that speaks across the piece.

On the other hand, I would not underestimate the value of a set of expert people thinking through some of these cross-cutting issues and how that is helpful to the specific bodies within the subset. You will be thinking about issues which are relevant to them all in different ways, but they will not necessarily be able to see the big picture themselves, so that is something you can contribute.

Maybe it is also about doing the cross-cutting work but then thinking through the specifics for different organisations. If you have done a generic piece of work on precautionary principles in regulation, or something like that, when you are next talking to specific regulators think through the implications of that for that particular regulator and focus your questioning through your own work to look at the specifics for them. I am sure your staff will be doing this anyway.

Q3 Lord Eatwell: Who does it better? How should we compare the scrutiny which is done in the UK Parliament with the European Union or other countries—the United States, for example, where you very often have those extremely adversarial committees? What lessons could we learn from others?

Dr Hannah White: That is an excellent question. There are also parallels closer to home with the devolved legislatures to look at. Westminster committees are different from many parliaments in the sense that it is bicameral. You have the House of Lords committees as a whole separate ecosystem of committees which are able to contribute to scrutiny in a slightly different way from the Commons and, indeed, in a way that is designed to be complementary to the Commons. Many legislatures do not have that, and therefore they have to combine more functions within single committees.

That was the purpose in the Scottish Parliament when it was set up. It wanted to have powerful committees within the parliament and gave them both a legislative scrutiny function and a policy scrutiny function. In theory, that is good because you get people who are more expert in the subject matter looking at the legislation, and there is a read-across from policy scrutiny to legislative scrutiny. It does have disadvantages in a unicameral House because of the impact of whipping. If you are being whipped on legislation, the work going on within a committee is more likely to bleed across into the policy scrutiny, so you tend to get more political committees. That can be an alternative model that other people use. In the EU and so on, lots of committees do both. There may be instances in which there is pre-legislative type scrutiny where the Government bring forward Bills that are relevant to your committee and that you might want to look at, but obviously you do not have any formal function in that sense.

US committees are quite different. As you say, they are very adversarial. They are hugely better resourced, but they also have more of a budget role, so I do not think the comparison is necessarily direct. One of the disadvantages of the resourcing of the US committees, which always looks attractive from this side of the Atlantic, is that their work tends to be much more staff-driven. There are whole scrutiny processes and things that are going on which are largely outwith the sight of the members sitting on the committees, because they are busy politicians and there is a lot of stuff going on, so it does not necessarily have the same legitimacy.

If you compare internationally, Westminster parliamentary committees are, generally speaking, seen as pretty good, not least because of the cross-party element, which appears to work in Westminster in a way that it does not in lots of parliaments. In many ways we should be grateful for the committee systems that we have, although, as I have said, there many ways in which we can think about doing it better.

Q4 Lord Allen of Kensington: I will build on the EU point. To some extent, I know we have relied on EU systems and EU institutions. What I am keen to understand is what we need to do differently to augment that gap or fill that gap. What do we need to do not just to take it back to the levels we had before but to make it better? Specifically, where are the gaps and what do we need to do when we think about the UK and scrutiny?

Dr Hannah White: Structurally, Parliament has adapted its scrutiny systems since the UK has left, which was necessary and, in the Lords’ case, has created lots of interesting and timely committees; that is a good thing. The overarching point is that, for you, the EU held a great deal of regulatory expertise. It had a lot of experts working in different areas within the Commission but also on committees in scrutinising that regulation. The UK model, as everyone always admits, tends to be more generalist. We do not have the expertise in government and, apart from particular experts who happen to be in the House of Lords, we do not generally have a great deal of expertise in regulation within Parliament.

There is a big job both within government and within Parliament to increase expertise, understand the issues and build that up. Obviously, there are new regulators—the Office for Environmental Protection, the Trade Remedies Authority, the IMA and the OIM—so it may be that you wish to give some particular focus on those as they get established and start doing their work, and see whether they are achieving the objectives they were set up to do. Some of those have a devolved aspect. For example, the Office for the Internal Market is regulating areas as well. Do you want to co-operate in some ways with your counterpart committees in the devolved legislatures? Do you want to take evidence from Ministers in the devolved Governments? There may be questions there.

There are also existing regulators that have taken on additional responsibilities post Brexit. For example, the Health and Safety Executive will have more work to do in chemicals regulation and things like that, so you may wish to keep an eye on the extent to which it has the resources and so on that it needs to fulfil its new remits. An enormous but important point is that the EU will continue to develop its regulatory framework. It will be important, in whatever way it is possible, for the UK Parliament to keep an eye on what is going on and maybe to spot issues where you think the UK should be seeking to influence and so on. That is obviously an enormous task for which we used to have a big committee system which involved, I think, 70 Members of your House, so I do not say that lightly, but it is none the less important. We cannot ignore what is going on in terms of this massive regulatory entity sitting on our doorstep.

Lord Allen of Kensington: I was very interested to hear you say it is patchy. What I am keen to understand is that if you are prioritising best practice across the whole spectrum, what would that look like? You talked about follow-up and communications, which are really important in holding people to account, but what about things such as resources, committee membership and committing training to make sure that people have sufficient training? You talked about cross-cutting. What priorities do you suggest that we focus on, because you cannot do everything across such a big range of scrutiny and review? What would the priorities look like?

Dr Hannah White: The first priority is to prioritise. Before I begin to answer your question, I am conscious that I may have left Lord Eatwell unsatisfied with my answer to his previous question, so if you would like a follow-up as well I will happily respond.

Lord Eatwell: Thank you.

Dr Hannah White: First to prioritise and then to sit down—the fact that you are even having this session indicates that you may be more inclined to do that than some committees—and to think strategically about what the scope of your remit is, all the things that you could cover, what is most important to cover and what approach you wish to take. It is always the case that you think, “Oh, I am on this committee and it has this defined remit which is much narrower than my general responsibilities when I try to do my job in the House of Lords”, but actually it is a vast remit and there are many things that you could do.

Talk together about what you think the priorities are, and I would encourage you to come up with a strategy, in whatever loose terms—something where you say to yourselves, “These are our priorities and the principles we can test against when we make our decisions about specifically what pieces of work we want to do”. It could be something quite detailed or it could just be, “We think the three main things in the next year or three years are going to be this”. It does not preclude you doing other things, but how does each piece of work that you do build into a coherent body of mutually enforcing work that you think is making a contribution? Some committees, particularly in the Commons, can be very reactive and then they end up with a hotchpotch of lots of different pieces of work. It does not stop you changing it later on, but if you sit down and think from the start about what the priorities and direction are that you want to go in, that will help. There may be a mixture of long-term themes that you want to build on and short-term priorities where there is an issue arising that you want to deal with.

Then it is important to tailor your approach to the thing you are trying to do. This sounds obvious, but it is a mistake that committees make. They think they have this model of doing an inquiry and it involves coming up with terms of reference, getting written evidence, taking oral evidence and then producing a report, but actually there are lots of different ways you can approach your work and they do not all necessarily have to follow that model. It might be that there is a particular issue that you just want to pursue in correspondence with a Minister and then publish the letters on your website. You can extract information from government that way. It may be that you want to do something which involves finding out what the public think about something, in which case you might want to use different techniques. Think through the possibilities. You will all have experience from different committees, but also look at what other committees are doing for different ways to approach your work, because then you can get more bang for your buck if you are able to approach things in different ways. Prioritise, have a strategy and think about different ways of doing what you do.

Training is also important. You will obviously have thoughts on what you are better or worse at as committees, but think through your strengths and weaknesses. Maybe there are some things where some of you are very good and others feel less confident, and you want to pursue that. It can also be very useful in a team-building sense because you get to know each other and your strengths and weaknesses. Take some time to do that, if you are open to that. I know that many of you are very expert, but you can never have enough expertise and understanding of what is going on out there. Think through a programme of who you would like to go and talk to or get in here to talk to you in terms of seminars with academics or talking to practitioners. There is no substitute for going out and seeing people operating where they operate. Keeping that going and all taking responsibility for that is also really important.

The Chair: Do you want to follow up, Lord Eatwell?

Lord Eatwell: What I was thinking about in your reaction to the heavily resourced US committees and so on is really going to be followed up by Baroness Bowles, but I think there is an inconsistency in what you are saying. You are saying that there should be a consistency in what the committee does over time, it should have a strategy which is sustained over time, and it should go back and reconsider everything. All those things require a degree of permanence in the minds which are directing the activity. That degree of permanence can really come only from staff of considerable expertise. I know that when Baroness Bowles chaired the committee in the European Union, she had some remarkable expertise available; one of my pupils was one of her advisers. A committee like a House of Lords committee where the membership turns over is almost constitutionally incapable of doing what you suggest is desirable. How are we going to square that? I will now hand over to Baroness Bowles, because I note that she is going to talk about exactly these sorts of things.

Q5 Baroness Bowles of Berkhamsted: I was going to fish in exactly the same pond on the issue not just of resources but of permanence. If I may draw on my experiences when I was chair of the Committee on Economic and Monetary Affairs in the European Parliament, not only was I on the committee for a long time before I became its chair but there are people on that committee who have been on it for 25 years. The amount of knowledge among the committee members, not just the advisers, is phenomenal. It is the same if you go to the US. In the US I would have regular meetings with members of the various committees that dealt with issues that I dealt with in the EU, and there were some people there who had been on certain committees a very long time and had a lot of expertise. Of course, there were those that churned, where the staffers were doing the work.

With permanence you built those relationships, and we cannot really do that if we are rotating every three years. That means that if we are going to follow up, we are going to be following up on issues that have been reported on by others who have, by then, left the committee. There is nothing wrong with that, but you probably do not have the time to read all the evidence all over again on every report before you review it.

I would be very interested to hear your views on the resourcing and whether it is sufficient, especially in the Lords because we are not as well resourced as in the Commons at this point in time, how we deal with retention of expertise among the actual committee members as well as among the expertise we can draw on, and other scrutiny work that we might want to do.

I am sorry to load you with so many questions all at once, but the final thing that came to mind is timing. Are we timing our interventions at the right moment? A lot of what is done, especially in the Commons, is often retrospective. We wait for something to go wrong, as you hinted at in your earlier comments, or the CEO comes along and sits there for an hour every six months or whatever. Are we being proactive enough in getting in and asking questions out of that rather fixed timing mechanism? Are we doing it early enough? I noticed that you said what a good idea it would be to get in early on things such as the Trade Remedies Authority and the OIM. I think that is an excellent suggestion.

Dr Hannah White: I will try to work backwards but if I forget any of your questions, please feel free to remind me. I should have mentioned that timing is absolutely crucial in terms of factors determining successful committees. This is the reason behind what I say about maintaining your awareness of what is going on, because that is what enables you to pre-emptively identify things which may become issues that you want to get people in to ask them questions about—and hopefully stop them becoming issues—rather than only ever ambulance chasing after the event. Timing is crucial when you come up with an idea for scrutiny. It involves thinking through, “What is the opportunity for influence here?”. If it is something where the Government are consulting and there is an open door then, obviously, you need to make sure you conclude your inquiry in time to contribute to the consultation. If it is something where the Government have just set out a policy position or set up a new body, you may need to wait a bit until it is operated in order to evaluate it, but thinking that through on each occasion is really important.

You are absolutely right, Lord Eatwell, that there is an inconsistency there. The issue is the size of the House of Lords, the fact that your Lordships are active people who wish to serve on committees and the fact that the House has therefore decided that you should do so only for three years in order to give everybody an opportunity. I am tempted to say the big picture answer is to reduce the size of the House of Lords, but that may not be an issue that we want to get into.

You have to be realistic about those factors and think about how you can maintain a degree of continuity. That is where having a strategy of some sort—define it as you will—would help, because it enables new people coming in to understand, at a strategic level, what you have been trying to achieve and how the pieces of work you have done fit together. House of Lords committees, in general, are underresourced, particularly in terms of the policy expertise that you are able to draw on, which is excellent but limited and tends to move around, so you do not have that continuity. That, again, is the result of choices made by the House of Lords Administration, the resourcing model and so on.

I know there have been discussions about increasing the resourcing of Lords committees and that would be a really beneficial thing to do. If you look at the entire budget it takes to run Parliament, it is the same as administering a mid-sized government department and yet Parliament is supposed to scrutinise all government departments and all regulators, to legislate and to do everything else. It would not be unreasonable to put in more resource to aid scrutiny in the House of Lords. That said, the reason I focused on staff-led versus Member-led work is that I think it changes the calculation when it comes to whether Ministers think that all the members of a committee are really behind recommendations and focused on something a committee is saying or whether they think it is just a regular exercise carried out by the staff. Staff continuity and staff expertise are really important to support the committee, but you do not want to get into a situation where the bodies being scrutinised think that there is no democratic legitimacy behind the scrutiny to which they are being subject. Have I answered all your questions?

Baroness Bowles of Berkhamsted: You have made a good shot at them. Do you think we should travel more? For example, I mentioned that I went to see the US regulators and regulators all over the world relatively regularly. Of course, the difference was that I was doing that as a full-time job whereas we are not really doing committees here as a full-time job; we do other things. Should we try to build those relationships between ourselves and other regulators in a continuous way? Believe it or not, even in the European Parliament we had problems with trying to match what the Commission had available to it. We had general policy units on which all committees could draw for various things. Should we be looking at some such structure, where there are maybe more experts we could all use, who stay around but also have a bigger overview and know where to go and get things, instead of having a very small number of clerks who, as you say, also move around?

Dr Hannah White: On travelling, the answer is yes. On all the issues your committee is grappling with, there are people in lots of different countries and places grappling with very much the same issues. Looking at different approaches and understanding different circumstances and how different people are approaching it would be really valuable. There is definitely something about going and talking to people which is different from just reading an account of what they do differently or even talking to them online. I would not get too worried that you cannot all go on a visit so therefore no one can go and visit. There is a model where you can send one or two members in a rapporteur-type function, which the EU committees make much more formal use of. Sending one or two of you off, maybe someone who is an expert in an area and someone who is much less of an expert, to talk to different people could be a model to inject expertise and understanding back into the committee. To the extent that it would be permitted by the Lords authorities, that would be a good thing to do.

In terms of a standing body of experts for you to draw on, obviously, there is the House of Lords Library, which performs that function to an extent because there are people who stay there for long periods of time and build up expertise. I know that is limited in some ways, but there might be a case for you to argue for different areas of expertise that need to be developed in order to support the committee structure as it now is and your particular needs. The House of Commons set up the Scrutiny Unit within the committee office, which has lawyers, auditors, financial experts and people from the NAO. A committee could not justify having an entire person all the time, but it can draw on their expertise. That is a model that the House of Lords could look at as a way of having more expertise for committees to draw on. It is worth thinking about while your staff are so limited and move around, and I am sure that other committees would be interested in thinking with you about it as you carry out your work and see what limitations you think are presented by the support that your excellent staff are able to give.

Q6 Lord Cromwell: I have been very struck by your emphasis on building relationships with the people we scrutinise and in particular that these should avoid becoming combative, which I suspect is an easy trap to fall into. Nevertheless, performance and accountability, at some point, at least in part, come from having suitable metrics agreed, in place and measured. I know the Institute for Government has done some work on these sorts of metrics. I wonder what lessons you can share with us that you think we should be considering, and in particular—this is an interest of mine, I admit—how it is best to derive and then agree those metrics with those who are going to be subject to them.

Dr Hannah White: In relation to regulation, the idea of a committee developing metrics is more plausible than in other areas of policy. That said, the sorts of metrics you might want to develop will need to be different according to the different sorts of regulators you are thinking of. The key thing is to be clear about the objectives of the regulators and the model of regulation that they are seeking to adopt. Do they have a large population of relatively unsophisticated entities that they are regulating and therefore they have a more rules-based approach, or do they have a small population of really sophisticated entities and therefore they have a more principles-based approach? In turn, that will determine the suitability of different sorts of metrics that you might deliver. Generally speaking, the broader their objectives, the harder it is to be able to develop suitable metrics.

The Government have made clear that they are very keen to have a more principles-based approach to regulation post Brexit, so that is something which will no doubt be a consideration for you. This is something we have thought about more generally in relation to government. Any metrics need to combine thinking about the outputs that a regulator might produce—if they are thinking about fraud, the specific number of cases or whatever it is that they identify—and the outcomes that they are seeking to achieve; you can very easily do one well without achieving the other. You need to be thinking about both outputs and outcomes. Outcomes can sometimes be harder to measure.

Generally speaking, your issue with this approach is going to be data and the quality of the data to which you are able to get access. At the institute we do an annual exercise called performance tracker, which looks at nine different public services in terms of inputs and outputs and so on. The major issue we have is getting reliable data which enables us to look across the dataset. Those are the kind of things that you would need to think about. There is a question about the extent to which you are trying to do a comparative set of metrics, which enables you to say that this regulator is doing better than that regulator, or are you content to have an appropriate set of metrics for each regulator? In terms of agreeing them, that is the right question to ask. It needs to be mutually agreed to be a productive exercise in order to be most effective. It may be that a regulated entity does not think that what you think is important to monitor is important, in which case it is useful for you to understand why that is and to reflect on whether you still want to measure it. It should be an interactive exercise where you would talk to them initially about what they think their objectives lead them to be trying to do and how they are interpreting that, and carry on a conversation until you get to something which is mutually agreeable. As I say, it is ultimately up to you to determine what you think it is important to measure.

Lord Cromwell: It struck me, and some of the people we have spoken to, that the regulators have certain ideas about what the metrics might be—they are often quite ill defined—but the industry they regulate has very clear ideas on what those metrics ought to be. I think that role is underplayed. Everybody has a vested interest, but the industry should be communicating on an equal basis with the regulator as to what it thinks should be measured as part of its performance. Does that resonate with you?

Dr Hannah White: Absolutely. The committee’s role is to triangulate that, because there will obviously be things that industry would prefer were not measured.

Lord Cromwell: The same might apply to the regulator, to be fair.

Dr Hannah White: Indeed. In some ways, you can be the arbiter.

Lord Cromwell: The referee.

Dr Hannah White: The referee, indeed.

Q7 Lord Burns: Good morning. What do you feel about the general level of understanding of the powers and remits of regulators, both by the public and by MPs? In my experience, people often think regulators have a lot more powers than they actually do, particularly when things go wrong. They ask more of regulators without asking whether they have the powers. On the other hand, we also hear concerns that regulators are dealing with contentious topics which, maybe rightly, belong to government. Sometimes this has happened because Governments have handed on to them the tricky problems that they do not want to deal with themselves. Sometimes it is because the Government want to make public their own views about an issue, even though it is possibly an issue for regulators themselves. What do you think the trend is on these issues? Do we expect too much of regulators or do we think they are getting involved in things that are really for politicians? Is something wrong in that the remits are not quite right for today’s circumstances?

Dr Hannah White: A lot of questions.

Lord Burns: I am sorry. It is all about remits and powers.

Dr Hannah White: You are absolutely right that the remit of regulators is often poorly understood. To some extent, that is because people think not about the statutory objectives that have been set for a regulator but about all the other things that Ministers may have spoken about as aspirations and things that they would like to be taken account of and so on by a regulator, where the job of the regulator has to be very much focused on the statutory objectives. It may be that Ministers have required them to have regard to X, Y and Z but, at the end of the day, they need to be able to justify their decisions based on what has been set out in statute that they are required to do.

In terms of the question about contentious issues, in some cases it can be appropriate and desirable to outsource contentious decisions to a more technocratic body. Think about NICE taking decisions about which drugs the NHS should pay for. If that were constantly being done by politicians, it would, first, be a big technical workload and, secondly, become a political football. It can be good but, on the other hand, generally speaking, it should be a role for technocrats. You might think that the regulators are the ones with the technical expertise, but technocrats need to present the evidence and the options. Really contentious decisions should be taken by Ministers, because that is their role to balance the political considerations.

Do we ask too much of regulators? Sometimes, yes. There is no single answer to these questions, but if you have an entity which has more than four or five objectives it becomes really hard to manage and to prioritise so there is always a risk that some things will get neglected.

It can be really tempting for Ministers, who have been through this process a lot post Brexit, to not want to set up a whole extra body and to prefer to add objectives and responsibilities to existing organisations. That can be fine, as far as it goes, but can also lead to problems down the line. For example, we have seen that a lot of the discussion about the new chair of Ofcom was in the press. How can you find someone who has the expertise and experience to cover the whole range of responsibilities that Ofcom now has? That can be an issue.

If you give regulators contentious things and require them to do them, one of the risks is that it can impinge on perceptions of whether they are independent and working on the basis of the evidence, because they are just inherently contentious decisions. The other problem is that it can lead Ministers to be more interested in who is involved in running those organisations, so you can end up potentially going towards a more politicised appointments process because it is in the interest of government to make sure that those politically contentious decisions are being made by someone who they think shares their world view. That can be a problem.

To go back to the point about adding on maybe not statutory objectives but requirements to take into consideration the market, diversity, net zero or whatever it is, that can make regulatory decision-making more complex and harder for regulated entities to understand. If they have their basic objectives of the regulator that they think they are working on but then the regulator says, “We have made this decision because we were taking into account X, Y and Z”, that can set a precedent and make the experience of people who are being regulated and trying to understand what it is they are being asked to achieve harder.

Lord Burns: The reason I raise this is that this confusion, or stretching of the bounds of responsibilities, does make scrutiny that much more difficult.

Dr Hannah White: Yes, absolutely.

Lord Burns: Because when you come to assess how well they are doing, you find that buried in there is a lot of misunderstanding about what their job actually is.

Dr Hannah White: A useful function of the committee can be to discuss with the regulators what they think their job is. One of the useful functions of parliamentary committees is to have a greater degree of openness about these things and to talk about it in public. Calling a chief executive or chair before you to talk about what you understand their role to be can flush out inconsistencies or lack of clarity. There may be issues. For example, if there is a set of bodies now required to have regard to net zero or whatever it is, looking across the piece at how they are approaching that and what influence it is having on their decision-making could be quite interesting.

The Chair: Lord Eatwell and Lord Blackwell have follow-up questions.

Lord Eatwell: It has been very striking in the development of financial regulation that the institutions which have been created to deal with what we call macroprudential risks, systemic risks, have been almost entirely incapable of doing anything because they have run directly into government policy. For example, the Bank of England committee for a long time refused to consider loan-to-value rates in the housing market as one of its tools, because it said, “That is such a political issue that we cannot deal with it”. So instead of the plumbing issue—when you are looking at what a bank’s capital looks like—looking at macro issues runs into exactly those policy areas and is a considerable difficulty as the range of regulatory responsibility is being extended, as we know. Having made that comment, I have just one other thing. I am afraid I have to leave shortly, and I want to apologise because this has been a really terrific session and it is my loss that I am having to leave early. Thank you very much.

Lord Blackwell: Good morning. I want to follow up on this point about delegation of political topics to regulators because our sense—certainly my sense—is that at the moment, as you look across the regulators, whether you are looking at media or energy or environment, a number of them seem to be wrestling with quite difficult policy issues that have landed in their laps, and you can see both good and bad reasons why the Government may have wanted to push things out to regulators. The good reason is that they think an independent regulator may be better placed to take these decisions. The bad reason is that they think it gets them off the hook for accountability.

Looking across the way government has operated over decades, I wonder whether this is a permanent trend or a cyclical thing. As you think about the Government’s interaction with the health service, for example, it goes through cycles where it is nice to push everything out and then Ministers realise that they cannot actually escape accountability and then they have to claw things back again. I wonder whether we are in a cycle of that or whether there is a permanent trend of trying to push things out to independent bodies.

Dr Hannah White: The answer is definitely that it is cyclical, but it may not be the same cycle going on in all parts of government at the same time. The other good example, not from a regulatory point of view but from an inside-outside government point of view, is always the UK Border Agency, which goes in and out of the Home Office like a game of hokey-cokey. Ministers want to have closer control and then they discover that actually they would quite like not to have close control and they would like somebody else to be accountable. That is definitely the case. The other issue with government trying to achieve public policy objectives through regulation and regulators is that sometimes you can load so many different elements into something that a regulator is trying to do that you end up narrowing the number of entities capable of dealing with it. For example, think about rail franchises. The only companies sophisticated enough to take on a rail franchise with all the different things that it entails are the enormous state-backed companies, so then you have a direct effect on the market and the size of the market by what you want your regulation to achieve.

Conversely, of course, you do not want the opposite where you have multiple entities, possibly insufficiently regulated. For example, in the energy market, was there enough assessment of the extent to which those firms had hedged the risk against future energy prices? You had a really healthy-looking market, but was it a sufficiently regulated market? I am sure this is an issue you will all be thinking about. Those questions are things that Governments can, unfortunately, end up being quite reactive about. They do it one way and discover that they have gone too far in that direction, so they pull it back the other way but that has disadvantages too.

One of the functions of a committee such as this can be to think about those issues in more of an overarching way and to see whether there are lessons for government which can be quite useful. They would always have to be quite specific. As Lord Cromwell said earlier, the idea that you can come up with universal principles that will work across all regulated industries and sectors is not likely unless they are very generic, but there may be some subsets of things where you can come up with some quite useful thoughts on looking at a subset of related bodies.

Lord Blackwell: Principles may be difficult, but it would be nice if we could draw some lessons that would act as guidelines of what is appropriate to put in the remit of the regulator and what is necessary in terms of political direction to enable it to be effective.

Dr Hannah White: The Institute for Government has done this in relation to arm’s-length bodies. There is, as you will all know, a massive variety of models of arm’s-length bodies and we think it tends to be slightly too random what exact model a Minister will pick when thinking about setting up an arm’s-length body. We tried to come up with a typology of the options and the pros and cons of different models: “Are you going for a non-ministerial department?”, or whatever it might be. That is the sort of thing which potentially could be quite useful to say what it is appropriate to regulate and in what way.

Lord Blackwell: Maybe another way to think about it is, when you say we want an independent regulator, what actually is the scope of the independence?

Dr Hannah White: Absolutely, and what are the accountability mechanisms and who is being held accountable?

The Chair: That brings us to Lord Reay’s question.

Q8 Lord Reay: You have probably answered a fair amount of my question because it is very much related to Lord Blackwell’s, but what role does scrutiny from Select Committees play in sustaining the independence of regulators? Is there an increase in the politicisation of regulators’ work that poses a challenge to their independence?

Dr Hannah White: Parliamentary scrutiny is an important mechanism for bodies, including regulators and others that have a degree of independence which is integral to their remit, in helping them to sustain that independence. To give an example, which is again from an arm’s-length body as opposed to a regulator but there is a read-across, the Health and Social Care Committee in the House of Commons wanted to do some work on childhood obesity. It was aware that Public Health England had done a big piece of work looking at all the evidence at the behest of Jeremy Hunt—the then Health Secretary—in order to allow the Government to make decisions. The committee said, “We could have 100 evidence sessions and gather all the same evidence or we could just ask PHE to release this report to us, so that we could just read it and move on from there”, but Jeremy Hunt did not want Public Health England to release that report at the time. The committee repeatedly asked in various ways and was pushed back, and eventually ended up having the chief executive in to take evidence from him.

I think it was a very difficult evidence session where the committee was asking, “Why can’t we have this when you are supposed to be an independent body in this way?”. But it put that tension on the public record and afterwards—I am not saying this was the only reason—Jeremy Hunt did release that report, which enabled the committee to then do its work. My understanding is that the chief executive was grateful to the committee for enabling him to air the tension there was between what he was politically being asked to do and what he felt, from a public policy point of view, would be really helpful to be able to allow the committee to see this evidence. It was not that it was new research; it was bringing together all the evidence that there was on this topic.

That is not a regulator example but it is an example of how a committee taking an interest and holding an evidence session can help an independent body do what it thinks its job is when it may be under different political pressures and having that triangulated point where, as a regulator, you have your statutory basis and you are aware of the things that a Minister has said that they might like you to do. We sometimes have strategic policy statements and things such as that, which are really useful for Ministers to convey what it is that they want a regulator to be doing. If they do not have the same basis as the statutory objectives a regulator has been given, it is hard for the regulator to triangulate what it is expected to do because it is aware of the political priority but also of its statutory responsibilities. Then, it can be really useful to have another point where those things can be discussed in public and people can say, “This is what I understand my role to be, and this is how I am interpreting what I have been told by Ministers”, and so on. That openness that a committee can generate can be really useful.

Lord Reay: Do you think there is an issue with the amount of hiring that goes on between the private sector and individuals—regulators—particularly in the financial sector? It has been suggested that, as a result, there is a disincentive to investigate certain things such as, perhaps, fraud or money laundering. Do you think that is an issue and, if so, what do you think should be done about it?

Dr Hannah White: I am not expert enough in financial regulation to be able to give you a definitive answer. There can be real value to regulators in employing or consulting people from within industry to understand how things really work and what the considerations are to have that perspective and that expertise, so I would not want to say that that interchange is inappropriate. It has to be managed and you do not want it to be purely the interests of the people who expect to be going back to work in that industry within a short period of time to be driving the prioritisation and the approach within the regulator. Some interchange is definitely important and useful, but it has to be balanced by a more independent sense of what is important, which can include a political sense of what is important.

The Chair: Lord Hollick has a follow-up question.

Lord Hollick: Thank you, Hannah, for joining us today. I am sorry I was not able to be with you in person, but it is a very interesting session. I just want to pick up on one particular point, which I think is a difficulty we all share: the quality and reliability of data provided by the Government. Over the last decade or so the Government have become slightly more enthusiastic in following the idea that data should be kept under close control. Various reasons, such as commercial sensitivity or things such as that, are used to effectively deprive committees of up-to-date and accurate data about the state of affairs and the state of discussion around government policy. How do you think we could tackle that? Have you considered any measures?

For instance, in the United States you can call for papers, and that potentially sets up a very adversarial position which we do not necessarily want to get into, but on the other hand we do not just want to be fobbed off. I will give you an example: the Economic Affairs Committee has done two inquiries into HS2. The gap between the cost of HS2 provided by the Department for Transport and the number provided by outside experts and observers was stark and significant, and it was only with the benefit of the rear-view mirror that you could see that the numbers being provided by the Government were, in fact, inaccurate and were well short of the real numbers. Have you any thoughts and ideas on how we might tackle that problem?

Dr Hannah White: It is not easy at all. One thought is to do exactly as you are thinking about, to an extent, while thinking about metrics and ways in which you might judge the effectiveness of regulators, and to think about some of this data in peacetime, as it were, and, before you think there is an issue, to try to establish expectations with the Government about the sorts of data that ought to be available to you so that that is an established expectation and something that might happen on a regular basis. That way, you can identify issues arising rather than waiting until there is a problem and then saying, “But we need to see the figures on this”, which is the point at which the Government are least likely to want to release it. I accept that this is a sort of counsel of perfection because it requires a degree of clairvoyance on your part.

Maybe you could begin your work by thrashing out and firing off a volley of letters to different departments saying, “As a committee, these are the things that we think we are going to want to know. Please can we have a commitment that the data will be released to us?”. It will be harder for them to say no when there is no apparent reason for that. Obviously, as you all know, there will be data which is either commercial in confidence or, if it is about prudential regulation, it would not be appropriate to release. I totally agree with you that the default answer in government is too frequently, “No, we cannot release that”. It is too easy for them to rely on exemptions when it does not feel convenient to release data. My best advice would be a pre-emptive attempt to establish things which you think you are going to want to find useful.

Lord Hollick: Well, perhaps we should hire Bellingcat as a special adviser.

Dr Hannah White: That is another option, yes.

Lord Hollick: The comments made about the independence of regulators is pretty much compromised by the fact that they are now often joined at the hip in terms of policy-making. A recent example is looking at the decision to reduce the storage capacity for gas, and being probed as to how that decision had come about. It is clear that Ofgem had possibly not felt it was in a position to give or air its independent view to the committee. This acts as a barrier to getting to the heart of the matter. Your point is a good one but if we come back on a regular six-month basis and do follow-ups, they know that they are going to be in front of us again and we will be asking the same questions.

Dr Hannah White: Exactly, and that is the sense in which committees can actually change processes in organisations, because if they know that there are certain sets of data you are interested in and that you will be returning to it, whether or not you do a full evidence session or whether you just write or whatever it is, that can lead them to give significance to that data.

Q9 Lord Blackwell: I would like to ask a bit about your observations on the culture of regulators and the extent to which that is simply an extension of the culture of government or somewhat different. From the evidence we have had, and our own experiences, our perception is that regulators can tend to be risk averse, conservative and cautious. That may be simply that they are civil servants like the rest of government, which you have presumably done a fair amount of work on, but I wonder whether the way in which committees, particularly House of Commons committees, interrogate them actually exacerbates that caution. The typical questioning tends to focus on things that have gone wrong and particularly things which are politically salient, and therefore it becomes a culture in the regulators of wanting to avoid sticking their neck out anywhere where that might cause them to have to explain why they did whatever they did. That perhaps drives them towards trying to stick as closely as they can to the rules rather than what one really would like regulators to do, which is to use their expertise and relationship with the industry to exercise judgment. Do you have any views on that?

Dr Hannah White: Yes. As we have already discussed, one of the problems with a regulator sticking its head above the parapet is that that can be a very effective way of bringing more political attention to the regulator, and potentially that can spell trouble. We would all think it is really important for a regulator to be independent and to say things in public to a committee or otherwise, as appropriate, but you can see how, from a regulator’s point of view, that can look like just bringing a world of trouble on to themselves. Secondly, regulators are not just as conservative as the Civil Service but much more conservative than the Civil Service, in some ways for good reason in that regulation is all about precedent and predictability. For the people who are being regulated, it is really important, as I said before, for them to be able to understand the basis on which decisions are made. The way they do that is by looking at the precedents of past decisions that have been made. If the decisions appear to be random or affected by all sorts of other issues which are suddenly brought into play, that can be really difficult for regulated industries. In some ways, it is right and appropriate for them to be conservative with a small C.

On the other hand, the world changes and the objectives that are set for regulators at one point in time may no longer be appropriate. The challenges which are facing the industry shift and, as you say, we would all like to see a regulator which is able to be flexible and fleet of foot, to understand how things are changing and to change itself as appropriate in that context. There are ways in which some regulators have tried to do this. The FCA sandbox approach is a way to try to enable firms to experiment with innovative approaches and to make sure they have the regulatory support as they do that, but that is not appropriate for all sorts of industries and markets that you might be regulating if something that you might do in an innovative way would pose a real safety risk to consumers. It is a real tension between exactly what we have asked regulators to do, which is to be conservative and to follow the rules and to administer those rules because they are managing real risks that we think will cause real harm to markets or people or one to the other indirectly, and wanting them to move with the times and to innovate.

One good thing about the establishment of this committee is that you can think about some of these issues and help regulators to think about them. Obviously, you cannot do it in a detailed way with every regulator and everything they are seeking to deal with, but there is the whole question about how a regulator innovates, which is a really interesting one in and of itself, and you might be able to look at examples and to cross-fertilise between regulators what ideas there are about how to do it. There might also be really specific regulatory issues for different regulators where your interest might push them to be a bit more proactive in their thinking about emerging issues that they are going to have to think about and they do not seem to be doing so, or at least not at a pace that you would like to see.

Lord Blackwell: Predictability is obviously important, but as we have left the EU there is a drive to move towards more principles-based regulation with the benefit that then the regulators are using expertise in judgment rather than a one-size-fits-all rulebook. But the benefit to them of a lot of complicated rules is that it enables them to defend that they have just taken mechanical decisions. Given the way scrutiny operates when it is combative, do you think it is actually possible to get a culture where principles-based regulation can work, or does the way scrutiny operates drive them towards wanting to build defensive ways?

Dr Hannah White: That is a really good question. Again, it depends on the nature of what is being regulated and what you are trying to do. Even though there might be an aspiration to move towards a more principles-based approach, it is not going to be appropriate in some contexts. It is inevitable that scrutiny often focuses on things that have gone wrong, and that becomes very uncomfortable for regulators in some contexts. Sometimes that is entirely appropriate. Although it is important to build constructive relationships, that is not at all to say that when things go wrong you should not be asking difficult questions and trying to get to the bottom of it.

As you say, from a human point of view, it is entirely explicable why people would move towards thinking, “If we have a rule and we can tell whether the rule has been broken or not, that is just much easier than having to defend a principles-based approach”. It is just something where you need to make sure as a committee that you are doing both; you are fulfilling your accountability function when you think you need to, but also trying to have the constructive conversations with regulators which give them the opportunity to think about things that they might otherwise not be thinking about, to innovate and to encourage that alongside it.

Sometimes that can seem inconsistent, but I am sure that the chief exec or the chair who has come in and been grilled by you one week will not be averse to coming in another week to talk about something on a more constructive basis. It is hard to get around this combative thing, because sometimes that is what you are here for.

Q10 Lord Trefgarne: How can we promote policy-making in the future, particularly as this might involve the regulator, which should perhaps be consulted as we are considering policy way into the future? What would your advice be on that?

Dr Hannah White: Again, that is a question I am glad you are asking. Asking a regulator to do some things can be a good way of ensuring that longer-term policy objectives remain a focus, because it can move things out of the direct electoral cycle and decisions that will be affected by some of the consideration of elections. Obviously, there are examples of places where there has been an attempt to ensure that the needs of future generations are taken into account. Wales has the Well-being of Future Generations (Wales) Act and a future generations commissioner who has a statutory role to try to help all sorts of public sector organisations, including regulators, think about the impact of their decisions in the long term, not just immediately. I have not seen any kind of objective analysis of the extent to which that has had an influence in Wales. I think the Act was in 2015, so it has had a little time to play.

There are some structural ways to try to get regulators and others to think about the long-term impacts of policy. There are also techniques in the process of policy-making in which you could involve regulators, such as questions about who to talk to when formulating policy. Are you talking to young people whose interests are going to be more affected in the longer term? What techniques are you using when formulating policy? Are you doing more engagement work and coproduction? One of the most important things when thinking about long-term policy objectives is how to generate cross-departmental thinking and thinking between different policy areas. You could try to bring regulators into those discussions, because the way in which you are regulating a particular industry or market may well have longer-term impacts, but those will very often intersect with many other policy objectives and things which government is trying to do.

It is a really interesting question to think about in relation to regulators, and there are bodies which provide a positive example. It is not a regulator as such, but the Climate Change Committee, for example, is an independent entity that has a role in presenting evidence, setting carbon budgets and so on and maintaining a longer-term focus which is slightly outside the immediate cut and thrust of government policy-making. Regulators can be seen in a similar vein and could play that sort of role.

Lord Trefgarne: Would you not agree that Lords committees, less subject to the electoral cycle than they are in the House of Commons, can look further forward?

Dr Hannah White: Absolutely, and the evidence is that you do. That is a really positive contribution, because it is something that is very difficult for House of Commons committees to maintain focus on. Even if in theory they think something is important, it often slips down the priority list.

The Chair: Thank you very much indeed. Lord Eatwell has already said, and I think I speak for the rest of the committee in saying, that we found this session to be extremely helpful, very interesting and very stimulating, which of course causes us the usual problems. I now declare this meeting closed.