19
Industry and Regulators Committee
Corrected oral evidence: Regulators and growth
Tuesday 27 January 2026
10.05 am
Watch the meeting
Members present: Baroness Drake (The Chair); Lord Best; Baroness Harding of Winscombe; Lord Teverson; Viscount Thurso; Viscount Trenchard; Lord Udny-Lister; Baroness Valentine.
In the absence of Baroness Taylor of Bolton, Baroness Drake was called to the Chair.
Evidence Session No. 9 Heard in Public Questions 106 - 117
Witnesses
I: Sarah Cardell, Chief Executive Officer, Competition and Markets Authority; Lawrence Tallon, Chief Executive Officer, Medicines and Healthcare products Regulatory Agency; Dame Melanie Dawes, Chief Executive, Ofcom.
43
Sarah Cardell, Lawrence Tallon and Dame Melanie Dawes.
Q106 The Chair: Good morning and welcome to this evidence session of the Industry and Regulators Committee on regulators and growth. The meeting is being broadcast live via the parliamentary website. This morning the committee is hearing evidence from: Sarah Cardell, chief executive officer, Competition and Markets Authority; Lawrence Tallon, chief executive officer, Medicines and Healthcare products Regulatory Agency; and Dame Melanie Dawes, chief executive at Ofcom. I welcome you all here today and thank you very much for coming.
A transcript of the meeting will be taken and published on the committee website, but you will have the opportunity to make corrections to that transcript if that is necessary. I hope that you have received an indication of the areas of questioning, particularly around growth, that the committee has. I will open with a general question and I invite the three of you to give us a brief introduction to your role as a regulator and your main objectives, starting with Dame Melanie.
Dame Melanie Dawes: Thank you very much for inviting us today. Ofcom is the UK’s communications regulator. We have been established for over 20 years now, and our job is to further the interests of citizens and consumers in relevant markets—that is straight from our founding statute—where appropriate by promoting competition.
Communications markets have completely transformed, certainly over the last three or four decades and actually over the last couple as well, and our role has changed to reflect that. We have gone from a place where there was hardly any competition, for example in telecoms markets, to one where there are multiple technologies providing connectivity to the consumer—multiple players bringing broadband and mobile coverage into our homes and on our devices. At the content end, when you think about media, we have gone from a situation where we had very few players providing us with news or entertainment to one where we have the streamers and social media as well as traditional radio and TV.
We consult every year on our plan of work. We have four objectives. We are in the middle of that consultation now and have an event in Edinburgh taking place today. Briefly, our four objectives are, first, internet and post we can rely on; that is about fibre rollout, investment in mobile and supporting consumers to navigate those markets. Secondly, it is media we trust and value; that is about backing our public service media, regulating the BBC, implementing the Media Act, and maintaining content standards. Thirdly, it is a safer life online, which is about the implementation of the Online Safety Act, still very much in its early days. Finally, it is making spectrum available to multiple parts of the economy, which is very much an innovation-focused part of our brief.
The Chair: Thank you. That is very clear. Sarah, would you like to go next?
Sarah Cardell: Thank you very much, and thank you for the opportunity to speak with the committee today. The Competition and Markets Authority has a number of statutory responsibilities. That includes merger review, investigating anti-competitive agreements, investigating potential breaches of consumer protection law, but also carrying out broader market reviews, market investigations and, relatively recently under the Digital Markets, Competition and Consumers Act, a new digital markets competition responsibility.
Over the last year, recognising the Government’s priority focus on growth and reflecting the new strategic steer that we had from the Government in May last year, we have made sure that we are focused and situating all the work we do squarely within that priority focus on growth. That has culminated in the publication in November last year of our new strategy document, our strategy for 2026 to 2029—the next three-year strategy. The way that we have captured our mandate is to say our fundamental purpose is unchanged—that is to promote competition and protect consumers—but we do that squarely with a clear end goal in mind, which is twofold. One is to help drive economic growth and the other is to support household prosperity. We see those two things as inevitably quite interconnected. If you are helping to drive economic growth, of course that is driving up overall prosperity in the country. Equally, if you are working to support consumers, consumer confidence and consumer prosperity, that has a positive impact flowing back through into economic growth.
We set out in our strategy five key objectives to deliver against that mandate. Unsurprisingly, the first is to continue to promote and enforce strong and healthy competition across the UK economy. We have a cross-economy mandate. We know that strong, dynamic, competitive markets are critical to drive investment, innovation and productivity. Those are all key levers to supporting economic growth, as well as keeping prices down for consumers and maintaining choice and innovation in markets. We are also, unsurprisingly, continuing as a strong champion for consumers, including implementing our new consumer protection powers.
Our third strategic objective is relatively new, and that is about stepping up our role as an enabler of competition particularly with a growth focus in mind. We are often recognised more for our role as an enforcer, but we have an important statutory role also as an adviser to government, working closely with the Government, particularly as they implement the industrial strategy, to apply an appropriate protection lens—for example, looking at how procurement or regulation in the context of today’s discussion can be channelled to support a pro-growth competition mandate.
Importantly for today’s discussion, our fourth objective is our role to support a regulatory environment in the UK that makes sure that the UK is a great place to do business and invest. We have undergone a process of transformation internally to support that.
The final one is a keen focus on what we are doing to support the UK interest, making sure that every action that we take is tailored to the UK interest and how we can best deliver against that.
The Chair: Thank you very much. Lawrence, would you like to go next?
Lawrence Tallon: Thank you as well for the opportunity to give evidence to the committee. The Medicines and Healthcare products Regulatory Agency, the MHRA, is an executive agency of the Department of Health and Social Care. Our primary responsibilities are to approve clinical trials of new medicines and medical technologies in this country, to license new products, medicines and healthcare technologies, and to provide safety and surveillance of medicines and medical products, including technologies, as they are deployed in the country—so post-market surveillance. Part of that latter role also includes enforcement, where we need to take action to either take a medicine off the market or potentially close down criminal activities with medicines.
Our primary purpose is to serve the patients and the public of this country and to ensure that they have timely access to safe, effective and innovative medicines. We frame everything through the lens of patient-centred regulation. When we get that right, it also serves the growth of the life sciences sector in this country because, of course, patients want to ensure that any medicines and medical products on the market in this country have a strong safety profile. They also want to make sure that, as new products become available, patients in this country have access to those medicines and medical technologies as soon as in any other developed country. That then chimes with the interests of the life sciences sector in all its different facets: big pharma, biotech and medtech. We have a combined interest to make sure that safe, effective and innovative products come forward to patients. Therefore, I do not think that our role in safe and effective licensing in any way conflicts with the growth of the life sciences sector in this country. In fact, I think that they are complementary.
I have a couple of probably important points to clarify about the role of the agency. First, we are a whole of UK agency, so we are the regulator for all four nations, which is slightly separate from some of the other health bodies. There is a separation between the MHRA, which principally considers whether a medicine or a medical device is safe and effective—that is, whether it should be on the market—and the role of NICE, the National Institute for Health and Care Excellence, which is a close partner organisation of ours. Its role is slightly different and it is to decide whether a medicine is cost-effective and should be funded on the public purse. I just offer that for clarity.
Q107 The Chair: Thank you very much. Drilling down deeper now to this whole issue of regulatory challenge, do you have a theory of change for how you work and support growth in your sectors and in your economy? Do you have such a thing in how you operate? Sarah, do you want to open on this one?
Sarah Cardell: Yes, thank you. There are perhaps two elements. One is the issues that we choose to prioritise in the work that we do, because we have quite a bit of discretion about where we choose to focus our time and effort. The second is how we go about that work. On the priorities, there are areas of our work where we have far less discretion—for example, merger control—but other areas where we have more discretion. That is where we are reflecting the Government’s strategic steer, which is clear, that we should be looking at opportunities to support growth and investment that benefits the UK economy as well as continuing to keep a keen focus on outcomes for consumers.
To give a few examples of that, when you are thinking about growth, infrastructure is an important area. Last year, we launched a market study looking at how well the market for road and rail civil engineering infrastructure is working to align with the Government’s 10-year infrastructure strategy and to provide important insights there. That is particularly with a focus on the role of the Government as a procurer and how procurement can be used as an enabler of growth rather than in some cases an obstacle that can get in the way of growth and scaling opportunities, and with an eye to the regulatory environment.
On merger control, our role is to make sure that anti-competitive mergers do not go through, but at the same time the vast majority of deals are not problematic from a competition perspective and some may well bring investment benefits. A good example of that is the VodafoneThree merger that we reviewed last year, where we were able to craft remedies that protected consumers. Working closely with Ofcom in that case protected consumers from any adverse price increases, but it also brought forward important infrastructure investment. We are tailoring our approach to the issues that we look at and how we address them.
We have implemented quite a fundamental transformation in the way that we go about our work over the last year. It has been referenced as the 4Ps programme. That was building on feedback that we had directly from a wide range of stakeholders about the perception of the competition regime in the UK and whether it was overall contributing to a healthy, positive regulatory environment that was pro-growth.
The key themes that we heard from that feedback were, first, pace. We know that pace really matters for businesses and investors. We have implemented a programme of change to drive up pace. Predictability was the second key theme. We know that uncertainty can chill investment, so what more did we need to do to drive greater predictability and greater certainty for businesses and investors engaging with our work? The third was proportionality. It is very important that we take action that promotes competition and supports consumers, but we need to do that in a proportionate way that does not have excess adverse impact. That has been a key factor for us. Th final one was process. We were hearing overwhelmingly from the business and investor community that it was not sufficiently easy to engage with the Competition and Markets Authority. We did not have a dynamic, iterative engagement with the business and investor community and we have radically transformed that, including setting up a Growth and Investment Council, which includes representatives from a wide range of business and investment organisations across the UK. That has helped to shape and inform our work and give us direct feedback.
That has been quite a fundamental programme of change. Alongside that, we are looking at upgrading the way that we measure the impact of our work and feedback on our work. I am happy to go into more detail if that is helpful.
The Chair: Do you apply your theory of change retrospectively as well as prospectively to understand what you could have done better or what did or did not work?
Sarah Cardell: Absolutely. In looking at past practice, a good example is our approach on merger remedies, where we have undergone a review of whether we are getting the balance right in requiring structural remedies and our openness to behavioural remedies and conduct remedies. We looked at our past practice, but we also sought feedback directly from businesses that have been involved in previous merger control reviews as well as the wider stakeholder community. We took the lesson of VodafoneThree as one example and applied that prospectively to updated guidance and engagement with stakeholders.
Dame Melanie Dawes: I think that Parliament had a pretty clear theory of change for Ofcom when we were set up in 2002. Our founding principles, which I have already mentioned, are to further the interests of citizens and consumers. We have always interpreted that as being the citizens of the future and the consumers of the future as well as those of today. Making sure that services will be available in the years to come is important, not just thinking about what is needed in today’s market. In industries that need investment I think that is very important, so that flexibility in our founding law is important.
The other things I point to in our founding statute are, as I have already referenced, very early on it talks about promoting competition where relevant. That, of course, is an important driver of growth and healthy markets, as Sarah has been describing. We also have to have regard to the importance of innovation and investment. There you have an investment, clearly one of the components of GDP and growth, and in innovation one of the most important drivers of future productivity growth. We feel that our legislation has always given us a strong growth focus, and the new growth duty makes that explicit. We find that very helpful, but we have always felt that it has been central to our work and the way that we trade off decisions.
The final thing is that, unlike some of the other economic regulators such as water or energy, our markets have been disrupted by technology enormously over the last decades, and I mentioned that earlier. What that means is that competition has naturally come into those markets at the network level and at the content level in a way that has allowed us to deregulate. We have had growth, innovation and investment. The right answer for Ofcom has often been to step back. For example, we do not regulate the home broadband market in the way that we did a number of decades ago and we are deliberately adopting a pro-competition approach to fibre rollout at the moment. That is a slightly different context to some of the other regulators where we have not seen competition emerge in the same way as we have seen in telecoms and in media.
The Chair: Staying with that, your remit allows you to pursue the interests of the current consumer and the future consumer, or citizen and consumer interests. That has allowed you to be more forward thinking and strategic. You have obviously had to do a trade-off at some point between the immediate consumer and the future consumer. Could you give an example of how you have worked that through?
Dame Melanie Dawes: A good example is our fixed telecoms regulation at the moment. We decided five years ago that we would allow inflation indexation of the core anchor product for what was then the most popular broadband product in the home, which was fibre to the cabinet, as the particular product to which we attach the regulation. We were regulating Openreach’s pricing but we were allowing an inflation indexation on that. That created a margin for investment not just for BT and Openreach but also for the rest of the industry. That was an explicit decision by Ofcom—on which, of course, we consulted and we made it very explicit—to allow slightly higher pricing over this period to get the investment that we need in new fibre networks for the country.
What you have seen over the last few years is that, on the new fibre products, the competition that has been unleashed through our approach has driven down pricing for fibre products in the home. You have seen a 40% real terms reduction if you are just looking at what is available to you—if you have it, and nearly 80% of households now do. It is much cheaper than it was four years ago, and it is usually cheaper than the traditional fibre to the cabinet product that I was referring to. That is an example of where we have traded those things off. Overall, the consumer of today is getting a pretty good deal out of this as well.
The Chair: Thank you. Lawrence, do you want to take us through on theory of change?
Lawrence Tallon: I will talk briefly about our mission, the methodology and the mantra that we follow as a theory of change.
The mission, which I mentioned earlier, is putting patients and citizens in this country at the centre of our regulatory decision-making. I think that it is important to describe the false dichotomy that often presents in our work in medicines regulation. The false dichotomy that I encounter often is that patients’ interests are only around safety and industry’s interest is only around innovation in the name of profit. I do not believe that this is, in fact, true. Of course, patients rightly expect that any product that they access legally in this country should have an adequate safety profile, but they also have a very strong interest in having access to the latest, most innovative and most effective medicines and medical technologies. Patients are very much interested in innovation as well as safety. Industry, of course, has no interest in having safety problems because, first, people who go into the development of medicines and medical technologies have the same outcome of wanting to improve patient care, but also, frankly, it is bad for business if they have safety problems.
I do not think that the interests between the life sciences sector and industrial growth and patients are fundamentally opposed to each other. That is not to say there are not areas of ambiguity and tension, but in the core I think that access to safe, effective and innovative medicines are an aligned objective between patients and industry. The mission of putting patients first is our guiding principle.
The methodology we use is what we call risk-proportionate regulation. That means you have to think very much about the nature of the product, the nature of the disease or the prognosis and the circumstances of the patient. To give two brief illustrative examples, if we were to use a prophylactic vaccine against a respiratory virus in a young person for whom the likely prognosis is they may have a runny nose for a week or two and then recover, we would have to set a very high bar for safety to use that vaccine because any potential risk is not worth the benefit, given the counterfactual. However, when we are talking about a young person who may have a severe and aggressive cancer and may have a prognosis that they probably will not be alive in six months, and there may be a personalised immunotherapy available that could change that outcome and give them many more years of life, and provided that the benefit/safety profile is sufficient and understood by the young person or their family, then, of course, you will apply a very different framework of risk proportionality. In our methodology we have to think about the product and its safety and efficacy, the prognosis of disease and the patient’s circumstances.
The mantra, lastly, is we talk about being fast, expert and open. Just as Sarah said, overwhelmingly the message for us to support growth is about speed—not about reduction of quality but about speed of decision-making. There are lots of different data points to bring a medicine to market, but it can cost something like $1 billion to $2 billion or a similar number in pounds. The estimates vary, but a recent publication in the Journal of the American Medical Association estimated that it is about half a million pounds a day in development costs. Every day that we can shorten the decision-making process is worth significant money to industry. We are very much focused on fast decision-making as well as maintaining the high bar for quality.
Expertise or experts is crucial because, of course, the competitive advantage of this country very much clusters around the strength of our basic science and our technology and our universities. The expertise we are able to bring to bear is very much outsized relative to other countries. In life sciences, this country is third only behind America and China in publications and citations in high-impact journals.
The last part of that mantra is open and openness. Making that scientific advice available to industry early on, before they have submitted their clinical trial application, will derisk the regulatory journey. It will increase their chances of successful regulatory approval and will also reduce friction for us and rework within the clinical trial application. Fast, expert and open is our mantra, with a methodology around risk-proportionate regulation, all guided by that mission of patient-centred regulation.
The Chair: Thank you very much. Lord Best has a question.
Q108 Lord Best: You have been talking about what you are all doing to promote growth and give it greater emphasis. My question is about what the Government are doing and whether or not they are fulfilling their promises. In October 2025, in the Regulation Action Plan, the Government announced their intention to “reform the Growth Duty so that the legal framework is clearer, more focused and ensures regulators must consider and promote growth”. The Government have committed to “work with regulators to ensure they have clarity from government regarding what growth means for them”. My question is: are the Government fulfilling these commitments they have made? Are they being more helpful and giving greater clarity so you can understand what prioritising growth really means? We will perhaps for the first time start with Lawrence.
Lawrence Tallon: I think that we are in a good place with our Government Ministers at the moment. We have a strong, committed ministerial team with Wes Streeting and Zubir Ahmed at the Department of Health and Social Care, Patrick Vallance at the Department for Science, Innovation and Technology, and Liz Kendall, of course, as the Secretary of State. There is close alignment between them, so I feel that as a regulator we have a clear steer on what government wants from us and incredible support to deliver that agenda. I am afraid that I do not really have any recommendations for things I would do differently, other than ideally keep that as it is and keep it steady and stable.
I will highlight some aspects. I know that there is a lot of talk about a general duty for growth, and I am certainly comfortable with that. I do not necessarily think that it will massively change what we are doing because, as I have described already, our core work and core mission is enabling growth. There are certain aspects of regulation that could do with small amounts of change. I think that the main barrier there is not so much government support for what we are trying to do but just simply the congestion of parliamentary time to put legislation through.
I am in discussion with Ministers about some of the changes I would like to see specifically on the regulation of medical technologies, because AI will change that field so dramatically. Well, it has already changed that field so dramatically. The Medical Devices Regulations date from a period before AI as we currently know it. They have, of course, been updated, but they are some 25 years out of date. They were set in legislation some 25 years ago, so although they have had incremental updates they are clearly not designed for an era of AI. I would like to be in a position that we can rethink the way we do regulation of AI as a medical device in particular. The Government are very supportive of that, and it is simply a question of finding space in the parliamentary calendar.
Lord Best: As usual.
Sarah Cardell: The Competition and Markets Authority is in a slightly different position. We are not subject to a growth duty as such, but what we do have, as I mentioned earlier, is the strategic steer from government. Government published a new strategic steer for us back in May last year, which I think was quite a step up in the level of specificity and guidance that it gives us in a very helpful way. As I have said, we have quite a bit of discretion in the choices that we make about what to do and where to focus our time. It says very clearly that our mandate has not changed, the statutory purpose that we have for promoting competition and protecting consumers, but government expect us to do that in a way that supports growth and investment in the UK.
There is a particular element of focus on the industrial strategy’s eight growth sectors, and I will come back to how we are implementing that. There is a particular focus on the role that we play in enhancing the UK’s attractiveness as a destination for global capital and investment. Quite importantly, when we are thinking about growth, it is not just private capital and private investment; it is also the resilience of public services and public finances. Again, there is a very specific targeted request for us to focus on efficiency and user experience in those public services. Finally, I mentioned earlier our new digital markets competition powers, and the steer talks quite specifically about using those powers to unlock opportunities for growth and investment across the UK’s digital economy. It gives us some quite clear direction in those areas.
To give a couple of examples of how we have implemented that in practice, in the digital markets regime we have now designated Google in relation to search and Google and Apple in relation to mobile and we are in the process of identifying which areas we should prioritise for action. There we are focusing on issues that will really make a difference for the UK economy. To take mobile as an example, think about app development and sectors like gaming or fintech, which are big sectors for the UK economy and which can really be supported by dynamic competition and good market functioning in those areas. Digital wallets is another priority focus for us, where we think that there are opportunities to grow investment and dynamic innovation in the UK. We are taking quite a targeted approach applying that steer from the Government.
On supporting public finances, I have mentioned procurement a number of times. We are working with government in the role that government has to help shape markets, but we also know that public sector procurement is rife with anti-competitive bid rigging that can result in inflated prices of up to 20%. That has an in the order of billions impact on public finance. We are working very closely with government in prioritising areas, working with central government departments to root out anti-competitive bid rigging, using our own digital tech capability, which can use AI to spot for anomalies in bidding data, and working and partnering with government to roll that out to get a much greater scaled-up approach to identifying competition problems in those areas.
There is a lot of partnership with government that needs to happen, too. I touched earlier on the stepping up of our role as an enabler. The steer asks us to focus on the industrial strategy’s priority sectors. We have been partnering with the Ministry of Defence, looking at how it is implementing the sector plan, again with a keen eye on procurement there, looking at opportunities for scale-ups to come in and play a stronger role in the Ministry of Defence’s work and in the defence supply chains. Lawrence and I were just speaking outside about life sciences, and that is another key priority area. I think that we both reflected on opportunities for scale-ups to come in and benefit from healthy and dynamic competition in those markets.
We have clear steers from the strategic steer, but it is also important that we work closely with government as we implement that, while retaining our independence in individual decisions on, for example, merger control.
Dame Melanie Dawes: It is always helpful when the Government are clear about their overriding priorities. That helps the whole system to gear up around those. We view the Government’s commitment to growth, which they were clear about right at the very beginning, and their commitment to driving down regulatory burdens as extremely helpful, frankly. My board was clear with us as an executive in the summer of 2024 that we needed to think about whether we were properly focused on growth. As I say, I think that we have a strong track record in this area, but we have done a lot of work on Ofcom’s strategy to make sure that we are putting our resources in the right places.
Alongside that came collaboration with the Government on a number of specifics. I will give you two examples. One is the importance of mobile investment. Ministers were extremely clear at the back end of 2024 and in 2025 about what we already knew, which is that we needed to overhaul the mobile coverage checker on our website at Ofcom because it just was not good enough. It was only data about coverage; it did not tell you whether the signal strength you would get on your mobile was good enough to actually do anything with that coverage. It did not explain to people that it can vary by times of day, with congestion on the network and so on.
We had already started some work in that area and we had already got it mobilised, because it is quite a big and complex thing to do to overhaul all that data for all the mobile network operators. However, it was helpful that the Government were alongside it, putting a bit of pressure on us but also putting a bit of pressure on the industry to say, “You need to work with this. We really care about it, too.” We launched a new checker last June. It is not the completed article, but it is a lot better. Martin Lewis has been championing it. We have had nearly a million views. It nearly crashed our website at one point a few months ago. I think that it is a good example—something very practical that helps consumers navigate the market better, drives the right incentives across the industry, and I hope focuses the investment in the right places. The collaboration with the Government very much improved our work.
I will not give you a second example because of time, but I am happy to give you some more if it is helpful.
Lord Best: The National Audit Office has just had a new report out, Regulating for Growth. It found that the Government “has not systematically monitored regulators’ implementation of the Growth Duty, cannot confirm whether the duty has had an impact on growth, and has been unable to share good practice or hold regulators to account”. Your experiences sound as if they are different from some others and you report positively on your own experiences.
Dame Melanie Dawes: It is for regulators to account in public for how we are implementing all our duties, including any growth duty. We do that through our annual report and accounts and in multiple other ways on individual consultations. I would gently push back on the National Audit Office there. I am not sure, but I think that the Government need to constantly be pulling together a full picture. They have given us a duty. Particularly where we are making independent decisions, we need to account for how we are delivering on that.
Lawrence Tallon: I completely agree. I am not sure of the date of the publication, but I would refer the committee to the publication of the One Year On report from RIO, the Regulatory Innovation Office, which I think was a couple of weeks ago. That published how regulators have been working across sectors on innovation. One of the government departments also publishes cross-sector data on regulatory performance. Like Melanie, I think that I would slightly push back on that perception.
The Chair: Thank you very much. We will turn to regulatory predictability and flexibility with Viscount Trenchard.
Q109 Viscount Trenchard: Good morning. My question is in two parts. The first part derives from what we have heard from businesses about how they value regulatory predictability and stability on the one hand and regulatory flexibility on the other. They need predictability and stability to be able to make long-term plans and investment, and they need flexibility to respond to new opportunities. How do you balance these two? Could I start with you, Lawrence, please?
Lawrence Tallon: It is an important question. As Sarah has already said, overwhelmingly the predictability that industry wants is to understand the timescales for development. Certainly in our industry the costs of bringing new medicines to market are enormous. If they can plan how long that regulatory journey will take, it helps them to decide whether to invest in the UK or another economy. The life sciences sector delivery plan that the Government published last year has been clear on the ambitions for timescales, particularly for clinical trials. This is crucial for encouraging research and development investment into this country and a move from a 250-day life cycle now to get a clinical trial, from application through to first patient recruited, down to 150, which would be competitive with all our other peer economies with the exception of China, which is in a slightly different position.
We are going very much for predictability around timescales. We have eight headline performance targets that we report on publicly. They are all time-bound targets. I would like to bring in a basket of other measures that are not just time but also quality, and I will be publishing some additional measures from this year. We are now hitting seven of those eight targets and by the end of this quarter we will be hitting eight of the eight, which gives predictability and certainty to industry about timescales. We will also be publishing, as I said, a richer set of data, not just around maximum timescales but around median timescales, so that industry can plan its regulatory pathway.
On flexibility, this is where UK life sciences is such a strength for us because we have brilliant scientists who can help the life sciences sector develop their products and help them derisk the regulatory pathway. What we try to do to balance that issue about flexibility with predictability is to publish as much forward guidance as we can. Very recently, we have published on: rare diseases; cell and gene therapies, which are closely related as one of the main treatment areas for rare diseases; mRNA vaccines—not only mRNA vaccines for respiratory pandemics, as we know, but also cancer vaccines; and phage therapies, which are important in the antimicrobial resistance world—so viruses used as medicine as opposed to being the disease, with viruses used to kill bacteria.
We will also be coming forward this year with a major series of publications on AI as a medical device. We are trying to give as much forward guidance to industry about what to expect and make scientific advice available, in writing and in person to industry, so that they can derisk their regulatory journey as they know what the regulator will be looking for and, frankly, so that we can keep pace with the science and technology because we have engaged with developers.
Pace is critically important, and bringing down the timescales for development is critically important for the growth duty. At the same time, we can balance that with as much availability of guidance in writing and in person as possible.
Viscount Trenchard: Thank you. Sarah, how would you answer this?
Sarah Cardell: Again, it is incredibly important. I think that this goes to the heart of the 4Ps framework that I mentioned earlier, reflecting the overwhelming feedback that we had from stakeholders on the importance of predictability for the reasons that Lawrence said—investor confidence and business certainty.
To briefly give four examples of how we have sought to address that in practice, on merger control the UK regime has quite a bit of discretion around the jurisdiction that we have when we can call in a merger for review. We have put out improved guidance to clarify that.
On the consumer side, we have new consumer protection powers—again, to Lawrence’s point, really important. These apply for businesses, whether large, well-advised businesses or small sole traders. It is important that we have clear, accessible guidance that businesses can understand. That helps with compliance.
On our digital markets regime, we have a lot of discretion on uncertainty from not just the businesses potentially under investigation but also the wider stakeholder community. What are the issues that we want to prioritise? We set out clear road maps that gave a route through our expected priorities over the next two years.
Finally, on an issue like competition enforcement, there is always a shadow of uncertainty around collaboration between businesses. Often they will hear from their legal advisers, “No, you cannot speak to a competitor because you will be infringing competition law”. Particularly in areas like the industrial strategy or collaboration between firms for environmental purposes, we really wanted to make sure that the fear of breaching the law was not chilling legitimate collaboration. We have stepped up an open door policy in that space so that businesses can come and talk to us. Two great examples there are supporting universities that are looking to collaborate and, as I mentioned, firms that want to collaborate to bring forward environmental innovation. That has been a big priority for us over the last year.
Lawrence has mentioned pace. We have introduced a number of key performance indicators (KPIs) to provide more clarity, particularly on the merger side. There is a lot of uncertainty about the early stages of a merger review. As I mentioned, most mergers are ultimately not problematic so we want to get through those as quickly as possible. We have introduced new KPIs on our pre-notification and phase 1 timeframes.
How do we balance that with agility? For me, that is all about the process and our engagement with stakeholders. Merging parties want to know that they can come in and talk to us, work through possible remedies and get that engagement early on. That has been an important priority for us to transform. It is the same on the collaborations work. More broadly, it is making sure that, as a regulator, we have an open door and we can work together to seek quick resolution to issues. It is not soft resolution to issues, but we do not always need to go through the step-by-step, lengthy, formal processes to get to good outcomes for both consumers and businesses.
Dame Melanie Dawes: You have touched on one of the great challenges of regulating. Stability versus flexibility is, for us, quite often a difficult trade-off in the decisions we make. Sometimes you have half the industry wanting the rules to remain unchanged and be very stable and the other half wanting a lot of change or a lot of flexibility over time. That is important as well.
As an example, I mentioned our work on fixed telecoms earlier and the 10-year investment framework that we have created. We did allow for a midpoint and that is happening right now. We will confirm the new rules, that midpoint updating of the rules, in just a couple of months’ time. We are looking there at a lot of technical areas, such as what the right reference product is for the pricing model that I was describing earlier, how we need to update our understanding of competition, quite a lot of technical areas. We allowed for that midpoint so that we can adjust along the way without jeopardising the stability of our long-term framework. That is not always easy, though, and it is important to acknowledge that.
I will add that I think you are hearing a little bit that regulators vary in some of these issues. You do not need a licence from Ofcom to innovate, whereas you do to some extent from the Medicines and Healthcare products Regulatory Agency. For some regulators that license, you need permission to bring a new product to market, but for the most part that is not the case in Ofcom’s work. The flexibility debate takes on a slightly different texture for different regulators.
Viscount Trenchard: Thank you. The second part of my question is about the difference between prescriptive regulation and principles-based regulation. To what extent can principles-based regulation help to provide higher-level predictability while retaining operational flexibility? I will ask each of you whether your regulatory frameworks are, on the whole, prescriptive or principles based. We believe that one challenge with principles-based regulation is that it can be less clear how to comply with it because it may be a bit ambiguous. How do you manage this challenge, for instance through pre-application support and engagement or through setting clear expectations through guidance? For this part, I will start with Dame Melanie.
Dame Melanie Dawes: Let me bring in the Online Safety Act here. For the most part, Ofcom’s regulatory set-ups have strong principles backing them up and leave us with the decision as to how far to be prescriptive about rules. In my opinion, you need both in a good regulatory regime. It is hugely important for something like online safety, where we are trying to drive a massive culture change in an industry that has not been regulated and has not prioritised safety, that there are clear principles of safety by design right at the heart of and the beginning of the Online Safety Act. However, when it comes to driving change, this is possibly a unique brief in British regulation at the moment because we are trying to drive a massive increase in standards. I do not think that there are many other regulators, if any, that are trying to do the same thing. Enforcement against those rules is very much an early priority for us, which is quite unusual in new laws.
When you are trying to enforce and drive change quickly, you need clarity. Where have we been able to enforce and fine quickest under the Online Safety Act? Where there are clear rules, particularly age assurance being required on porn sites at age 18 to prevent under-18s from accessing those sites. There are a number of other areas as well where we have used our regulatory toolkit to go in and drive change fast.
I think that you need principles in the heart of the legislation, particularly where you are trying to be absolutely clear with an industry what you need from it and what needs to be different for online safety. However, if you want quick enforcement you also need some rules. Then, of course, the dilemma is how you make sure those rules stay up to date and that there are enough of them. The broader debate we are having on online safety at the moment is whether this goes far enough and Ofcom can act quickly enough, given the scale of the risk that we are all facing.
Sarah Cardell: It is a little bit different for the Competition and Markets Authority because most of the work that we do is about enforcing rules that are in legislation, whether that is merger control or competition enforcement, and less setting regulatory frameworks. To give you two quick examples to perhaps contrast, take the Digital Markets, Competition and Consumers Act with two new regimes introduced last year. One is new consumer protection and the other is the new digital markets competition regime. The second of those is closer to a more standard regulatory regime in the sense that it gives us the ability, once we have designated a firm, to introduce conduct requirements and regulatory rules effectively. We have spent a lot of time thinking and working closely with Ofcom and others that have, frankly, far more experience in this space, working through the right level of prescription to have, whether that is a principles-based approach backed up by guidance, backed up by interactions with the firms.
I think that it is very dependent on the circumstances. In our case, we designate an individual firm. Our regime is participative by nature. You inevitably have a lot of back and forth with the designated firm. That is very different from an industry-wide regulatory regime where you need to provide broader guidance. It is much more bespoke and much more tailored and more iterative. We can take a principled approach. If that does not work, we can then go in deeper and be more prescriptive. That is the approach that we are taking on digital.
To contrast that with the new consumer protection powers that we have, that is not a regulatory regime but we have a set of statutory rules that we are empowered to enforce. As I mentioned, recognising the range of different companies that that could apply to, for us it was critical to spend the first six months of that regime getting good guidance in place, backing that up with a huge number of round tables and interactive sessions with business, and then using the full range of our toolkit. We will take formal enforcement action where we see egregious conduct, but we will also use advisory letters or warning letters. There are different ways to nudge and encourage compliance, and it is important that we use that range of tools at our disposal.
Lawrence Tallon: I will be quite brief. This is probably an area where there are some subtle differences between the different regulatory bodies. Clearly, principles-based regulation is important to what we are trying to do overall. As I have already said in my previous answers, the principle of putting patients at the centre and a risk-proportionate framework is very much about a principles-based approach to regulation.
There are elements of what we do that are probably a bit different to some other regulators. We are allowing new active molecules to be put into live humans. This is not something that can be left as a matter of principle. It needs to be very much focused on quite prescriptive rules. That derisks it for the scientists as well because scientists want regulatory clarity in those examples. We will be very clear about what we need for toxicology data in animal studies, for example, before we would allow such a molecule to be put into a live human.
I think that it is principle based at the overall framework level, but when we are talking about specific interventions, both regulator and regulated parties want clarity about evidence.
The Chair: Thanks very much. I have a quick supplementary for you, Dame Melanie. On that balance between how far you are prescriptive and give predictability, which a lot of companies value because it allows them to plan, what is your internal control? How do you say this is the point where more prescription becomes a barrier to entry? In your area there is a lot of creativity going on. How do you manage that internally, not in great detail but just how do you know when you pass the line?
Dame Melanie Dawes: That is a very good question. I will switch back to telecoms there. Over the last 10 years or so, Ofcom has had quite an active programme of improving the ease with which consumers are able to navigate the market, with requirements for companies to give, for example, end of contract notification so you do not stay in your contract without realising it, paying more than you should, automatic compensation, and so on. Those are the regulatory rules that can be quite expensive for small companies to operate. All I can really say there is that we try to make sure that we are proportionate in everything we do. It is another very clear part of our founding statute that any rule that we introduce is right for the task and is not overdoing it.
It depends a little bit on the market as well. In some markets you are dealing with a small number of quite large companies, and in others there are a lot of smaller and medium-sized companies where the barriers to entry question becomes more relevant and the costs can be very disproportionate. It is a factor that we have to weigh in, but it is an important one.
I am not sure that having principles instead necessarily helps those smaller companies. What helps is a regulatory track record. In the end these are complex trade-offs sometimes and what I think some of the companies in our industries would say, particularly the ones we have been regulating for a long time, is that they understand the way that we do business and they feel that they can have a dialogue with us, so that predictability is a bit easier. Of course, you have to be very careful that that does not seem unnavigable for people who are not currently in the market and might want to come in. Being open and transparent, and making sure we engage with the broadest range of stakeholders is also very important. These are all soft ways that we work. It is not just about the legislation and the rules; it is also about how you apply them and how you engage.
The Chair: I suspect that in some follow-up questions members of the committee will want to interrogate this issue a little more, but as we were focusing on growth, entry to market, of course, is part of the growth solution. We will now turn to risk, Viscount Thurso.
Q110 Viscount Thurso: Good morning. My question is about risk appetite and what is changing. The Government, as part of their growth thrust, have asked regulators to be less risk averse. What does that mean for you? What are you actually changing? How much of that is a result of the Government’s steer? In answering that, could you also respond to how you will signal any changes to those you regulate and whether you need any legislative changes? Lawrence, I think that you have already said you need legislative change, so I will not start with you. I will start with Sarah.
Sarah Cardell: It is a very good question. I have thought a lot about this and how this applies to the Competition and Markets Authority because I think that it is a little bit different from other regulators that are perhaps more explicitly weighing and trading different policy objectives. For us, our mandate is quite a straightforward one in a way. We have a set of rules that we enforce in promoting competition and protecting consumers. For risk appetite or risk aversion, the way that I have implemented this over the last year is to think about how we deliver the greatest beneficial impact without incurring unnecessary costs, whether that is on ourselves in our operations or the impact on businesses.
Pace is probably a good one to come back to. We have done an awful lot in trying to speed up our pace and our processes. If you took that to an extreme, that could come at a risk of poor-quality decisions, ultimately, for us, ending up being challenged in court but also potentially poor outcomes: moving so quickly to review a merger that we are not identifying all the competition concerns and therefore we are not identifying a deal that should be blocked, to take an example. Unsurprisingly, I do not think that we are in that space. I think that we are in a good, balanced place where we are looking at those risks.
However, in setting the key performance indicators (KPIs) that I mentioned we have introduced for pre-notification and phase 1, we have set ourselves stretching objectives but ones where we think we can still complete the necessary evidence gathering and the necessary review. We have built in checkpoints. For example, we have said we will deliver against this KPI for the period of time for a pre-notification review, but only if companies provide us with the information that we have asked for in the time that we have asked for it. If the companies are not meeting their deadlines, we will pause on that KPI because otherwise we will not have the information that we need to reach a robust decision. In that sense, we are balancing pace and robustness of decision and quality of output.
It is the same when I think about the range of ways that we can reach an outcome. We can investigate competition enforcement cases and we can go through to final contested decisions. They may well end up in court and that process can easily take five years. That is not a great way to deliver an outcome at pace but it may be necessary in certain cases. In other cases, we might reach a settlement with a company that enables us to resolve those issues more quickly.
We had an example last year where we had an investigation into concerns around information exchange between housebuilders, and we reached a commitments outcome there where we did not make a finding of infringement, we did not impose a penalty, but we secured a payment from the housebuilders concerned of £100 million, which went to the Government’s affordable housing programme. I think that that is a very sensible, balanced judgment where we get clarity about the law, the companies commit to stop any action that might infringe the law and we get a beneficial payment going straight to a good and relevant cause. We secured that in 12 months or so rather than five years of a contested case.
We are constantly weighing the balance up there. Are we getting a robust outcome? How long is it taking us? What are the risks if we reach too many settlement outcomes? Is there a sufficient deterrent impact? It is a constant balance and weighing exercise.
Viscount Thurso: Within that, do you think that there is some misunderstanding between the normal corporate process of running a risk register and working out what the risks and the mitigations are—risk is sometimes the wrong word; it is actually a barrier to getting things done—and the notion that there is a trade-off between growing the economy and risk and that you really probably all have a new risk in your register, which is that my activities will impact growth? I do not know. Is there a confusion there?
Sarah Cardell: It is a good question. In our case—it might differ for each of us—I do not look at the work of the Competition and Markets Authority and see a binary trade-off between promoting competition and supporting growth and protecting consumers. They are all interconnected and in many ways complementary and ultimately are about us delivering the best impact that we can through our work to support the economy in ways that do all of those three things. When it comes to implementing that, as I say, there are some fine judgment calls that we have to make all the time. Obviously, the risks of getting it wrong, the risks of being too slow, those risks are playing into the judgment calls constantly. As Dame Melanie said, ultimately we must be held to account for those judgment calls. That is our job; that is what I am paid to do. I do not think that it is about a macro-level risk adjustment in that sense, if that helps.
Dame Melanie Dawes: I think that you are right. There is a confusion sometimes about different meanings of risk and different applications of the concept of risk. There are some regulators—the Financial Conduct Authority is a good example—where managing systemic risk across the system is the job, because the nature of the financial sector is that it can affect everybody when there is a problem in that industry, as we know from the financial crisis a few decades ago. The risk judgment is very central to its objectives and one that I understand it debates very actively with the Government, quite rightly, and with the industry.
Ofcom does not have a systemic risk management role. For us, it is about the risk of not achieving outcomes, and we do not usually use “risk” in that context. We are more likely to be weighing up how we achieve that outcome, what the best way to do it is, how quickly we can go, and what the balance is of supporting consumers today against the balance of growth tomorrow, in the way that I was describing earlier.
The final thing is that as part of our corporate governance at Ofcom we have an explicit risk appetite, which is owned and set by our board, much debated regularly, particularly in our audit and risk committee. The board is very clear that we have a low risk appetite for things like the health and safety of our staff and the risk of cyber attack on our systems. However, when it comes to our policy-making and enforcement action, we are open and at the other end of the risk spectrum. We have consciously moved towards that more open end over the last few years as we have taken on the online safety job. You cannot implement the Online Safety Act without being very open to risk, because it is completely novel, it has never been done before, it is very complicated and the people who we are trying to regulate have not had this as part of their objectives in the past.
Viscount Trenchard: And they have deep pockets.
Dame Melanie Dawes: And they have deep pockets.
Viscount Thurso: Let me turn to you, Lawrence, because you are probably at the other end of the spectrum, where there is a very clear trade-off.
Lawrence Tallon: Yes. The Government, as you say, have clearly signalled a different risk appetite. There are ways that you can do that in legislation and guiding frameworks, and leadership is another important factor. In our case, the leadership of our organisation has changed quite substantially over the last year. I am not a regulator by background and I have tremendous respect for professional regulators, but a clear decision was taken to bring in someone who was not a regulator by background. Before I came into this job, I was in another place—not that other place, but that other place—St Thomas’s, where most of my career up until now has been innovating in health services. If you see the drones buzzing around between here and Guy’s, that is one of my projects, which was funded by a venture fund that we spun out of St Thomas’s—a fully Financial Conduct Authority-regulated venture fund with risk capital. By definition, that requires a different risk appetite.
The Government have changed the chief executive of the organisation and the chair, who comes from front-line clinical practice, Professor Anthony Harnden, himself constantly dealing with risk as a GP in his day-to-day job. We have just appointed a chief medical and scientific officer, also from clinical practice, Professor Jacob George from the University of Dundee. Part of the change of the risk appetite is on frameworks and legislation and partly it is about putting different leadership in who have been on the other side of regulation.
That said, we are changing our frameworks, and you cannot talk about risk without talking about benefits. Risk is just uncertainty. It has upsides and it has downsides. I very much agree, Viscount Thurso, that when I have sat on public sector boards over a number of years, whenever the word “risk” is used, it is universally used in a negative context and it is never counterbalanced with benefit. With patients, we need to be asking what the risk is of this medicine or this product causing harm. We also need to be thinking about the prognosis of the patient and what opportunity we might be denying if we do not license the product. When the benefit-risk ratio is appropriate and when the disease is sufficiently severe, as long as the patient and their front-line clinician understand that benefit-risk ratio, it is our job as a regulator to make reasonable choices available, to take out of the equation unreasonable or unsafe choices, to bake in what we call standard of care, the accepted wisdom.
There is a zone in between that Professor Sir David Spiegelhalter, who has been helping us with the development of our risk framework, talks about as the zone of preference, where the benefit-risk judgment is acceptable to be made available to patients provided that they and their clinician understand and that it is the right decision for them in their circumstances.
Viscount Thurso: I will close with one very quick follow-up to all of you, and it is almost a one-word answer. The heart of my question was: what have you changed as a result of what the Government have asked for? Listening to you, all of your answers are extremely good and very helpful, but broadly you are not changing anything except having a good look to make sure that you are doing what was required anyway. Is that fair or have you actually changed a lot?
Lawrence Tallon: I hesitate to say that it is unfair, but it is certainly not accurate in our case. I do not know if members of the committee this week have taken the Economist in their reading list, but I would certainly get the article that I am about to refer to circulated by the clerk of the committee, where we, as a regulator, have made a world-first in approving what we call a platform approval. This is a gene therapy for very, very rare, severe disease in children with fatal neurodegenerative disease, where normally the approach of regulators all around the world has been that you licensed the medicine one by one. It has been written up in the Economist this week, or it might be last week now, that we have a world first to approve production process through which that gene therapy is developed so that the tweaks to the specific genetic medicine can be made as part of a platform and 10 other children will get the same treatment rather than having to be licensed one by one. That is a significant change if you are the parent of one of those children.
Viscount Thurso: I will get in trouble from the chair if the answers are all that long.
The Chair: Did anybody want to push back on that summary?
Sarah Cardell: Very briefly. Our duties have not changed, but we have changed quite radically the way we are going about delivering those. I will not go over it all again. I will pick up on one point that Lawrence made about a change of leadership. There is also a change of culture internally more generally, and that is something that we are driving to deliver against the 4Ps framework that I mentioned.
Dame Melanie Dawes:, I hear the challenge, and we will take that one away and think about it. Collaboration with government starts to get exciting when it is about specifics, in the way that I was discussing earlier on mobile investment. That is where you start to see a collaboration, a partnership, the Government being clear that they will do certain things, which means that something that we might have been considering suddenly has a bigger strategic context in which you can fit it. It is still early days, but that is where you can start to see regulators and government operating more closely together.
If I was a bit spiky, I would say that quite often, in fact generally at Ofcom, my experience, not just of government but of the wider media, consumer, political landscape, is that we are usually being asked to do more. It is often the case that we are being asked to regulate more on media, and sometimes Parliament is legislating in brand new areas like online safety. That is a slightly different thing. However, on our more traditional brief we are often being told that we should be doing more to protect consumers, rather than less. That can make it hard for us to navigate the trade-offs.
Q111 Baroness Harding of Winscombe: I was going to ask this question later, but I think that now is the right time. Does the growth focus encourage you not to do things rather than to do things? I want to address this to Dame Melanie and to Sarah. Melanie, you referenced the Online Safety Act, which you and I have worked a lot on together. There is no doubt that parents, teachers and campaigners are frustrated that the Online Safety Act is not having the impact fast enough that we all hoped it would have. It is a fear of a lot of us who work in this space that the Government’s focus on growth, particularly growth from the great big tech companies with all their big budgets, might be dampening your enthusiasm for holding them to account on online safety. Could you expand on how that growth duty is changing your risk appetite for tackling the Online Safety Act?
Dame Melanie Dawes: The growth duty does not apply to the Online Safety Act. That is clear. We asked for that two years ago, for good reason. There are two things here. First, there is no question that the growth agenda is in any way affecting our implementation of the Online Safety Act, no question of trade deals or relationships with the United States. The Government have been absolutely clear from the moment they took office, as the previous Government were, that they want us to implement this Act without fear or favour as fast as we can. That has not changed over the last year at all. It has been extremely helpful for us as we have approached the implementation of the Act.
However, as you say, parents are frightened and politicians and Members of this House are extremely concerned about speed and pace. We have to hear that at Ofcom and we do hear it. We are only 10 months into the illegal harms codes being enforceable, six months for the children’s codes. We have only just started on this journey and we are dealing with an industry that has had 20 years of not caring about this. The challenge that we feel, particularly over the last few weeks, is that we need to do more to put our work more in public. One of the big planks of our strategy for achieving change is the supervision of the big companies, but the problem with that is that it is behind closed doors and how would you know what we are achieving and be able to trust in that. We are giving that a lot of deep thought at the moment. We know that it is not working because we are not able to explain the outcomes.
My final point is that regulation is achieving change. We have 75% of daily visits to porn sites now covered by an age check in the UK. There is lots more to do to force compliance across the system. We have companies using technology to detect child sexual abuse imagery that were not using it before. We have grooming protections, privacy protections for under 18s, combined with age assurance on services like Discord, Reddit, X, Telegram, that were not there before. So change is happening. Some of it is being driven by regulation. Regulation is a big part of the answer here, particularly working internationally with our partners, including Australia and other countries. However, we are well aware that there is a very strong feeling that it is not enough.
The challenge here is partly that 20-year challenge of this enormous mountain to climb with an industry that has not cared about this. The change being driven by generative AI means the problem is just getting worse and worse; we are not regulating a static target here. Without wanting to opine on bans or the specifics, I think that it is absolutely right that we are opening up the question of whether the Act is strong enough in that context. It does not cover AI properly. The Secretary of State has said that, and there is a number of other things. We are also giving quite a lot of thought to how we can support that parliamentary and political and government debate by taking what we have learned about what is effective and what can help you move it fast so that we can build that learning in this incredibly innovative field into whatever comes next by way of changes to the law.
Baroness Harding of Winscombe: Sarah, regarding the equivalent for the Competition and Markets Authority, I worry that the focus on growth might be affecting what you do. It encourages you not to do things, not to put pressure on and scrutinise mergers and it is quite noticeable. You have blocked one merger in the last 12 months. There was an interesting article in the Financial Times a few weeks ago saying that there had been none, and one quickly came out. Do you feel the pressure to reduce your focus on competition because of the Government’s desire to drive growth?
Sarah Cardell: I do not think that there is any pressure to reduce competition because of the Government’s desire to drive growth, because we know that competition is a key driver of growth. Our focus is very much on prioritising what work we take forward to make sure that we deliver the best impact that we can for the UK. I could spend a long time answering the question, and I am conscious of time, but I will take a couple of examples.
On merger control, dealing in stats of one or zero or two is somewhat misleading. The reality is that the deals that we look at each year depend on the facts of those deals. In every year, the number of deals that go through to a phase 2 review are a handful only, and it will depend on the facts whether those ultimately end up in a prohibition, a clearance or a clearance with remedies. To reassure on this year, the deal that was prohibited shortly after that newspaper article was by no means pushed out because of that article. Obviously we run to statutory timetables. That case was running to a statutory timetable and it was a complete coincidence that prohibition came through. However, it demonstrates the point that the newspaper article reported one prohibition in 2024, zero in 2025 and that was portrayed as a radical change of strategy. I do not think that one to zero is a radical change of strategy, and we are back at one again for 2026 and it is January. I would not put too much emphasis on the statistics in that newspaper article.
The much more important issue is, as I have mentioned, that we are constantly doing our portfolio and thinking about where we can deliver the best possible impact. When it comes to our digital markets work, we had, as you know, the new powers coming into force in January. Designations are subject to a nine-month statutory time limit. We have designated three firms already within that nine-month time limit—Google in relation to search, Google and Apple in relation to mobile. Those designations were all issued in October. We have to make sure that those designations are robust. We talked about risk earlier. We need to make sure that those designations are robust to legal challenge. I am very pleased that we had no appeals on any of those three designations. That means that we can press on with interventions. You will see in a matter of weeks the first proposals coming through across those designations. We have committed to take a proposal to our board in the first quarter of this year, which closes in March, on a further designation proposal.
We are pressing on in the digital market space but making sure that we are picking up and focusing on the issues where we believe that we can deliver real benefits that drive growth, investment and innovation for the UK, the same with merger control, and at the same time making sure that we are absolutely pushing through on competition enforcement. As I mentioned already, we have an important programme of work on bid rigging in public procurement and on consumer protection. We have to continue constantly to make sure that we have that balance across our portfolio. I am very confident that we are doing that in the way that best delivers for the UK economy.
The Chair: Thank you. I am conscious of our time here. Staying with risk—we are rather hooked on risk—Lord Udny-Lister.
Q112 Lord Udny-Lister: Yes, I will continue this theme. I am interested in when things go wrong. Who bears the harm? Is it business or is it people? Lawrence, would you start?
Lawrence Tallon: I come back to some of the comments I have made earlier. I do not believe that the interests of people and business are fundamentally misaligned. If we bring forward safe, effective, innovative medicines, patients and the people of this country will benefit and so will industry through the benefit of investment in research and development. Similarly, we have a mature system of regulations so this should not and will not happen, but if we were to have a significant issue of harm, clearly that would be bad for patients and citizens, but it would also be bad for industry. If you are selling a medicine that proves to be harmful, it clearly is bad for business. I do not believe that those two things are at odds with each other.
Fundamentally on this attitude of risk, we as people, as societies, overweight sins of commission versus sins of omission. We very much think about, in my industry, if we license this medicine and some harm occurs to a patient, we can see that and we can quantify that and we need to minimise the risk of those things happening. We also have to think about if we do not license this medicine and harm occurs to patients through absence of a medicine that could give them a safe and effective treatment. Somehow, as a society, we do not give that equal weight. The change that I was describing to Viscount Thurso is that we have changed our attitude on risk. There is no logical reason that we should treat those things differently, commission and omission. We should be thinking about the missed opportunity to improve patient care just as much as the risk of harm. We are confident enough in the maturity of our systems of licensing medicines, of looking at the evidence, of scientific expertise and of post-market surveillance to know that we have a mature system to manage the risk of harm of medicines being licensed. We need to be thinking about the risk and the harm of not bringing those medicines through.
Sarah Cardell: I am thinking about how to apply that question to the Competition and Markets Authority for the work that we do. It is not so much with us a risk of something going wrong, but whether we are delivering the best outcomes for consumers and businesses. To echo Lawrence’s theme, they are often absolutely aligned. If we are not sufficiently robustly enforcing consumer protection, evidently consumers would be suffering, but so too would the vast majority of fair-dealing businesses that are doing the right thing, are complying with the law, are putting the investment into their compliance programmes and want that level playing field. It is important that we take action against the egregious players, for the benefit of both consumers and businesses. It is the same on the competition side because people ultimately will be benefiting from competitive markets, so too will be the businesses that may be suppliers or customers but also good, honest competitors in those markets. There is a common interest in getting the right level of enforcement activity.
When we think about some of the changes that we have been driving over the last year or so, one of the areas of feedback that I was getting a lot from businesses and from investors was a sense of if the competition regime in the UK is perceived to be excessively interventionist—one can debate whether or not that is true, but if it is—it can have a chilling effect on investment and a damaging impact on the way the UK regulatory environment is perceived. There was some reasonable evidence that that perception was causing harm, whether or not it was well founded. What I have been seeking to address through the changes that we have been driving over the last 12 months or so is action to remedy that perception, that we are a sensible, pragmatic, robust but pragmatic and workable agency with whom businesses can engage, with whom investors can speak, and who can have confidence in the overall regime. For us it is getting that balance right. However, I do not think that there is a binary trade-off of winners and losers in that context.
Dame Melanie Dawes: This is such a big question. We have to think about accountability to answer the question of who is responsible when things go wrong. Given that we are operating in a democratic market economy, usually when you are talking about consumer protection the first accountability is with the company that is selling its service to consumers. Regulation can set standards, it can oversee, it can check, it can enforce when standards are not met, but it cannot take the accountability away from the companies that are serving their consumers for the products that they are providing.
You and I were both closely involved in leading the government response to the Grenfell Tower fire in 2017. That revealed a very shocking lack of oversight by the Government and their agencies, including officials in my department and Ministers in successive Governments on all sides of the political spectrum over several decades of failing to have a regulatory system in place that was adequate to the task, and failing to spot when the regulations were not being followed. The accountability for what happened that night at Grenfell Tower is with the companies involved and the local authority that was managing the building, but there was an enormous responsibility on government that had not been met over many years. It depends on what has gone wrong and why, but it is a very important question. I do not feel that I have given it justice.
Lord Udny-Lister: Can follow it through a bit more? This is a question to all of you. Do you feel that government and Parliament need to be much clearer in their acceptance of risk and the outcomes, particularly when some of the additional risk crystallises and it goes wrong? Are the Government sufficiently supporting you, on side and recognising that risk is risk?
Dame Melanie Dawes: I refer back to my answer to Viscount Thurso earlier. I do not think that it is about this Government specifically. I am not making a comment about this Government, but generally in our political and media debate there is a risk that we are too risk averse in seeking to protect consumers from every possible outcome. The worry about that is that it becomes quite hard to get the investment and growth that the economy needs. I welcome as much engagement as possible with parliamentarians on these issues in Ofcom’s brief, which is why I welcome sessions like today. They are big and difficult questions and we need to be engaging and debating them publicly.
Sarah Cardell: I do not have a huge amount to add. I agree with what Melanie has said. It is a slightly different lens for the work that we do, but the principle is the same, which is that we need to have these conversations and these debates. What is unhelpful is if there is an unclear set of expectations of what you are seeking to achieve, what the trade-offs are, what the risks are and who the winners and losers are. As we have heard today, it is a little bit different in each different regulatory environment, but that has to be a helpful thing. Certainly in our case, for example, the strategic steer has elevated that debate and that has been very helpful for us because we can then be clear as we are implementing that on why and what we are doing.
Lawrence Tallon: I do not necessarily think that it is a government thing. I think that it is a society thing—civil society, Parliament, including Government. We very much weight the sins of commission and we somehow ignore sins of omission. The level of dynamism, innovation and change that we need in public services, to improve public services such as the health service and the economy, requires a societal risk appetite that is greater than we currently have now. We have, at least in my sector, very strong support for that from the Government, through the Department of Health and Social Care and the Department of Science, Innovation and Technology. However, the media and the general debate will absolutely latch on to one thing going wrong but ignore the part of the iceberg that is below the water about the sins of omission.
Lord Udny-Lister: Melanie, you wrote a letter to the Prime Minister in which you called for better co-ordination between government, local authorities, industry and the regulator. You said that Ofcom will set out later this year what more can be done. I am intrigued by this as to what it means in practical terms.
Dame Melanie Dawes: You are talking about our latest letter to the Prime Minister. This is about mobile investment.
Lord Udny-Lister: Yes, I read it as such.
Dame Melanie Dawes: We do write quite a lot of letters on these topics. Mobile is interesting because it is a market that we do not regulate in the same way as we do fixed telecoms, because the market structure does not require it. It is highly competitive and we do not have a dominant player. The industry has grown up in the last 20 years without the significant market power of BT being a factor in the way that it is on the long-established fixed network. It is a different market and our regulation is largely about consumer protection in the way that I was describing earlier and it applies to all the players. The other big role that we play is to make spectrum available for mobile services. We auction, sell that government national asset into this industry, among others, so that it can provide its services.
We have been doing a lot of thinking about what levers we have to drive investment. That is why we think this is very much for a whole range of players and not just a regulatory set of decisions in the way that we can have more impact on fixed networks. The Competition and Markets Authority has been instrumental here because the work that it did on the merger of Vodafone and Three has changed the market structure in a way that we are all hoping will drive greater investment, which we think is needed for the country.
What were we saying in our letter? We are exploring all of this. We are working very closely with the Government. We are thinking about how we can help consumers through our checker. We are also doing a lot of work in Greater Manchester, for example, gathering data and crowd-sourcing data on mobile coverage so that we can improve that more and more. Some of the levers will be for government and some will remain with the industry. It is a good example of a collaborative effort where you have private sector decision-makers that can be enabled by the Government, enabled by the regulator, but where regulation is not really the issue; it is more about partnership and collaboration.
The Chair: Baroness Valentine’s question is on the Government’s action plan.
Q113 Baroness Valentine: You have touched on a lot of what I was going to ask you, so I will steer you to some certain areas within the question. What are you doing differently in response to the Government’s action plan and the renewed focus on regulators’ duty? Let me finish off the question and I will come back to some areas that I am interested in. Are you on track with the activity you set out? What will come next after those first steps? What are the barriers you face to making changes? We have heard less on the barriers, and I am interested in answers to that.
Can I pursue what Viscount Thurso was touching on? If your action plan says that you will do things faster and that you will do things with better clarity, that does not sound to me like a growth duty thing; it sounds to me like business as usual. Surely as a regulator you are always trying to process more efficiently, more effectively and be clear with everyone concerned. Are you trying to do that better? Are you trying to do that faster? What about that is relevant to the growth duty?
There is a spectrum from doing things quicker and efficiently, through to being more user-friendly with business. Maybe there is an argument that you should tilt the rudder a bit because of the growth duty, but I might argue that you should be doing that anyway. Then you can go a bit further down that spectrum and say that you are more hungry for your innovation and what you need to do to allow more innovation to come forward. That is a continuation of that spectrum. Are you are saying you are doing stuff better or quicker that you would have done anyway, or are there things that you really are doing differently as a result of the growth duty steer? Sarah talked about public procurement and a step change. As opposed to different to what one is doing anyway, I would have thought that tackling confidence of working with business and confidence and competence in dealing with tech were huge areas to go for and seem more in the line of the growth duty. Could you all talk about the thing that is specifically led by the growth duty, and barriers as well?
Sarah Cardell: We do not have a growth duty, so I will answer it with reference to the steer in the regulatory action plan, which is essentially the same question. The first part of the answer is to agree. We are looking—and we have been driving a lot of change in the way that we go about our work, the 4Ps—at what is the connection between that and driving growth. It comes back to what the perception is of the UK’s regulatory environment and whether that is a stimulant for growth and investment. We have had a lot of discussion about this within the Competition and Markets Authority. It is important that this is not a perception of us cosying up to business or going soft on business. That is not the case. The robustness of our decisions, because those are critical to drive the outcomes, are paramount and has not changed.
To answer your question: should we have been doing this already? Yes. The feedback that we had was that we were not in the right place in that balance, that perception, the way that businesses could engage with us, the pace with which we were delivering our work, so we have stepped that up through our 4Ps work. We are implementing over 75 specific commitments in driving that change. That is a living, breathing, programme of change. We should be doing it anyway, but it has absolutely sharpened our focus, and rightly so. That is point one.
The second area goes to another part of your question about the substantive focus for us. Where are we redirecting our work? In those areas of discretion, to take something like our markets work, we have very broad discretion about which markets we might choose to review under a market study or a market investigation. We can obviously only do a handful of those at any one time. We are keeping that consumer focus; we have had in the past things like vets and infant formula. We are, partly in response to a request from the Chancellor but it was something that we were already thinking about, looking at dentistry as another area. We are still keeping that consumer focus, but alongside that we have stepped up, doing something like the market study on civil engineering. That is probably not a market that we would have picked, absent the growth focus.
I want to call out the work that we are doing on advising government, because that is a step change. It is important when we look at the industrial strategy and the opportunities to use competition as a lever for growth in that space. There are huge opportunities and we have had a number of round tables, particularly with smaller players, start-ups, scale-ups, who have talked to us, particularly in the defence and life sciences sectors—they have been the two that we have focused on so far—about how procurement can get in the way of opportunities to entry, barriers to entry or to scale. They are simple things like the fact that in defence you are stuck in this vicious circle where you need a track record of government engagement and government contracting to get the investment that you need to start to scale. It just perpetuates this vicious circle. Then you have incumbents and you do not have a healthy, vibrant scale-up sector. There is an important role for the Competitions and Markets Authority, quite different from the role that we have played historically, to work in partnership with government, with the Ministry of Defence, being the voice of scale-ups in that space. That is something that we are actively doing that is different and is delivering directly.
The way that technology is operating in that space is another great example. Life science is one that is replete with opportunities for innovation. How do we make sure that we are capturing the benefits of that innovation and keeping that in the UK? Sometimes it is also about shining a light on the limits of our remit. Merger control is a good example where there are often concerns. We hear concerns all the time from scale-ups that reach a certain size and then may be bought out by a US competitor. That will often not raise a competition concern within the remit of our merger control, but we can identify that as a factor that is at play in these important markets. We can be a voice in that debate; it is not within our enforcement remit. Moving into that space is important.
The other piece on the regulatory action plan is to partner more with other regulators, who we can assist in applying a pro-competition lens to the regulatory frameworks that they have in place when they are looking at how we are contributing to the regulatory action plan, to the ask of Government to reduce the regulatory burden by 25%, and for us to be a much more active partner in that space. That is something where having a mandate from government to bring us into those discussions would be incredibly helpful as well.
Dame Melanie Dawes: As I said at the beginning, Ofcom’s overall legislative frameworks are quite focused on growth, talking about competition, innovation and investment. When the previous Government made it quite clear that they were prioritising growth, and this Government as well, we thought very deeply about this. It is not the case that we discovered something that we were worried about from a growth perspective or something that we were missing. Mobile is the one area where, because we do not regulate much in that sector, we had not been doing as much and we have stepped into that in the way that I was just describing. I do not think that the Government heard from telecoms or media that Ofcom was acting as a burden on growth or investment. They will always hear things that people would rather we did differently, but my understanding is that there were no big smoking guns from the industries that we regulate at the moment. We were very clear that we do not want to be complacent about any of that.
To your question about speeding things up and so on, that is important. Often one of the most direct impacts we can have is by removing the cost that we are imposing on an industry unnecessarily, either by taking too long about things, asking for too much information or asking the wrong questions and so on. That is often where the nuts and bolts of the problem with regulation comes from. It is very important, which is why our latest growth letter to the Government was clear about what we are doing on the admin burden side. There we have a programme where we are trying to get rid of some regulation. We have a big open question out there to broadcasting, TV and radio: what can we reduce and get rid of? That is about scrapping rules. We are also increasingly now using generative AI tools to think about how we can speed up and digest consultation responses quicker.
We are all doing that and we are doing some of that in collaboration with our partners through the Digital Regulation Cooperation Forum. What the rules are and how you apply them matter to growth, cost and efficiency. We are trying to cover all of those different bases, but growth in the end comes from the private sector. The trick is to enable it where you can and get out of the way where you should.
Lawrence Tallon: I very much take the premise of the question that you do not just want to know about business-as-usual improvements, but step-change improvements, not just in time. Here are some really important step-change things we have done in time approvals. As Melanie said, that is one of the most important things we can do. There are also some very fundamental changes we are making to how we regulate, which I will come on to in a second.
On time, and specifically in response to the Government’s action plan, one of the most significant things that we are doing is working with our partner organisation, NICE, the National Institute for Health and Care Excellence, to speed up the process through which medicines get approval of safety and efficacy and cost effectiveness. Doing those two things in parallel, while previously they were sequential, means that we can get medicines to patients about three to six months more quickly, which for my focus on patient centeredness is absolutely essential. On growth, that is worth hundreds of millions to big pharma because it means that they are getting reimbursed three to six months earlier within their patent period. That is very significant.
The second thing is speeding up the approach to clinical trials. When we bring down the trial life cycle from 250 days, as was, to 150 days, that will materially change the research and development investment decisions of global companies about bringing their trials back to the UK. Members of the committee may recall an important report on this subject by Lord James O’Shaughnessy a couple of years ago, where he described the loss of market share to the UK on commercial clinical trials that happened after Brexit. We are now well on the way to recovering that. Last year we saw a 9% increase in the number of clinical trials, phase 1 clinical trials, in this country. That is direct research and development investment in the country. Those things are materially speeding up things and they are of great value to patients and industry.
On what we are doing fundamentally differently, regulation in our sector will change radically in the period ahead because of the major advances of AI and biotechnology. The way that medicines regulations have generally been set up is to look at small-molecule medicines, which are essentially a static medical product for highly prevalent diseases. That is the way that the clinical trial infrastructure, the licensing infrastructure and post-market surveillance is designed. However, because of the rise of biological medicines and personalised medicines, and because of the parallel rise of AI, we are seeing a complete change in the products that are coming to market, coming to patients. Of course we still have the small-molecule static medicines as well, but we see many more adaptive and adaptable products that are personalised to the patient and their own biology.
The big change that we need on the regulatory side is to put a far greater emphasis on post-market surveillance of these products after appropriate trials, rather than very high initial barriers to entry, particularly for non-interventional digital technologies. The analogy that I often use is that we need to think much more like a hurdles race than a high jump, where instead of a single almost improbably high initial barrier to entry, we have more proportionate barriers that allow you to first test in a small population, then spread, then spread. Then we monitor the effect in the real world, particularly of things like AI, where even if the model is static, as the new data gets fed into it the performance of that model might change over time, either positively or negatively. We need to think about a much more iterative and proportionate series of hurdles rather than an improbably high barrier to entry. We are putting out real-world practical guidance on this in things like mRNA vaccines for cancer and for respiratory virus, on rare diseases and cell and gene therapy, and on AI as a medical device. That is practical change in how we do regulation in the future.
The Chair: Staying with action plans and burdens of regulation, Baroness Harding has a question.
Q114 Baroness Harding of Winscombe: You have all alluded to this a little bit. My question is in two parts, but I will give you both straightaway so that we try to get a bit of time back. The action plan includes a commitment to cut admin costs for businesses by 25%. Could you give us an update on how you are doing to meet that target? We have already heard in this inquiry from a number of businesses that the administrative burden of regulation may be smaller compared to the broader cost of complying with the regulations. You have alluded to this already. What are you doing on both parts of that cost impact to businesses?
Dame Melanie Dawes: The actual existence of the regulations is often where the biggest cost to business lies. It is important for government, Parliament and regulators to check that the requirements are still needed, because the last thing you want is a bunch of out-of-date rules that are getting in the way of the market operating effectively. There is a number of areas where we are looking at deregulating effectively, and some of that is fairly obvious—removing old requirements on fax machines and post boxes, although post boxes were extremely contentious and much loved but we thought that it was important to look into that. We have also looked at the Royal Mail’s universal service obligation; that is an example of reducing those requirements to recognise that they can no longer be sustained when we are not sending as many letters as we used to. They are not commercially sustainable. We have also opened up the review of broadcasting that I referred to earlier. We did that a couple of years ago on advertising and we had the industry ask us not to change anything very much, or at least many in the industry said that. Sometimes the industry quite likes the rules because it is what they are familiar with. It is important for all regulators to do that work. Sometimes it is the Government and sometimes it is us that needs to act.
We need to do our job efficiently for everybody. That is where there is an opportunity for generative AI. The 25% is a government target and they will need to talk to all of us about our overall numbers. In the case of Ofcom, online safety and also some of the new requirements on telecom security, being put in for very good reason, will increase regulatory costs. We need to have a conversation about that overall quantum. We set out in our letter to the Prime Minister recently what we are doing in those areas and some of the things that we have done differently, putting more of our spectrum licensing online, for example. The vast majority of it is now online and quite seamless. Where it is complicated and different operators are sharing spectrum, we need to make sure that there is a safety and a technical compliance check as well. That gives you an overview as briefly as I can.
Sarah Cardell: Similar to Melanie, I think that the Competition and Markets Authority (CMA) does not have a large rulebook of regulations that we administer ourselves. A lot of our focus has been about the burden of our ongoing processes and that is all of the work on the 4Ps and I will not repeat all of that again now. We are tracking the progress of that and we are working very closely with the Department for Business and Trade as our sponsor department on how we will measure and report on the impact of that reduction in that ongoing regulatory burden. That is the first piece.
On historic rules, the main area for us is historic remedies that have been in place, whether through previous merger investigations or previous market investigations. We have announced reviews of both sets of those. On the market side in particular, we inherited rules that were put in place by the Competition Commission before the CMA even came into force, so there is a significant back book of remedies. We have identified 33 sets of market remedies, which is 60% of that back book, that we think are ripe for review. That does not mean we will remove all of those. As Melanie said, there are always a mix of different interests. Some people would like to keep them, others would like to remove them, but we have identified that set. Similarly, we are reviewing a number of our historic merger remedies. We need to get the balance right, but where the market has moved on, where they are no longer effective or other rules have perhaps come into play, we should be removing those as unnecessary burdens.
The third part goes to the second part of your question, on how we think about that broader cost impact as we introduce any further interventions. The best example of that probably is the new digital markets regime, which I know that you are very familiar with. As that was going through Parliament, there was a lot of debate, as you will recall, about the importance of proportionality and that being a central theme of the regime. We are very actively taking that on board. We will be coming out very soon with our first set of proposed interventions in that space, and we have very clear analysis about the cost-benefit assessment of the proposed interventions, such as whether there are less proportionate measures that we should be proposing or more interventionist ones, but they may come at a greater cost. That analysis is contained in our assessment and our proposal for particular interventions.
The final contribution, as I have mentioned previously, is that we are not just thinking about our own direct contribution to that 25% admin burden reduction. We believe that we have a helpful role to play in supporting other regulators. One of our day jobs, effectively, when we look at market dynamics is what the regulatory landscape is and is that working well. We can bring that expertise to bear in assisting others with that.
Lawrence Tallon: A key characteristic of our sector in health and life sciences, which is slightly different and Melanie highlighted this earlier, is that you cannot get a product into market without passing through regulation, which is different in some other sectors. I found when I came into this job that the overwhelming request from our industry groups was not to have less regulation. It was to have quicker regulation, and regulation done well and proportionately rather than insufficient regulation. The problem that my organisation had maybe two or three years ago was just insufficient capacity to deal with the workload, and I referred earlier to the O’Shaughnessy review that highlighted that. We have grown our capacity substantially and we are about 40% larger than we were when those backlogs were occurring. That is something that industry wanted rather than industry did not want, slightly counterintuitively. Overwhelmingly, the cost we impose on business is the cost of time delay. I know that this is a theme, so I will not repeat the point, but every day if you are bringing drugs to market, you are probably spending at least £500,000 a day. Every day that we can shave that down is money back to industry, so speed is crucial.
I have spoken extensively already about medicines and I will not repeat that point, but I will highlight something that we have done differently about cost burden, specifically on medtech. The number one request of me when I came to this job from the medtech sector was to clarify the position on international recognition. Specifically, we currently allow European CE marking[1] as a route to market into the UK, but that was due to come to an end and we would be requiring medtech providers to get CE recognition or, even if they have CE recognition, to repeat that for UK Conformity Assessed marking. That would be time and cost. It would not be value-adding for the UK as an economy or for our patients. Within my first 100 days, agreeing that with Ministers, we have clarified the position, which in respect of medtech we will be consulting on indefinite recognition of CE marking.
I do not want to prejudge what that consultation will find but, based on our previous consultations, there is no reason to think that that will not be widely supported. That is a direct reduction in cost because they do not have to do the same thing twice, essentially. We will, however, preserve a unique UK route to market, not to be duplicative and double cost with Europe, but for first-in-market innovative products specifically related to AI-enabled healthtech to come to the UK first through our new regulatory framework, which will allow companies to build their real-world evidence and then apply for marketing authorisation in larger jurisdictions like Europe and America.
Q115 Baroness Valentine: I have a question about fast lanes. The Government have suggested that companies could pay more to receive faster regulatory approvals, for example through paid-for fast lanes. Are you planning to set up a fast lane or similar channel? What do you need to operate fast lanes? How much impact would they have on your resources and how much would you need to charge for the extra effort? Can you see any drawbacks, for example on perceived regulatory fairness? Would it be better to reduce the time taken overall or to focus efforts based on risk or outcome? Lawrence, I will come to you first on that one.
Lawrence Tallon: I am very supportive of the idea of fast lanes. We already have a number of schemes in place and I would like to see more of this. To be really clear, the quality bar required, the evidential bar required, should remain absolutely where it is, irrespective of speed. We would not compromise on evidential requirements. However, as we have all said, speed is so important and it is clear in my conversations with industry that in the main they do not mind paying more if they have guaranteed, predictable, fast routes through regulation. We are already doing a number of these things, some of which I have mentioned so I will not repeat, but the crucial one is our work with the National Institute for Health and Care Excellence to make sure that we can bring medicines to market three to six months earlier and reimburse earlier. We also have a thing called the Early Access to Medicine Scheme, which is for very, very serious and severe life-threatening disease where a medicine is not yet licensed but could potentially give a life-saving treatment. We have that established scheme and the vast majority of requests that come through the early access to medicine scheme have been approved.
We also have a thing called the Innovative Licensing and Access Pathway and an equivalent on devices. This is ILAP and IDAP, which are essentially concierge fast-track services for innovative medicines and devices to get to market more quickly. At the moment, you bid competitively to get into those things rather than paying more for them. I very much would like to see a system in which we can essentially allow premium-rate charging, so if you pay more you have guaranteed speed. That means that we can invest in more people and better technology to be able to be faster.
On this committee’s work looking for recommendations, I would like to see a situation where not only can we charge a premium rate for faster service, but we can have benefits for UK-based industries so that UK-based start-ups could get the same fast-track service, but with a voucher scheme, so they do not have to pay. I was talking to Sarah earlier about how we might view that in respect of competition. Clearly, we do not want to completely skew competition, but if we want to promote UK-based start-ups in digital health and biotech, I would like to look at what schemes we can employ to give speed but with a cost benefit as well.
Baroness Valentine: Does that answer the question about the downsides of fast lanes? That is a compensation if small companies cannot pay.
Lawrence Tallon: My last point is that for large companies in our sector, big pharma and big tech, the cost of the regulatory fees are absolutely negligible. All they want from us is speed. Therefore, it would seem entirely logical to me that we would increase our fees. Even if we increase them a certain amount, we are far, far below our equivalents in Europe and America. We have plenty of headroom to increase our fees, which would allow us to bring in more scientific and technological assessors, to give big companies a faster service and to provide that service free or subsidised to UK-based start-ups. At the moment, that would require some reinterpretation of the Managing Public Money rules, but I am interested to speak to Sarah and the Competitions and Markets Authority and the Treasury about what we might do in that area so that we do not disadvantage small companies, whether we would do that with some specific parameters such as you have to be headquartered in the UK or you have to do your clinical trials in the UK.
Baroness Valentine: You would be disadvantaging a US small company, therefore.
Lawrence Tallon: Not necessarily, because we have not set the rules framework, but we would need to consider that. It could be that you might be headquartered in the US, but if you bring your trials to the UK and you are bringing inward investment to the UK, you could potentially avail yourself of the same advantage. We would have to put some parameters around that voucher scheme to make sure that it was net beneficial for the UK economy. As I say, the rules are yet to be written.
Sarah Cardell: Very briefly, that is a great example of the offer that we are making to government and partner bodies at the moment to bring us into these sorts of conversations. Your question perhaps was alluding to there being a risk from a competition perspective. There is a risk of smaller players being disadvantaged in these circumstances. We need to bring a pro-competition lens to how you get those schemes well set up to encourage dynamic opportunities and scale-up opportunities, particularly with a UK focus. We will take that one away as a joint project.
More generally, the question of fast lanes is less relevant for the Competition and Markets Authority (CMA) because we do not have that regulatory approvals activity within our remit. Our role here is much more about helping others design those schemes in a way that it does not have a detrimental impact on competition, or at least that we are eyes open to the trade-offs. As that conversation demonstrated, you will often have a number of different policy objectives that need to be weighed and traded in that circumstance. Our offer is to bring a competition lens as part of that.
Within the CMA, we do not have this same regulatory approvals, fast-track system. The closest we would come—but it is not about payment for access—is, for example, with merger control. It is open to companies. We encourage companies to apply for a fast track to phase 2. If you know that there are competition issues, if you want to move forward quickly to a remedies discussion, just at the broader point on pace, let us get on and move to that quickly. We are actively encouraging routes through our processes that speed them up, but it is not, in our case, about payment for access.
Dame Melanie Dawes: This is most relevant where we are licensing spectrum because this is essentially a licensing question, as you are hearing from the Medicines and Healthcare products Regulatory Agency. We offer a fast track for some eventualities, particularly where there is a help to life or an urgency that is needed, but we do not charge extra for it.
Essentially, we have key performance indicators (KPIs) on all of this. About a third of the licences we give are for very straightforward and repeatable uses of spectrum like a boat licence or amateur radio enthusiasts, who are a very passionate group of stakeholders for Ofcom, and 95% of those licences are entirely processed online by the applicant. It is like taxing your car, effectively. It is quite straightforward.
Then things get steadily more complex, right up to how you find a brand new licensing regime for low-earth orbit satellites, which is what we have had to do, like other jurisdictions, over the last few years. That was an entirely new regime that we have had to set up. Recently, we have also allocated spectrum to direct-to-device so that companies can now offer a connection that uses a normal phone coming from a satellite, which is a big solution for connectivity in areas where you do not have a fixed or mobile connection that works.
When we are setting up a new regime like that, we always ask the question about speed and pace. However, our experience is normally that companies that are innovating like that want to know that they have somebody expert to talk to and that there is a time period on it. If people say they need a fast track, we will listen to that, but it is not usually required beyond our normal processing requirements.
We recently went out and did a big review of all our KPIs to see whether people were happy with them. Some people were not aware that we offer a fast track, which is something that we need to improve on. We did not hear huge demand for this. It can be important, but I think it depends a little bit on the product that is being licensed.
Q116 Lord Teverson: Sarah, I liked your example of the housebuilders and the voluntary donation to affordable housing. That is a good example of regulation. Barriers to SMEs in the defence industry are also something I have come across. It is good that you are doing that.
On sandboxes, I am interested to understand what examples you might have in your own organisation of those, how they are funded, if that funding can continue, and what some of the results have been. Lawrence, perhaps we can start with you on this occasion.
Lawrence Tallon: Sandboxes are really important for us. If I refer back to my earlier analogy of a hurdles race rather than high jump, the sooner that you can get products tested in the real world and start to see how they perform, the sooner you can build your evidence to know whether they are suitable for a wider scale. We have a number of sandbox-type arrangements. Some are by product type and some are by geography.
For example, we are in conversation with the NHS in London, Greater Manchester and Leeds about how we can create a safe environment within which to test particularly non-interventional medical technologies and pathway-type changes to models of care that can happen with regulatory permission but without the full regulatory approval that would be required if it was going to scale around the country. There is huge appetite in the NHS to do this because, clearly, there is a real crying need for reform of health services. We have a number of geographically-bound sandboxes.
We also have some that are more around the product type. We have a thing that we call AI Airlock, which is now into its second iteration. That essentially allows developers of AI health products to work with us to understand what they will need to do to clear regulatory hurdles. Frankly, it allows us to work out how we regulate for this new emerging technology. That has been very successful.
Another one we have, which is for medicines, is the innovative licensing and access pathway, where we essentially put a multidisciplinary team around a particular medical product that meets a new need that we currently cannot meet, and the Medicines and Healthcare products Regulatory Agency, the National Institute for Health and Care Excellence and the NHS work together with the developer to pull that through. A lot of those have been funded by government, particularly by the Regulatory Innovation Office. Having captured the learning, we need to reverse-engineer that into business as usual, so that it becomes the sustained and embedded way of doing it.
For a regulator like ours, which licenses products, this is a crucial part of how we shift towards that post-market, iterative way of regulating rather than a single, very high barrier to entry.
Lord Teverson: Are you confident that funding will be there for the future to carry this on?
Lawrence Tallon: The Government have been committed to all of these projects and I am confident in that support. Even if the exact nature of the funding changes, sandboxes or live test environments as a model are absolutely where we should be going as a regulator, however we end up funding it in the future.
Dame Melanie Dawes: We have some sandboxes, again mainly in our spectrum work. Generally, Ofcom does not license and, therefore, people do not need our permission to innovate. There are no rules to suspend as you innovate, which is what a sandbox is about.
Generally, we do it on spectrum, usually in close collaboration with the Government. For example, we have a reasonably long-standing programme with SONIC Labs for testing new technologies for Open RAN in particular and how they can be applied to mobile networks.[2] That is as much about technology testing as it is about regulatory testing, using some of the same principles.
However, on a number of questions over the last hour or so, online safety is quite different. There, we have had an industry that has been innovating and testing on the public without any controls. It has not been thinking about safety. That has now changed. They need to do a risk assessment if they are changing their service—if they are a service we supervise, one that is big enough or small but risky—and they need to come and tell us what mitigations they are putting in place. We are pushing very much in the opposite direction there. Of course we still want innovation, but we want it to be done in a managed way that puts safety by design at the beginning.
Lord Teverson: Thank you. That is an important differentiation. Sarah?
Sarah Cardell: Again, it is slightly different for us because we do not have that regulatory approvals framework and we do not tend to think about sandboxes in that sense. The closest we come to it—and it is an area that we are exploring quite closely through the Digital Regulation Cooperation Forum (DRCF) with Ofcom, the Financial Conduct Authority and the Information Commissioner’s Office—is if we think about the rollout of agentic systems and, from my perspective, particularly consumer protection.
Again, it is not a sandbox in the sense of suspending the existing rules—I do not think anybody would advocate for that—but there is a strong opportunity for us to work collaboratively as a group of regulators, and with industry, to think about what effective consumer protection looks like in an agentic world. That is big and complex and brings into play online safety issues, privacy issues and competition and consumer protection issues. I think it naturally sits very healthily within our DRCF forum. That is probably the closest we would get to the sandbox space, as I think about it.
Lord Teverson: Thanks very much. I had wanted to ask a little bit about the question of competition and growth. Competition can be even better for other people’s economies than our own with globalisation, and we have a very open economy in the UK. I will not pursue that because we do not have time. However, Sarah, I want to take you up on one thing that does or has concerned me for some time, which you mentioned about growth, which is the acquisition of small venture enterprises or SMEs before they get somewhere and then, often, their repatriation somewhere else. The National Security and Investment Act 2021 tries to solve that to a degree. Do you deal with that? Is that strong enough or should it be widened so that you can stop this pillaging of our future growth, effectively, in corporate society?
Sarah Cardell: That regime is separate from the competition/merger review regime. I find this a fascinating area that merits probably a longer discussion, and I would be very happy to come back to the committee and have a longer conversation about it.
Lord Teverson: I am sure, yes, but we do not have time.
Sarah Cardell: Our role, as I see it, is to help to open up this conversation. It links to your earlier point about how we grow—to borrow Julia Hoggett’s phrase—globally consequential companies for the UK. The role of competition in driving scale-ups and growth for the UK, and then making sure that it does not all get bought out and transplanted into other economies, is essential. I do not think it is a merger control question, or at least not as merger control is currently designed.
There is a very interesting question about the Government’s policy objective in particular sectors. Do you want to grow a UK player that is capable of competing on the global stage? Do you want to build resilience in UK supply chains? Do you want to build a dynamic, innovative environment? You might set a slightly different competitive market framework, depending on those slightly different policy objectives. That is not to say that you would extract competition from any of those frameworks. I do not think you would. I think competition is a key driver in any of them. However, the way you channel competition to achieve that end objective is slightly different, and that is the debate I am keen that we open up.
Again, we are doing it differently. I do not think that two or three years ago you would have had a competition authority actively wanting to pursue that kind of discussion. That is one of the contributions that we need to make to the growth discussion. How do we achieve those objectives? How do we utilise competition in a more considered and more nuanced way? That is probably part of a longer conversation.
Lord Teverson: Thank you very much.
The Chair: We will move to AI. We were inevitably going to get to that issue. Baroness Harding.
Baroness Harding of Winscombe: I fear my question could be a whole inquiry, and there are quite a few more questions.
The Chair: You have about 12 minutes.
Q117 Baroness Harding of Winscombe: I will try to be quick. All of you have referenced AI in almost every answer this morning. It would be great if you could sum up what you see as the challenges and opportunities of AI for your regulatory space, externally the impact that AI has on your objectives and also internally how AI is enabling you to deliver faster, more efficient, more effective regulation.
Dame Melanie Dawes: Shall I start? We have done quite a bit of work on this over the last couple of years. We publish an annual report on this, which is a government requirement that is quite helpful.
Across all our sectors, AI clearly has the capacity to transform the way that services are run, whether it is managing network optimisation on telecoms, the scope to create new forms of content in broadcasting and media, or improving the efficiency of the way that spectrum is used. There are multiple uses and most of those do not have a lot to do with the regulator in that we do not opine on whether they are good or bad. We are trying to think about whether we need to facilitate any of that or stop blocking it, and that is always quite an active debate but generally the answer is no, not really. As I said earlier, whereas with some regulators you require permission to innovate from the regulator, that is not the case for Ofcom for the most part.
There are some risks. There are obviously risks in the media industry around fake content that can be very damaging for the public, and how we find it. I do not have an easy solution to that. We know that for adults and children alike—it does not matter what age you are—it is extremely difficult to detect fake content. Often that does not matter, but sometimes it really does. For online safety, generative AI in particular is an increasing risk, particularly given the culture of just launching a new product and the competition in that industry to do that even faster than ever before. We have talked a bit about that. It is one of our great challenges as the regulator and a great challenge for Parliament in thinking about legislation.
However, there are also opportunities because the problems that AI causes, often only AI can solve. Automatic content moderation, for example, is not the only tool we would want to see, but it can be enhanced and made even stronger and better by deploying AI. We are beginning to see that. Technology solutions need to be deployed because they often help us to solve the problems that are being created, or at least some of the problems. Technology will not solve all of the problems. Further rules and decisions on that will almost certainly be needed, as well as implementing the Act as quickly and as concertedly as we can.
Sarah Cardell: I will make three points. On how AI affects some of the competition or consumer protection issues that we might see, I will give a couple of examples. I touched on an important one before in consumer protection, which is the rollout of agentic systems. That is a very big one and very important. On competition, it comes in many forms. One example that we are very focused on in competition enforcement at the moment is algorithmic collusion, what that means for price setting by companies independently, and whether you have potentially a systemic risk of bypassing the traditional rules on independent price setting by firms. Those are two big and important issues. There is obviously a much wider theme, which is how AI could be used to up-end, or could simply develop in a way that up-ends, competitive dynamics.
In many ways, it is an obvious force for good. It can create opportunities for innovation and new entry. I know your previous interest in the digital markets regime. Clearly, we want to make sure that, where there are opportunities for competitors to come in and innovate using AI, they are able to do so on a level playing field that is not serving to further entrench incumbent market positions. That is absolutely front of mind across all of our digital markets work.
Very briefly, using the technology ourselves internally, as Melanie has alluded to, for all of us is absolutely front of mind. It is essential for obvious reasons. I have talked an awful lot about priorities and trade-offs. We are all resource constrained, or certainly we are resource constrained, and the opportunity to use technology to operate more efficiently and more effectively is critical. That is paramount for us in our strategy going forward. There are a couple of good recent examples of that.
We launched just before Christmas a wave of the first consumer protection enforcement cases, including a number of cases around drip pricing, which is when hidden fees come through later in transactional journeys. Historically, the way we would identify those sorts of cases is through human review. We have built an agentic system internally that can effectively operate as a consumer to go through that transactional journey, and we use that very effectively to identify those cases for investigation. That is the sort of thing that we are using now. We will be rolling out much more.
Another one is bid rigging, as I mentioned earlier, where we can use AI to scan at scale for anomalies in bidding data and spot patterns that are indicators of bid rigging. We think that will massively increase our ability to detect and take action, but also to support government.
Lawrence Tallon: I will answer in two parts. First, on how we are using AI as a regulator, a lot of our core work is essentially ingesting very large files in structured ways, interpreting and analysing that data, and of course a lot of that is amenable to agentic AI. A colleague of mine who heads up our clinical trials team, Andrea Manfrin, has published a study in a peer-reviewed journal, the British Journal of Clinical Pharmacology, on how we have used AI to cut the assessment time of clinical trials from 91 days to 41 days, and that is just the start.
We are now investing, with the support of the Regulatory Innovation Office, in a programme that we are calling ARISE, which is AI for Regulatory Insight, Safety, and Efficiency. That is essentially looking at where else we can apply agentic AI to interpret these files so that our expert scientists are not trying to pull information from here or there and find case law and precedent but have it presented for them so that they can use their human expertise most effectively and efficiently.
The second part of my answer is on the work we are doing to regulate AI as a medical device. Again, a slight difference here is that, if an AI meets certain criteria, it is classified as a medical device. If it is affecting medical decision-making, it has to be regulated to be in use, which is slightly different from direct-to-consumer health and well-being products.
I have already talked about the shift from a pre-market emphasis to post-market. This requires a sophisticated way of thinking through how we regulate AI. Therefore, we have stood up an expert commission, which we are calling the National Commission into the Regulation of AI in Healthcare, chaired by a clinical academic called Professor Alastair Denniston from the University of Birmingham. The deputy chair is the Patient Safety Commissioner, Professor Henrietta Hughes, who is also a GP and who, by the way, uses AI in her clinical practice. It brings together a range of experts—academics, ethicists, clinicians, patient advocates, big tech, small tech, government regulatory bodies—to figure out how we will regulate this new technology.
While I do not want to prejudge the outcomes of that review, which will report later this year, Professor Denniston talks about a model based on the five pros. This is a shift in emphasis in regulation. We have traditionally looked very heavily at the medicine or the technology, and all of the regulatory focus has been on how the medicine or device performs and how safe and effective it is. Of course, we still need to look at the product itself in that way. We also need to look at the producer. Do we have an ethical producer that will report safety signals and maintain its model after it is in the market, as it starts to drift or change in performance? Does the healthcare provider understand how to use AI within its framework of clinical governance? Will it spot errors? Will it be able to understand the performance drift? Do professionals understand how to use that product? We would not expect a prescriber to understand the detailed chemical composition of a pill, but we would expect them to understand the expected intention of that medicine. It is the same with AI. They do not need to understand the detail of the algorithm, but they need to understand what it is supposed to do.
Looking at the product, the producer, the healthcare provider and the professional, the fifth pro, very importantly, is when you add all that up, does it add up to a distributed framework of regulation that is proportionate to the risk, rather than just layer upon layer, which becomes disproportionate? I think that foreshadows some of the recommendations that will be coming forward, but we will publish fully on that later this year.
The Chair: Thank you. The clock is against us, I am afraid, which is a shame because you are three important regulators in your reach, and we want to hear and give consideration to your evidence.
There are three areas of questions that we have not got to, which is a reflection of our interest in your answers to the previous ones and, therefore, directly a compliment. Viscount Thurso would have pursued two of them. One is on the issue of key performance indicators and how the approach to performance monitoring will change. The other was on the issue of working with other regulators in the UK and the synergies and efficiencies there in reducing regulatory burden. The third one, which I would have pursued, is the relevance and importance of your relationship with international regulators, particularly in the area of growth, what that means for processing applications and whether the UK will align with certain economies.
These are important areas. I was hoping that we could ask you to write in with an answer—we will formally send you an email with the questions—and, being a bit pushy, that you might give us a fairly full reply, because we cannot counterquestion. It would be very helpful. I am sorry we have to do that, but I think the richness of the debate necessitated it.
I want to thank all three of you for the manner in which you have engaged with the questions. It has given us a lot to think about and that is much appreciated. I will now close the public broadcasting session with a final thank you very much indeed for your time today.
[1] CE marking or CE recognition indicates that a product meets the requirements set out in EU regulations and can be moved freely through the EU.
[2] SONIC Labs is the SmartRAN Open Network Interoperability Centre. It provides an opportunity for companies to collaborate on opening Radio Access Networks, known as Open RAN.