If the integrity and legitimacy of the UK’s regulatory system is to be preserved, the findings and recommendations made in a House of Lords report into the independence and accountability of the UK’s watchdogs must be addressed by the government, Parliament are regulators themselves.
This is the view of Lord Hollick, Chair of the Industry and Regulators Committee, which has just concluded an inquiry into how effectively the UK’s regulatory bodies operate.
This week we summarise the report, entitled ‘Who watches the watchdogs? Improving the performance, independence and accountability of UK regulators’, which offers a less than flattering picture of the regulatory landscape, including excessive interference from government, poor accountability and lack of independence.
Lord Hollick concludes that “a fresh approach to overseeing UK regulation is required”, calling for the creation of an ‘Office for Regulatory Performance’ to investigate and report on regulators’ output and support Parliament in holding regulators to account.
While this might mean sweeping reform for many regulatory bodies, there is a chance that the financial watchdogs may escape with just minor changes.
The committee makes a particular example of the improvements in regulatory oversight made by the Treasury Select Committee following the 2008 global financial crisis. For example, increased scrutiny of the Financial Services Authority with the addition of Specialist Advisers to review reports on the failings of banks.
Lord Hollick says: “Other select committees may wish to explore whether these methods could be used to examine shortcomings within regulators.”
The report also exemplifies how financial regulators benefit from an ability to raise their own revenues, giving them some leverage against an interfering “budget- and finance-oriented” government.
Charles Randell, former Financial Conduct Authority Chair, notes the “enormous differences between the regulators that have taxing powers and those that do not” which provides “a measure of autonomy” in raising their budgets. He contrasted this with the Gambling Commission and the Environment Agency, where “central government can, in effect, starve the regulator of the resources it needs to do the job” which he describes as “a fundamental problem” for some regulators.
The report also gave an approving nod to the FCA’s inclusionary approach to consumers including a consumer panel and network, a national outreach programme, as well as a new consumer duty it has placed on firms which Randell says “is leading to a fundamental change” in the financial services sector.
However, financial watchdogs will still be subject to some reform including being able to demonstrate their efficacy and proving accountability. But given the House of Lord’s motivation to uphold independence and integrity, change – if done properly – should be no bad thing.
Gill Wadsworth, Editor