Lords call for regulators’ regulator to regulate regulation

An independent watchdog should be established to keep tabs on the UK’s regulators, a House of Lords committee has recommended.

The Industry and Regulators Committee’s inquiry into UK regulators found the country’s watchdogs are overloaded with objectives; conflicted on those objectives; unable to attract new talent; and too closely tied to politics.

To tackle these issues, the Committee has called for the creation of an ‘Office for Regulatory Performance’ to investigate and report on regulators’ performance and support Parliament in holding regulators to account.

The committee’s final report adds that this new watchdog “would complement and improve existing parliamentary scrutiny”.

It continues: “Extra resources from the government would be required in order to fund its work, but given the fundamental importance of effective and regular public accountability, we believe this would be money well spent.”

One of the main issues raised by the committee was the conflicting objectives which many regulators face, including Ofgem and Ofwat.

The report concludes that “some regulators are being overloaded with objectives, without clear guidance on how they should prioritise between them”.

It adds: “Some regulators have been given too many statutory duties, objectives and issues to have regard to by government and Parliament without a clear sense of priority.

“In the context of finite resources, this makes it difficult for a regulator to achieve each in turn and increases the potential for tensions and conflict between them.”

To tackle the issue, the committee has recommended that a review of each regulator is carried out with the objective of setting a “core purpose” for each organisation.

The committee also suggests that “regulators should be given more freedom to determine how best to achieve priorities [as] competing government priorities in the same area can be challenging”.

The report also questions the independence of regulators from politics. It concludes that “there is a perception that some regulatory leaders have been appointed on account of their political loyalty rather than their experience and capability”.

The committee also raises concerns about regulators which are funded directly by government which “inevitably influences their ability to carry out their functions independently”.

Lord Hollick, chair of the inquiry, said: “Our report raises concerns about the functioning of the three-way relationship between the regulators, the government, and Parliament, particularly the role and performance of regulators, their independence, and their accountability.

“We are especially concerned at cases where the government has failed to resolve political or distributional questions facing regulators, and instead interfered in their day-to-day workings.

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

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