How to be a Civil Servant
This is the first of five notes which:
Regulation is one of four policy tools available to Ministers. (Click the following link if you would like to understand regulation within the wider context of policy making.) It is accordingly for Ministers to decide their policy objectives and then - if they choose to achieve their objectives via regulation - to draft appropriate legislation for approval by Parliament. This legislation sometimes itself takes the form of regulations. Alternatively it creates regulatory bodies with specific duties and specific powers.
It is possible to identify at least six different types of regulation, although there are some overlaps, and numerous sub-categories:
Industry, and in particular employers, are required to carry out a wide range of tasks on behalf of government, including collecting tax (PAYE, National Insurance & VAT, for instance), paying benefits (tax credits, maternity pay), re-claiming student loans, ensuring that employees are working legally in the UK, and collecting statistics. These sorts of regulations are quite different to those listed below, but they do impose a huge burden on employers and their cumulative effect is frequently the subject of bitter criticism and complaint.
These include some of the oldest regulations of all - and some of the youngest. Can you imagine the fury of King John when, in 1215, he was forced to sign the Magna Carta limiting his powers and begining the regulation of property ownership in the UK? Later developments such as company law gave protection to company owners against their company's creditors, and patent law did much the same in the field of intellectual property. Coming up to date, there has been a flurry of regulation providing employment rights, including protection against unfair dismissal, sex discrimination, unreasonably low pay and excessive working time. Each extension of regulation is hotly disputed at the time, but generally becomes irreversible.
If you are a civil servant responsible for this sort of regulation, then do make sure that you consider how you will communicate with smaller firms, and how they will cope (or not) with the detail of the regulations. In other words "Think Small First".
You should also beware unintended consequences. You will never spot them yourself, of course, which is why consultation and openness is so important. Don't hesitate to change your plans following consultation, despite inevitable media jeers of "climb down!". Click here for a more detailed discussion of this subject in an extract from How to be a Civil Servant
Much of this sort of regulation comes from Brussels, and Ministers need to reconcile a number of possible tensions when it comes to transposing European Directives into UK law - see separate note.
And do remember that hardly anyone ever reads the legislation that you have drafted so very carefully, nor do they retain (if they even ever read) your carefully drafted guidance material. The best regulations are therefore easy to remember and self-policing, such as the simple concept of the minimum wage. More complex regulations, such as the working time regulations with their opt-out, complex rules to cope with multiple employers, and 17 week averages, are much less likely to be effective.
The regulation of risks to health and safety is a particularly difficult and interesting area which is the subject of a separate note.
The best form of regulation is choice, including competitive tendering. You don't need inspectors to detect inefficient, unresponsive and uncaring providers if their customers can go elsewhere. But many problems are often invisible to customers - at least until it is too late - especially if they buy the service only once or twice in a lifetime. It is sometimes possible to avoid legislation in these areas by encouraging professions and industries to regulate their own activities.
Such self-regulation ensures that the process is sensitive to the practical needs of those being regulated, and it cuts the cost to the taxpayer. Often, however, pure self-regulation does not work because "cowboys" refuse to be bound by it, and there is then a tendency for the bad to drive out the good. It is common, in these circumstances, for at least some in an industry to prefer the regulation to be undertaken by an arm of government. Alternatively, much apparent self-regulation (e.g. of lawyers and doctors, and of financial institutions) is in fact carried out by bodies created by statute, even if those bodies are dominated by representatives of the industry which they regulate.
Indeed, good "trusted" regulation can be essential if an industry or activity is to thrive. We would not have a nuclear industry if the Nuclear Inspectorate were not regarded as effective, so that industry and its regulator have developed a sort of symbiotic relationship. Much the same applies to the Human Fertilisation and Embryology Authority. Following that thought, it is interesting that the Better Regulation Task Force recommended, in January 2003, that there should be a dedicated nanotechnolgy regulator:- "Government has a difficult job in ensuring that scientific research can flourish, whilst at the same time confirming to the public that research being carried out is both ethical and safe."
There is a huge number of regulatory bodies, of all shapes and sizes, doing an amazing range of jobs. Some are very large (the Health and Safety Executive, the Environment Agency) and some are very small. Most of these bodies are created as non-departmental public bodies:- click here if you want to understand the difference between the various bodies that together form the UK public sector.
However, the March 2005 Hampton Report: "Reducing administrative burdens: effective inspection and enforcement" foreshadowed quite a shake up in this area, involving a large reduction in the number of inspectorates, and a reduction in the number of inspections undured by less risky businesses etc.
As noted above, the regulation of risks to health and safety is a particularly difficult and interesting area which is the subject of a separate note.
The Government has created a number of specialised economic regulators which make judgements about the future behaviour of large economic entities. Ofgem, Ofwat, Postcomm and parts of Ofcom take decisions about the extent of competition within, and prices etc set by, large utilities. The CAA sets the prices charged by large airports. And the Bank of England is almost in a category of its own as it sets the interest rates charged by financial institutions.
Ministers create these independent regulators for a number of reasons. For instance, companies within the utility sectors need "regulatory certainty" - which in effect means freedom from political short-term decision making - so as to reduce their business risk. This helps them plan their long term investments and borrow more cheaply.
Ministers also often conclude that hard but necessary decisions are best made by independent bodies whose objectives are set by Parliament but which are then free from political control. This results in "economic" regulators often being given responsibilities which are far from purely economic. The water regulator, Ofwat, has to consider water purity. The rail regulator, ORR, is now in charge of rail safety. And the postal regulator, Postcomm, itself defines the scope of the "universal postal service" whose protection is Postcomm's overriding objective. This delegation of power to regulators inevitably creates pressure for them to become more "accountable" than they are now.
Therefore, because Ministers are anxious to ensure that they have no responsibility for the often controversial decisions made by such bodies, but are sensitive to the criticism that those regulatory bodies might become over-powerful, they are sometimes created as non-ministerial government departments so that they are directly accountable to Parliament. (Click here if you want to understand the difference between the various bodies that together form the UK public sector.) Indeed, economic regulators are themselves regulated (if that is the right word) through being accountable to Parliament, and also accountable to the courts, the public and to Government. Remember, however, that being accountable means having to explain what you have done, and why. Being accountable does not mean that you can be told what to do by those to whom you account, other than as a result of changes in the law, or losing court cases. (Click here for a more detailed discussion of accountability.)
But not all regulators are government departments. Bodies such as the Financial Services Authority, the Competition Commission and Ofcom are all outside central government, even though they have taken over many responsibilites which once fell to central government.
Those companies, such as the utilities, that have dedicated regulators are apt to wish that they were not regulated at all, or else regulated rather more lightly. But the alternatives are scarcely more attractive:-
In practice, therefore, sectoral economic regulation seems destined to survive for a good while yet.
Sectoral regulators are also often accused of "regulatory creep" or "mission drift":- continually extending the scope of their activities in a self-interested sort of way. Their defence is that they are merely responding to interventions by politicians, or mailbags full of letters from people with genuine grievances who expect "the regulator" to "do something about it". As one regulator put it:- it is hard to say that "There is indeed a problem but we are not going to do anything about it".
A growing number of regulatory bodies oversee the performance of the public sector, and to seek to improve standards. The National Audit Office and the Audit Commission have long standing responsibilities for improving the performance of central and local government respectively, and other bodies oversee various aspects of, for instance, the police and prisons service. But they have recently been joined by numerous bodies, such as Ofsted, which seek to improve and/or control the education and health services. Again, Ministers generally prefer to have independent bodies taking controversial decisions about, for instance, which expensive treatments should be made available on the NHS.
Public sector employers are, of course, also subject to exactly the same burdens and regulations as their voluntary and private sector counterparts, which means that the public sector is in fact more highly regulated than any other.
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