Accountability in the political domain

Those seeking to call regulators to account thus face a significant set of challenges, which they have differing capacities to address. However, it has to be remembered that agencies are not passive actors in the accountability process: they are active participants who can act to manage their accountability relationships through communicative and other strategies in order to enhance their political and social legitimacy.

This section explores these dynamics by examining the role of four key regula­tory accountors in the political domain. It looks first at accountability within the executive, focusing on the ways in which the ‘better regulation’ agenda is used both to control regulatory bodies and to call them to account. Although the core executive’s ‘better regulation’ processes may not always engage the independent regulatory agencies, they provide an important context in which the activities of such regulators are often assessed by other accountors, notably parliamentary Select Committees and the NAO. The second part focuses on the role of parlia­mentary Select Committees, highlighting the constraints that Parliament has in practice to meet the challenges outlined above in calling regulators to account, the ways in which it is meeting those challenges, and the blurring of the bounda­ries between its role as accountor and other roles that it may play with respect to a regulatory body. The discussion then turns to the NAO, and explores how its institutional position limits its ability to act as accountor, notwithstanding its considerable capacity. Finally, the fourth part looks at a group of accountors, consumer panels which have legal mandates to represent the views of consumers to specified regulatory agencies, and draws on current debates on their reforms to highlight both the significance of accountability capacity, and the fluidity of roles that an accountor can play in regulatory processes, constantly moving from participant to accountor.

1. Intra-executive accountability—from the periphery to the core

Although we may speak of ‘the executive’ as a single entity, in practice it is inter­nally fragmented. We can distinguish broadly between the ‘core’ executive, which in essence is the Cabinet Office and the Treasury; the ‘extended’ executive, by which is meant government departments and their various units; and the ‘periph­ery’, which includes the regulatory agencies which have separate legal status, man­dates and powers. In practice, different parts of the executive can have a significant role in calling other parts to account.^[1313] There is a strong functional and political

368 Calling Regulators to Account: Challenges, Capacities and Prospects reason for this. Politicians who are in power pass legislation to create regulatory agencies to which they delegate important public functions and around which they put in place legal structures to ensure the independence of those agencies from political control. One of the challenges that the executive in particular faces is how to exercise some control over those agencies without violating (or being seen to violate) that act of delegation. There is thus a significant tension between the centrifugal forces which push functions out to the periphery, and the centre's need for control.^[1314] As a result, whilst we might have witnessed an internal fragmentation of the executive into a vast array of regulatory bodies, public-private contracting, outsourcing and so forth, we have seen a corresponding rise (though it may be with some considerable time-lag) in mechanisms being put in place by the core execu­tive to enhance its capacity to control and coordinate the many-headed Hydra it has created.^[1315]

One way to address the problem of control over regulatory or other ‘arm's length' bodies is to reduce their number. ‘Quango-burning' is nothing new; the allocation of functions has oscillated between agencies and departments since the establish­ment of inspectorates in the Victorian ‘revolution in government' in the nineteenth century.^[1316] In 2010, the coalition government engaged in its own review exercise and announced that four hundred and eighty one out of over nine hundred pub­lic bodies were to be reformed, reconstituted or abolished.^[1317] Nonetheless, despite some rationalization, significant functions remain in the hands of independent or quasi-independent public bodies which may or may not have a separate legal man­date.

The main instrument that the core executive (ie. the Cabinet Office and the Treasury) have to control regulators and call them to account is through their

budgets, for the majority (though not all) are at least part-funded by the state, with budgets set by the Treasury.^[1318] There is no doubt that the Treasury can have a significant impact on a regulator’s capacity through its funding decisions, and has recently imposed significant budget cuts (Ofcom’s budget, for example, was cut by 28 per cent in 2011). Whilst the House of Lords review of economic regula­tors found that, on the whole, the independence of those regulators had not been compromised by the funding arrangements in place,^[1319] the issue of funding does considerably complicate Parliament’s attempts to determine whether responsibility for regulators’ performance should in specific instances lie with the executive or with the regulatory agency.

With respect to regulatory functions, it is through the ‘better regulation’ agenda that we have seen the marked ‘re-centring’ of control by the core executive over regulatory processes, if not directly over regulatory decisions, particularly with respect to those regulators with considerable inspection and enforcement functions. Indeed, the development of better regulation processes, at least in the UK, can be largely explained as attempts to develop intra-executive mecha­nisms of control by the core over the periphery.^[1320] Despite its highly techni­cal and often mundane nature, regulation has been a key political priority for successive administrations since the 1980s.

Three strategies in particular have been used in the last fifteen years.^[1321] These are, firstly, the use of organizations within either the Cabinet Office or the department for business (the name changes frequently) to monitor regulatory proposals issuing from within government departments and some of their associated bodies, though not the independent regulatory agencies. Secondly, to establish specialist advisory bodies to advise the executive on what both departments and independent regula­tors are doing, and to appoint ad hoc independent reviews to investigate either particular independent regulators or particular functions of a number of agencies, and to report and advise. Thirdly, to impose cross-cutting duties on regulatory agencies through legal requirements and codes of practice. Each of these has the potential to make significant inroads into the exercise of discretion by independ­ent regulators, blurring the boundaries between independence, accountability and control, though their impact in practice is mixed.

a. Getting government to ‘do “better regulation” better’—structuring decision-making

The move by central government to attempt to push the ‘de-regulation’ and sub­sequently the ‘better regulation’ agenda through government began in 1985 with the creation of individual departmental deregulation units, responsible for identi­fying areas where regulation could be simplified or removed. Responsibilities were moved to the very top of government with the creation of a central deregulation unit as part of the Cabinet Office in 1995.

Both the previous Labour administration and the current coalition govern­ment introduced further organizational and procedural reforms. The BRE’s role in reviewing departmental performance and further driving the ‘better regula­tion’ agenda across government continues. It is now advised now by the Better Regulation Strategy Group, which is an advisory group comprised of business and consumer representatives, and the two bodies share the same non-executive chair­man.^[1323] The cabinet has also replaced the Regulatory Accountability Panel with two new bodies. These are the Regulatory Policy Group, which scrutinizes all new regu­latory proposals and the impact assessments accompanying them. It then passes all proposals with satisfactory impact statements to the Reducing Regulation Committee, a body comprised of external members which considers the impact assessments and the associated rules which are proposed to be removed to ‘make way’ for the new requirements, including those implementing EU legislation.^[1324]

As a mechanism of simultaneous control and accountability, the better regula­tion agenda is felt more strongly the closer the regulator is in its operations to gov­ernment departments, at whom these efforts are principally directed.

b. Using specialist advisors and reviewers

Executive control over regulatory policy-making within departments has been accompanied by the use of specialist advisory bodies and independent reviews to advise on regulatory reform across the whole of the regulatory landscape. The Better Regulation Taskforce was created in 1997 and devised five principles of ‘good regulation' which are now enshrined in legislation and widely referred to as the ‘PACTT' principles: proportionality, accountability, consistency, transparency and targeting.^[1327] It conducted a considerable number of reviews into specific areas of regulation and into the conduct of regulation overall.^[1328] It was reconstituted as the Better Regulation Commission in 2006, but still reported to the cabinet. Arguably two of its two most influential reports were Less is More, which set the current policy agenda on administrative burden reduction, and Public Risk—the Next Frontier for Better Regulation, which was produced at the request of the Prime Minister and in fact advocated its own demise.^[1329] On the basis of the latter it was abolished and replaced by the Risk Regulation Advisory Council in 2008, which produced a series of reports, guides and tools to help policy-makers and the pub­lic tackle public risk. Its work programme ended in 2009, and it has not been replaced. Political attention has moved elsewhere.

The appointment of specialist advisors to investigate particular areas of regula­tion, either particular sectors or particular processes across sectors, has also been increasingly used. Most influential of these has been the Hampton Review of Inspection and Enforcement in 2005, which reviewed the inspection and enforce­ment activities of the non-economic regulators including the Environment Agency, the Food Standards Agency, the Health and Safety Executive, the Financial Services Authority and the Civil Aviation Authority.^[1330] The Hampton Review marked a shift to scrutinizing more closely not just the consultation practices of regulators or the decisions they make, but their operational systems and processes. Amongst other things, it recommended that regulators should adopt a risk-based approach to

372 Calling Regulators to Account: Challenges, Capacities and Prospects inspection and enforcement, focusing resources on areas of greatest risk, and that regulators should be accountable for the efficiency and effectiveness of their pro­cesses, whilst remaining independent in the decisions they take.^[1331] Sector-specific reviews have also been instrumental in prompting regulatory reform. Most recent are the reviews of OfWat^[1332] and Ofgem,^[1333] of the regulation of the railways,^[1334] of the inspection and enforcement of the regulation of farming (which spans several agencies)^[1335] and of the enforcement policies and practices of the Health and Safety Executive,^[1336] each of which is likely to be the basis of legislation going forward, and which are discussed further below.

Whilst they may not form part of any formal ‘map’ of accountability relation­ships, such reviews do require regulators to give an account of their activities, and can provide a valuable resource for others seeking to hold them to account. Moreover, it is striking the extent to which such reviews set the agenda for other accountors. The Hampton review has been particularly influential in defining the ‘better regulation’ agenda for inspection and enforcement activities, and in partic­ular for driving the development risk-based regulation as a further element of the better regulation agenda. In the wake of the report, the government codified the ‘Hampton Principles’ in the Legislation and Regulatory Reform Act 2006, and set up the Macrory Review of regulatory sanctions, which also led to the Regulatory Enforcement and Sanctions Act 2008, both discussed below. The Treasury and BERR^[1337] also appointed the NAO to evaluate how well five regulatory agencies were operating in accordance with Hampton principles, and reviewed a further thirty-six.^[1338] Parliamentary Select Committees have picked up on the agenda without questioning it, and have urged regulators to adopt more principles-based approaches to regulation, and also to be more ‘risk-based’.^[1339] It is worth pointing out how quickly accountability criteria shifted in the wake of the financial crisis, however, when all of a sudden not only did principles-based regulation lose its allure, but accountors conveniently forgot that it had ever had one.^[1340]

c. Using principles and codes—the juridification of better regulation

In the last few years, we have also seen the increasing ‘juridification’ of principles of better regulation as they have morphed from general exhortations to statutory

obligations. Thus, what started off as instruments of political accountability evolved into ones of legal accountability. The extent to which they are embed­ded in the legal mandates of individual regulators varies: the FSA, Ofcom and Ofgem are under statutory obligations to conduct regulatory impact assessments, for example, but OfWat and the Office of the Rail Regulator (ORR) are not. However, there has been an increased move to introduce legal responsibilities to adhere to different parts of the better regulation agenda on a cross-regulator basis. The PACTT principles, for example, began as self-imposed guidance for one regu­lator (the Health and Safety Executive), were then adopted and promoted by the Better Regulation Taskforce as cross-cutting principles for all regulators, as noted above, then enshrined in a non-legal enforcement concordat in 1998, incorporated in the legislative mandates of some regulators (for example, Ofcom and the Legal Services Board), and are now enshrined in the Legislative and Regulatory Reform Act 2006 (LRR Act) as statutory principles of good regulation.^[1341] In addition, those regulators who wish to receive enhanced enforcement powers under the Regulatory Enforcement and Sanctions Act 2008 have to demonstrate their compliance with the principles before the government will introduce an order conferring the powers on them. Thus far, only the Environment Agency and Natural England have been granted additional powers.^[1342]

The LRR Act also introduced the statutory Regulators’ Compliance Code, which enacts the principles recommended by the Hampton review, to which regu­lators are now required to have regard in the exercise of their general functions.^[1343] It is not clear that the code has had a significant impact on the way that regulators operate, however. In its recent review of regulatory enforcement practices, the coa­lition government has expressed concern that the compliance code has not received the attention from regulators that it should have, though its greatest concern is that business feels that regulators are too onerous in their enforcement practices (it is notable that the review did not seek the views of other stakeholders, including consumers).^[1344]

So for the core executive at least, the better regulation agenda defines the crite­ria against which regulatory processes should be assessed, and it is through better regulation processes that the centre tries to exercise both control and accountabil­ity simultaneously. These processes have greater purchase with respect to govern­ment departments than they do on independent regulators on the far periphery. Nonetheless, even those regulators at the periphery have felt the pressure of the better regulation agenda through the injection of some of its core components into their legal mandates, as political accountability morphs into a source of legal accountability.

2. Parliamentary Select Committees

a. Parliament—organizing itself to be an accountor

Whilst parliamentary Select Committees may appear to be in a strong position to hold regulators to account, given the constitutional supremacy of Parliament, as noted above the complexity of the regulatory landscape and the number, range and scope of regulatory agencies that exists pose a significant challenge to their capacity to do so.

As a result, Parliament has struggled with the question of how best to organize itself to call independent regulators to account.^[1345] In a recent report, the House of Lords Liaison Committee admitted as much: despite successive Select Committee reports from both Houses recommending the creation of a joint committee to scrutinize regulatory bodies, it argued that the scope was too broad for the remit of such a body to be successfully defined: ‘ “Regulation” in the sense of the estab­lishment and enforcement of legal and other standards encompasses a huge sweep of public policy. The ad hoc committee [on economic regulators] found that the breadth of its remit was problematic, even in its more focussed form.'^[1346] It con­cluded that the scale of the task, together with the current upheaval in the regula­tory landscape, meant that Departmental Select Committees were better placed to perform such a role on a regular basis.^[1347]

There have been cross-sector investigations by ad hoc committees in both Houses. Nevertheless, Parliament’s accountability activities remain principally the preserve of Departmental Select Committees, certainly in the House of Commons. The House of Commons Select Committee structure deliberately follows the structure and responsibilities of government departments. However, whilst there is a clear rationale for it, this mirroring of the executive’s organizational structure has limitations, at least with respect to the accountability of regulatory agencies. As noted above, often the regulation of a particular sector is distributed between two or more regulators, which can in turn have different lead departments. This can create organizational silos within the executive, and indeed gaps in regulatory regimes, which are reinforced, rather than addressed, by the Departmental Select Committee structure.^[1348]

Moreover, in practice Parliament is an accountor that speaks with many voices. There is little apparent coordination between House of Commons Select Committees on their agendas, and certainly no clear systematization in the tim­ing, scope and incidence of review of regulators by each individual committee. Indeed, it was this lack of systematic attention to regulatory agencies which the proponents of a single committee hoped such a body could address.^[1349] Moreover, Select Committee reports show inconsistencies in the approach taken to reviewing the regulatory bodies, either by the same committee over time or between com­mittees, with little cross-referencing. This is not surprising given that the member­ship of committees changes regularly, but it does not facilitate systematic review. There can also be disputes as to which committee is responsible for what (for example, differences between the Lords and the Commons as to who should call the UK Statistics Office to account)^[1350], and diverging responses to the same event (for example, the different responses of the PAC and TSC to the non-disclosure of the government indemnity to the Bank of England during the financial crisis).^[1351]

It could be argued that there are merits in having unpredictable reviews—it keeps regulators on their toes.^[1352] That is true, but it is suggested that such rand­omized strategies are best when part of a broader systematic process which ensures that the same bodies are not reviewed over and over again whilst others are in effect ignored. One way to systematize Parliament’s review function could be for the committees of each House to agree a rolling timetable of review for the most important regulatory agencies, for example a convention to review every five years unless events make a review necessary within that period, and to agree a common set of core issues to investigate, adjusted as appropriate to the agency’s mandate and functions.^[1353]

Even if Select Committees in both Houses were to adopt such a process, how­ever, two issues remain. The first is that the parliamentary timetable may simply preclude it from paying an active accountability role in a crisis. The financial crisis exploded in the summer of 2008, during parliamentary recess. Decisions had to be taken with such speed that the affirmative resolution procedures put in place to ensure parliamentary accountability, though followed, were simply a matter of form.^[1354] Crises do not follow parliamentary session dates.

The second issue is that of motivating either the rest of Parliament or the gov­ernment to take note of committee reports of either House. Select Committees can sometimes be quite despondent about their ability either to call to account or to impose consequences. For example, in reviewing the proposals to merge Postcomm’s functions into Ofcom, the House of Commons Select Committee for Business and Enterprise commented that the model of accountability pro­posed (which was in fact the standard constitutional one of an annual report to Parliament, followed by scrutiny by the relevant Select Committee) was ‘funda­mentally misconceived.... Select Committees have no power to direct; we can only make recommendations in reports to the House. It is for the Government to take action.'^[1355] It argued in effect that its previous reports had been in vain, as it had had no power to make either the government or the regulator think again. It con­cluded, perhaps rather fatalistically, ‘only the Government has the resources and powers to monitor a regulator.'^[1356]

However, we should not underestimate the significance that the reports can have. Despite the difficulties Parliament faces in calling regulators and the execu­tive to account, it has nonetheless had some considerable impacts. The reviews of both Ofwat and Ofgem noted below stemmed in part from Select Committee rec­ommendations. It was on the basis of the PAC report and witness evidence on the Care Quality Commission (CQC) that the government postponed the proposed abolition of the Human Fertilisation and Embryology Authority and the Human Tissue Authority and the transfer of their functions to the CQC.^[1357] Moreover, the detailed engagement of the TSC in calling both the regulator and the executive to account in the financial crisis, which has continued with the change in gov­ernment, suggests that if they so wish, parliamentary Select Committees can be formidable accountors. Indeed it may be that reforms within Parliament to the procedures for appointing members to Select Committees could serve to give those committees a greater sense of independence, which could enhance their willing­ness to call regulators to account.^[1358]

b. Determining responsibility and apportioning blame—-from

‘many hands’ to ‘no hands’

Although capacity is important, it is recognized that some accountability challenges cannot be resolved by throwing more resources at them. One of the most intractable difficulties in calling regulators to account is trying to determine who is responsible in any particular instance — regulators or the government — and therefore who to blame when things go wrong. As noted above, the regulatory landscape is highly complex with responsibilities frequently shared between regulators and the govern­ment, and with an inherent tension in their relationship between independence, control and accountability. In operational terms, coordination is at a premium, issues can fall between gaps, and responsibilities can be unclear, to say the least. There is a risk that both the government and the regulator use the organizational complexity and ambiguity as to their respective roles to avoid responsibility.

If we recall Christopher Hood's argument that institutional structures are often designed largely to ensure that blame can be shifted away from their designer,^[1359] then we should not be surprised at this outcome, though it does not make it any easier to address. When things go wrong, blame can pass quite quickly and eas­ily to whoever seems to be the most proximate cause. However, as Hood argues, the challenge of calling to account ‘many hands' can also turn into the challenge of finding there are ‘no hands' when crises erupt, as each actor seeks to blame the other.^[1360] Moreover, lack of clarity as to the responsibilities of each organization can lead to paralysis, or at least severe bungling. As noted above, it was clear in the case of Northern Rock's collapse, for example, that each of the Treasury, Bank of England and FSA felt that the responsibility to act lay with the other, leading not only to difficulties in ascribing responsibilities after the event in the accountability process, but to significant failings in operations leading up to its failure and in its immediate management.^[1361]

Successive parliamentary Select Committee reports have criticized the gov­ernment for blurring the boundaries between its roles and responsibilities and those of the regulators in almost every area. For example, in a recent report reviewing the management of the risk of floods, the PAC commented that there were no clear lines of responsibility between local authorities, the Environment Agency and the department. The Agency relied on the department for fund­ing flood protection initiatives, but that budget had just been cut and the department had told the agency to find funding elsewhere and had told local authorities to increase their contributions, whilst again cutting their budgets. In short, the committee argued that the department was failing to accept ultimate responsibility.^[1362]

Responsibilities can also be particularly unclear in the period when the agency is being established. For example, in a highly critical report on the CQC, the PAC argued that although the Commission's governance and operations were poor, the Department of Health had considerably underestimated the task facing the CQC in merging three pre-existing regulators into one, requiring it to take on an expanded role with a reduced budget and without a defined set of objectives. In short, even though it was responsible for the Commission, it had not ‘had a grip' on what the Commission was doing.^[1363] Similarly, although the PAC criticized the leadership of the Equality and Human Rights Commission, it found that the lead department (which changed three times in the period leading up to its creation) did not have a clear project plan for the creation of the Commission, that there was no budget in place, and that the Commission's executive had had no say in which staff were to be transferred to it, leaving it without staff who had the necessary skills.^[1364] In this case, rather than try to apportion responsibility, the PAC simply (and probably rightly) blamed both for bringing the Commission into operation before it was properly prepared.

Another recurrent problem has been to identify who is responsible for defining the political, social or public interest goals that regulators should be pursuing, particularly with respect to the economic regulators. The McNulty report into the regulation of the railways, for example, argued that the ways in which respon­sibilities for the regulation of Network Rail (the infrastructure provider) and the train operators was shared between the ORR, the Department of Transport and the industry was unclear.^[1365] In addition, the report argued that the ‘high level objectives’ that the department set every five years for the regulator and the indus­try were often contradicted by political decisions made in the interim to meet short-term needs. It proposed that the ORR’s remit and capacity should be consid­erably enhanced and that it should take over complete responsibility for regulation of the train operating companies as well as Network Rail, removing the depart­ment’s regulatory role, but leaving it the task of setting long-term strategic goals.^[1366]

Finding the balance between the operational independence of the regulator and the exercise of strategic direction by elected politicians is not an easy matter, how­ever.^[1367] The recent review of Ofwat by David Gray, for example, emphasized the need for greater clarity in the respective roles of Ofwat and the government.^[1368] The Gray report found a widespread demand among stakeholders for greater clarity on the government’s objectives for the sector and on the respective roles of government, Ofwat and the other regulators. The regulation of water services is further complicated by the fact that Ofwat is also accountable to the Welsh Assembly, and the report found there was a need for greater coordination between the Westminster government and the Welsh Assembly on what their policy goals are. It recommended that they agree a MOU setting out their respective goals, and that their policy statements should be combined with clearer guidance to Ofwat as to how it should seek to balance its various duties in arriving at regulatory deci­sions. Moreover, in view of the number of regulatory bodies involved, government objectives for the water sector should be specified in a way that minimized the scope for conflict between the regulators.¹¹¹

A similar finding was made in the review of Ofgem conducted by the Department of Energy and Climate Change (DECC).¹¹² The review found that as Ofgem’s role had become more complex, there had been a ‘blurring of responsibilities between the Government and Ofgem causing some erosion of the regulatory certainty that independent regulation was designed to provide’. It concluded that there was a need for ‘an enduring solution that sees Government clearly taking responsibility for setting and communicating strategic direction, Ofgem's independent regula­tory decisions forming a logical and coherent part of this broader strategic policy framework, and ad hoc interventions avoided where possible.'^[1369]

The DECC review recommended that the government should introduce a new, five-yearly statutory ‘Strategy and Policy Statement'.^[1370] The statement would set out the government's policy goals for the sector; describe the roles and responsibili­ties of government, Ofgem, and other relevant bodies; and define policy outcomes that government considers the regulator to have a particularly important role in delivering. The regulator would then be expected to set out annually how it will deliver its contribution and monitor progress, and where progress is not on track, explain why and what action may need to be taken to mitigate the problems.

Such statements could bring a welcome degree of transparency to the relation­ship between government and the independent regulators, though as we saw in the case of Northern Rock, statements (or in that case a MOU) can prove to be less clear in ascribing responsibilities in any particular case. They can also become out of date, and/or departed from by governments, who instead intervene on an ad hoc basis to address short-term political goals, as both the McNulty and Gray reports respectively found with respect to rail and water. However, if the govern­ment could commit to such statements for a five-year period, it could go some way to providing both the strategic direction that a regulator needs, and some clarity as to the respective responsibilities of each.

c. Shifting roles

The recommendations of the Ofgem review also raised the question of how closely Parliament should become involved in policing the boundaries between control, independence and accountability. In the case of Ofgem, the DECC review pro­posed that the statement and any subsequent revisions would also be subject to Parliamentary approval through the affirmative resolution procedure, which would require Parliament to debate and approve the statement before it could come into force.¹¹⁵ This was presented as an opportunity to involve Parliament in holding the regulator to account, but a cynic could argue that it is also a way of ensuring Parliament signs off on the statement, thus restricting its ability to criticize later on—allowing responsibilities between the accountor (Parliament) and the accoun- tees (Ofgem and the government) to become unclear.

There is already a blurring of the boundaries of Parliament's role as accountor of Ofgem, because under the EU Third Package for Energy, it is national legislatures which have to approve the budgets of their energy regulators, not the executive.¹¹⁶ At present, the annual process for setting the budget is linked to Ofgem's consulta­tion on its annual corporate plan, which provides an opportunity for interested parties, including DECC and the Treasury to raise any concerns. Following the consultation, Ofgem sets out its main estimates for Parliament, which then votes on whether to approve the budget.^[1371] 'This process may be seen as giving Parliament a welcome voice, and of empowering it to ‘impose consequences’, but it may com­plicate Parliament’s role as an accountor.

This raises a broader question: whether, and to what extent, does ex ante engagement preclude the organization concerned from being an impartial ex post accountor? Does their ex ante involvement implicate them too greatly in the deci­sions and actions for which they then seek to hold the regulator to account? For example, Parliament (acting as accountor) may criticise Ofgem ex post for failures to achieve certain outcomes, but Ofgem may reply that it needs more funding in order to perform effectively, so that the reason it has failed is due to Parliament (acting as ex ante approver of its budget) and its refusal to allow it greater resources, thus implicating Parliament in the blame game. Moreover, who (realistically) calls Parliament to account for the budget Parliament provides to Ofgem is less than clear. The NAO, perhaps?

3. The National Audit Office

The role of the NAO in calling regulators to account has been steadily increasing over the last ten to fifteen years, and there is no doubt that the NAO has now become a significant actor in the political accountability of regulators in the UK. This is not necessarily because it can impose any direct consequences on those regulators that it criticizes: it has no power to do anything other than report. It is rather because it has become a well respected and valuable ‘accountability resource’ for other political actors, notably the executive and Parliament. In other words, by providing both the core executive and Parliament with detailed information and evaluation of regulators’ activities, it enhances their capacity to call those regulators to account. Indeed, Parliament’s accountability capacity would be severely reduced in the absence of the NAO. The NAO has developed considerable accountabil­ity capacity in terms of access to information, technical expertise in performance evaluation, and in regulatory techniques, drawing on external advisors for sectoral expertise, and its reports are generally of a high quality.

However, as it cannot comment on policy, strictly speaking the reviews that it undertakes are meant to be focused on the ‘value for money’ that a regulator pro­vides. Thus, it cannot criticize policy per se, only its implementation (though the line in practice may be blurred). Furthermore, it can only examine the accounts and performance of those regulators which it is given the legal powers to exam­ine: it was never granted the power to audit the FSA, for example, on the basis that the FSA did not receive public funds (although the Treasury did commission a review by the NAO on specific aspects of the FSA’s work).^[1372]

Moreover, its institutional position as government auditor has arguably limited the role that it could potentially play in providing a wider evaluation of a regula­tory regime, as opposed to an evaluation of the performance of individual organi­zations. That said, there are signs that the NAO is taking a more expansive view of its role, and it has engaged in cross-government evaluations recently, notably a highly critical review of reforms of the structure of government, and, less scath­ingly, of competition regulation.^[1373] In particular, it found that successive govern­ments were both very keen on reorganization (there were over 90 reorganizations of government between May 2005 and June 2009), and very bad at it. In a con­clusion which is relevant for the current exercise in reorganization, it stated: ‘The value for money of central government reorganisations cannot be demonstrated given the vague objectives of most such reorganisations, the lack of business cases, the failure to track costs and the absence of mechanisms to identify benefits and make sure they materialise.'^[1374] In order for any change to occur, however, the NAO relies on the executive to take notice, and on Parliament, the media and others to ensure that it does.

The NAO can nonetheless play a significant role in helping Parliament call regulators and the government to account. In particular, its capacity to undertake detailed investigations is extremely important. For example, it played a critical role in the accountability processes relating to the 2007—9 financial crisis, providing Parliament and the public with two detailed reports on the handling of the crisis and assessing whether the billions of pounds of taxpayers' money that was used to prop up the system was in fact well spent.^[1375] It concluded that it was,^[1376] but its inquiries did reveal some failings. Notable among these was that the Treasury had failed to inform the chairs of the PAC and TSC of an indemnity of up to £18 billion provided to the Bank of England at the height of the crisis to enable the Bank to provide emergency loans to RBS, Lloyds and HBOS of up to £60 billion in October 2008. The government's response was that it had been concerned that the information would leak, exacerbating the crisis, but it is notable that no ex post disclosure was made once this danger was over.^[1377] Without the NAO's investiga­tions, it is difficult to see how this information would have emerged.

The NAO is also becoming the ‘accountability resource of choice' for both the core executive and for Parliament. The NAO has been used by the core executive (Cabinet Office and Treasury) to perform specific reviews to monitor the regu­lators' implemention of policies and recommendations, and to perform succes­sive reviews of departmental regulatory impact assessments. As noted above, the NAO conducted reviews jointly with the Treasury of the implementation of the Hampton recommendations by the five largest regulatory agencies.^[1378] Committees of both Houses of Parliament have also asked the NAO to perform specific reviews on their behalf, for example of regulators’ regulatory impact assessments, and to provide it with briefing papers on regulators or regulatory issues.^[1379] Indeed, a num­ber of Select Committees have recommended that the NAO play a greater role in scrutinizing regulators. For example, the House of Lords report on economic regu­lators recommended that the NAO be charged with reviewing the regulators’ own post-implementation evaluations for their quality and objectivity, or conducting such evaluations itself.^[1380]

However, there are indications of some confusion, at least on the part of the government, over the questions of for whom the NAO acts, and to whom the NAO itself is accountable. In formal terms, the NAO acts on behalf of the PAC, to whom it presents its reports. However, as the government also uses the NAO to perform reviews on its behalf, the issue of for which it is acting can become unclear in the minds of some, at least. For example in giving evidence to the recent PAC review of the ORR, the Permanent Secretary for the Department of Transport argued that the government determined the NAO’s activities, only to have to be corrected by the committee, which pointed out that the NAO was funded directly by Parliament, not by the executive, and acted on Parliament’s behalf, not the government’s.^[1381] However, NAO reports on regulators, or in this case Network Rail, are approved by the lead department before they are presented to the PAC,^[1382] which leaves the question unclear of who, in reality, the NAO is reporting to. Its institutional position is thus blurred: is it acting on behalf of Parliament, the gov­ernment, or both (but at different times)? Blurring boundaries, shifting positions and the endless question over the accountability of the accountors (or who guards the guardians)—each of these issues continues to pose challenges for regulatory accountability.

4. Consumer advocacy bodies

The final group of accountors to be considered here are consumer panels or advi­sory bodies. Engagement by ‘civil society’ in regulatory issues is usually far weaker than that of business, but to the extent that it exists at all, it is usually stronger at the ‘input’ stages of policy processes (through consultation) than at other stages. For reasons that cannot be explored here, the last fifteen to twenty years have seen an increase in the creation of specialist consumer representative committees or panels which are attached to individual regulators, or given a legal mandate to make representations to and to review the activities of a group of regulators. Such bodies are often created by statute, charged with representing consumer views, and performing reviews and issuing reports; and in many instances the regula­tor is under a statutory duty to respond publicly to their comments. Specialist consumer representative organizations exist in a number of key sectors, notably financial services (FSA (now FCA) Consumer Panel), water (CC Water), trans­port (Passenger Focus), aviation (Aviation Consumer Advocacy Panel), legal services (Legal Services Consumer Panel), telecommunications and broadcast­ing (Communications Consumer Panel), and Healthwatch (CQC). In addition, Consumer Focus was created in 2008 to take over the consumer advocacy func­tions of the National Consumer Council, Energywatch, and Postwatch. Some of these organizations have an official link with the regulator as dedicated advisory panels; others, such as CC Water, Passenger Focus, and Consumer Focus, are separate external sectoral bodies.The development of consumer panels which are embedded within regulatory structures is a good example of a form of account­ability which is ongoing and ‘interstitial’, sitting between the formal processes of consultation prior to decisions and ex post reviews of performance. There has been no systematic study of their effectiveness, but whilst some consumer pan­els have been criticized as ineffective, lacking sufficient information, expertise and influence,^[1383] others have been praised for their engagement and expertise, as discussed below. The engagement of consumers or other individuals in the regulatory process and in calling the regulator to account has the potential to be considerably enhanced through the operation of both panels and external sectoral bodies, but only if certain conditions are in place. Notably, their accountability capacity has to be adequate (including possessing appropriate personnel, techni­cal expertise, financial resources, and access to information and research), they have to be able to respond quickly to changing events, their members need to have adequate negotiating and advocacy skills, and their personal authority and institutional position has to be such that they are respected by consumers, regula­tors and industry alike.^[1384] In other words, irrespective of any legal requirement that regulators take their views into account, consumer panels have to be afforded sufficient recognition by the regulator such that the regulator really does take note of what they say, and does not just ‘go through the motions’ of appearing to listen but in practice disregarding them.

I n this regard, there can be advantages gained in having specialist consumer panels which are able to develop the highly technical knowledge and expertise required to engage properly with issues arising in each sector. However, the coali­tion government is currently proposing to abolish the majority of these specialist panels (with the exception of those in financial and legal services, as they are not

384 Calling Regulators to Account: Challenges, Capacities and Prospects publicly funded) and instead to merge them all into a single ‘regulated industries’ unit within an expanded Citizens’ Advice Service.^[1385]

There are strong arguments against such a proposal, but at least the consultation paper has has prompted a fascinating debate on the relative capacities of different types of consumer organizations, both to represent consumers and to call regula­tors to account. The government argued that an integrated consumer body would be able to create greater capacity by developing stronger cross-sectoral expertise and capability; to consider the cumulative impact on consumers of changes across sectors; to develop an integrated ombudsman system to deal with complaints and redress; to raise public awareness and understanding of who is representing their interests; and to reduce overall costs and improve efficiency^[1386] (though it should be noted that the proposals have not been costed).^[1387] However the proposals have met significant opposition from regulators, consumer advocates and industry. Opponents of the proposals fall into two main camps: those who think that spe­cialist consumer panels should be merged into a single ‘regulated industries panel’ but do not think that the function should be given to the Citizens’ Advice Service, and those that think that specialist panels should be retained.

The generalist consumer advocacy bodies, such as Which?, Age UK, the National Consumers Federation and Consumer Focus sit in the first camp (and indeed the proposal for a single cross-sector advocacy body originated with Consumer Focus).^[1388] However these bodies expressed strong doubts as to whether the Citizens’ Advice Service, which is a charity, would have sufficient skills, funding, powers and status to perform this role.^[1389] It would require a significant re-focusing of the Citizens’ Advice Service, as well as a radical expansion and shift in the tech­nical skills of its personnel. As the consultation paper itself recognizes, ensuring that consumer interests are fully represented in these highly complex areas requires significant technical knowledge and expertise, an understanding of the trade-offs involved, and (though the paper does not note this), considerable political, advo­cacy and negotiation skills.^[1390] New powers would also have to be given. For exam­ple, Consumer Focus at present has strong powers with respect to energy and postal services to force companies or regulators to disclose information which it requires to fulfil its remit, powers which would be lost with the transfer of its func­tions to the Citizens’ Advice Service. Moreover, accountability to Parliament and

the NAO risks being lost. Under the current proposals, the Citizens' Advice Service would remain a charity and as such would not be accountable to Parliament for its role, nor to the Welsh Assembly.^[1391] Its accountability to government would also be unclear—a familiar problem, as discussed above. Instead, proponents of a general­ist consumer advocacy body argue that the remit of Consumer Focus should be expanded. This would have the advantage of having a specialist body with a specific legal mandate, with an established position and expertise and a dedicated budget.

However, as a number of other responses argued, there are also considerable arguments against the creation of a generalist advocacy body, even if it had greater powers and accountability. There is a real risk that specialist knowledge will be lost, that the skills, financial resources and attention of any such organization, and particularly a multi-function body such as the Citizens' Advice Service, would be too widely spread. Moreover, as a significant part of the regulatory agenda is set at EU level, consumer advocacy has to have an international as well as a national dimension. It is doubtful, to say the least, that a single organization could respond adequately at both national and EU levels to issues which cover most of the econ­omy unless it was as equally well-resourced as all the existing consumer bodies.

Further, as it would lose the privileged access to information that many cur­rently enjoy, a generalist consumer representative body which was external to the regulators would have to engage in more formal procedures to get the information that it needed from industry and the regulatory body. As a result, a non-specialist organization is likely to become too detached from the regulators and from the issues involved, able only to observe and comment rather than engage and negoti­ate. As the Consumer Council for Water argued in its response: ‘In our experience, most benefits for consumers are delivered by negotiating in detail on key issues at senior level in the sector, backed by real expertise and respect by the parties in that sector. In the water sector there are 22 companies and four main regulators with whom we negotiate. The complex nature and extent of the negotiations in water on behalf of consumers should not be underestimated.'^[1392] The result is likely to be a diminution in the accountability of regulators to consumer interests, rather than an enhancement.

It is striking that many of the regulators who have specialist panels responded that they would be reluctant to lose them.^[1393] Those regulators argued that con­sumer panels which are embedded within regulatory structures, in other words which may share premises, some staff, and have good access to internal meetings or meetings with other interested parties, perform quite differently to generalist advo­cacy bodies—they are advisory bodies, not lobbyists, campaigners or consumer advisors.^[1394] As the National Consumers' Federation observed, there is a distinction between ‘campaigning advocacy' and ‘participatory advocacy'.^[1395] Panels which are embedded to operate within the regulatory framework can have privileged access to policy processes and can provide targeted interventions at an early stage before policies are fully formed.^[1396] Moreover, they provide regulators with the ability to ‘test out' proposals at an early stage of their development, prior to public consulta­tion.^[1397] Such panels can be a valuable source of information for regulators as to what consumer interests are on significant but highly technical issues which can have both national and international dimensions. There is a real risk that their abo­lition would lead to the loss of a valuable counterbalance to the views of industry representatives, which are far more vocally expressed. Further, the panels were seen as inexpensive and offering good value for money (a key government criterion). As Ofcom summarized: ‘An expert panel can foster a close and constructive relation­ship with a regulator, respond quickly and flexibly across a wide range of issues, and operate with a small team of advisors and very low overheads.'¹⁴⁴ Moreover, regulators themselves recognized the importance of specialist consumer panels in providing legitimacy to the regulatory process and reassurance to consumers that their interests were being effectively represented and taken into account.

Tie debate over the reform of the structure and role of consumer advocacy bod­ies provides a valuable insight into the complexity of the accountability relation­ships that can exist between accountor and accountee and highlights the fluidity of the roles that any one organization can play within that relationship; in this case as the role of a consumer representative organization shifts between representative, participant and accountor. Moreover, it illustrates that the capacity of an accoun­tor to hold a regulator to account is determined by factors well beyond legal pow­ers, but based in the possession of resources and of an institutional position which is such that both the regulator and others recognize the ‘right' of that organization, in this case both to participate and to hold to account.

Again, however, the balance between independence and engagement is inevita­bly a difficult one to strike, in this case between the role of the consumer body as a participant and its role as an accountor. Tie key challenge is to ensure that con­sumer representative bodies have sufficient information, access and status to make a real impact on the regulators' decision-making process, whilst remaining sufficiently independent from it.^[1398] Consumer representative bodies also need to be suffi­ciently accountable to those whose interests they are meant to be representing, and to ensure that they are representing the interests of all consumers, not just one particular sub-set. To this end, ensuring that consumer bodies have adequate funding to pursue independent research into consumers’ needs and opinions, and into the impacts of policies on them, is vital. Without such research, consumer bodies are inevitably prey to the risk (and accusation) that they represent only themselves, or at best a small sub-set of what is in reality a highly heterogenous group. Conducting such research also enables them to build their own legitimacy in the absence of clear accountability arrangements. For at present, it is not clear to whom, if anyone, consumer panels are accountable, even if they are subject to requirements to issue and publish reports to the world at large. That makes them accountable to everyone, but as we know, tasks that are assigned to everyone tend to be performed by no one. Again, the question of to whom the accountors are accountable remains unanswered.

D.