The Regulatory Enterprise: Government, Regulation, and Legitimacy 0199579830, 9780199579839

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T H E R EGU L ATORY E N T E R PR ISE

The Regulatory Enterprise Government, Regulation, and Legitimacy

TON Y PROSSE R

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Great Clarendon Street, Oxford OX2 6DP Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide in Oxford New York Auckland Cape Town Dar es Salaam Hong Kong Karachi Kuala Lumpur Madrid Melbourne Mexico City Nairobi New Delhi Shanghai Taipei Toronto With offices in Argentina Austria Brazil Chile Czech Republic France Greece Guatemala Hungary Italy Japan Poland Portugal Singapore South Korea Switzerland Th ailand Turkey Ukraine Vietnam Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries Published in the United States by Oxford University Press Inc., New York © Tony Prosser, 2010 The moral rights of the author have been asserted Crown copyright material is reproduced under Class Licence Number C01P0000148 with the permission of OPSI and the Queen’s Printer for Scotland Database right Oxford University Press (maker) First published 2010 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this book in any other binding or cover and you must impose the same condition on any acquirer British Library Cataloguing in Publication Data Data available Library of Congress Cataloging in Publication Data Prosser, Tony. The regulatory enterprise / Tony Prosser. p. cm. Includes index. ISBN 978–0–19–957983–9 (hardback) 1. Administrative agencies—England. 2. Trade regulation—England. 3. Public utilities—Law and legislation—England. I. Title. KD4882.P76 2010 342.4290664—dc22 2010014344 Typeset by Newgen Imaging Systems (P) Ltd., Chennai, India Printed in Great Britain on acid-free paper by the MPG Books group in the UK ISBN 978–0–19–957983–9 (Hardback) 1 3 5 7 9 10 8 6 4 2

Preface and Acknowledgements In 1998 I published a book entitled Law and the Regulators. I hope that it was found useful by readers, but it may have contributed to a narrow vision of regulation. According to this vision, regulation is primarily economic regulation, concerned to make markets work, to mimic markets in areas of monopoly, or to protect consumers within them. The central examples are the work of the competition authorities and regulators of public utilities and financial services. However, this vision neglects a different world of regulation which is not primarily economic and is concerned with regulation for social reasons, not as a second best to correct market failures but as a preferred alternative to the operations of the marketplace. Some of these regulators have been covered in detail in existing literature, notably the Health and Safety Executive, but others, such as regulators for health and social care, have attracted far less attention. Many of the institutions are closely linked to government, but also have their own areas of autonomy; the map of the regulatory terrain is highly complex. This book, which is very different from its predecessor, is designed to correct this partial vision and expand the terrain of regulatory studies in a way which reflects developments in academic theory of regulation. In addition to mapping a broader regulatory terrain, I shall suggest that its breadth does not prevent us from developing coherent means of understanding the terrain and normative principles about how regulators should operate. Thus I develop a set of models which can be used for analytical and critical work. They are derived from the regulatory purposes evident in each case, and are in brief: regulation to maximize economic efficiency and consumer choice; regulation to protect human rights; regulation to promote social solidarity and social inclusion; and regulation as providing a site for deliberation. These models are then applied to 10 different regulatory bodies. In this way I hope to show that, despite the breadth of the regulation studied in this book, it is not simply a set of uncoordinated political and social interventions even after we leave the familiar shores of economic regulation. In brief, the regulatory enterprise is an enterprise of principle and one which, however broadly conceived, displays a certain coherence. There are a number of institutions and individuals whom I must thank for their help in writing this book. The generous study leave of the University of Bristol School of Law made writing this book possible at a time when I was also heavily involved with the burdens of research assessment, and I have had very productive discussions with colleagues here. I gained much theoretical enlightenment and was able to gather some empirical evidence through the European

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Commission FP6-funded project on Reflexive Governance in the Public Interest.¹ I have particularly benefitted from exchanges with Jacques Lenoble, Colin Scott, Peter-Vincent Jones, and Helen Adlard. I gained immeasurable help from those members of regulatory staff who agreed to be interviewed, though I should stress that they should not be taken as agreeing with any of my conclusions. They were Alison Spalding at the Food Standards Agency, Ed Mitchell at the Environment Agency, Gordon Macdonald at the Health and Safety Executive, Adrian Masters at Monitor, Chris Woolard at Ofcom, Maxine Frerk at Ofgem, Huw Brooker at Ofwat, and Michael Beswick at the Office of Rail Regulation. I am most grateful for their time and cooperation. I am also grateful to the libraries of the Institute of Advanced Legal Studies in London and the European University Institute in Florence for access to materials on comparative developments, and to Thomas Perroud for some useful material on France. Most of all, I am grateful to Charlotte Villiers and to Amelia and Laurence for tolerating uncomplainingly the inevitable disruption of writing and travel to family life. A word should be added on the geographical scope of the book. Within the UK, the coverage of regulators varies widely, with major differences as to which of the constituent nations is covered by a single institution. I concentrate here on the position in relation to England; important comparative work needs to be done on regulators in the different nations comprising the UK, but unfortunately the question is outside the scope of this book. The law is as stated at the beginning of 2010. Tony Prosser Bristol January 2010

¹ See (consulted 4 December 2009).

Contents Table of Cases Table of Statutes Table of European Legislation

ix xi xv

1. Introduction: Two Visions of Regulation and Four Regulatory Models 2. The Human Fertilisation and Embryology Authority 3. The Food Standards Agency 4. The Environment Agency 5. The Health and Safety Executive 6. The Care Quality Commission and its Predecessors 7. Monitor, the Independent Regulator of NHS Foundation Trusts 8. The Office of Communications 9. The Utility Regulators: The Office of Gas and Electricity Markets, the Water Services Regulation Authority, and the Office of Rail Regulation 10. Regulating the Regulators 11. Comparisons and Conclusions

176 201 223

Index

237

1 21 44 66 89 111 136 153

Table of Cases The European Court of Human Rights Dubus SA v France (5242/04, ECtHR, 11 June 2009) ............................................................... 165 Evans v UK (2008) 46 EHRR 34 .......................................................................................... 34, 35 The European Court of Justice C-205/03 Federacion Espanola de Empresas de Tecnologia Sanitaria (FENIN) v Commission [2006] ECR I-6295 .......................................................................... 123 C-127/05, Commission v UK [2007] ECR I-4619 ................................................................99–100 C-82/07 Comisión del Mercado de las Telecomunicacions v Administración del Estado [2008] ECR I-1265 ............................................................................................... 225 France Decision 86–217 DC du 18 septembre 1986 relative à la Commission nationale de la communication et des libertés, Rec. 141 ........................................................ 229 Decision 88–248 DC du 17 janvier 1989 relative au Conseil supérieur de l’audiovisuel, Rec. 18 ........................................................................................ 229 Decision 89–260 DC du 8 juillet 1989 relative à la Commission des operations de bourse, Rec. 71 .......................................................................................... 229 Decision 2004–497 DC du 1 juillet 2004 relative aux communications électroniques et aux services de communication audiovisuelle, Rec. 107 .................................................... 229 Decision 2009–580 DC du 10 juin 2009 relative à la diff usion et la protection de la création sur internet ..................................................................................... 229 United Kingdom Berkeley v Secretary of State for the Environment [2000] 3 WLR 420 (HL) ................................... 85 Bettercare v Director General of Fair Trading [2002] CAT 7 ....................................................... 123 Dugmore v Swansea NHS Trust [2002] EWCA Civ 1689; [2003] 1 All ER 333............................ 99 Edwards v National Coal Board [1949] 1 KB 704 ......................................................................... 99 Great North Eastern Railway Ltd v The Office of Rail Regulation et al [2006] EWHC 1942 (Admin); [2007] ACD 13................................................................................ 189 L v Human Fertilisation and Embryology Authority [2008] EWHC 2149 (Fam); [2008] 2 FLR 1999..................................................................................................................34 Marcic v Thames Water Utilities [2003] UKHL 66; [2004] 2 AC 42 ............................... 14, 81, 190 Office of Communications v Floe Telecom Ltd [2006] EWCA Civ 768; [2006] 4 All ER 688.............................................................................................................. 165 R v Chargot Ltd [2008] UKHL 73; [2009] 1 WLR 1 ................................................................... 99 R v HTM Ltd [2006] EWCA Crim 1156; [2007] 2 All ER 665 .................................................... 99 R (on the application of Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23; [2003] 2 AC 295 ...................................................................................... 165 R (on the application of Animal Defenders International) v Secretary of State for Culture, Media and Sport [2008] UKHL 15; [2008] 1 AC 1312 ........................................ 166 R (on the application of Begum) v Denbigh High School Governors [2006] UKHL 15; [2007] 1 AC 100 ......................................................................................234

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R (on the application of Daly) v Secretary of State for the Home Department [2001] UKHL 26; [2001] 2 AC 532 ...................................................................234 R (on the application of Edwards) v Environment Agency [2008] UKHL 22; [2008] 1 WLR 1587 ................................................................................ 112 R ( on the application of Limbuela) v Secretary of State for the Home Department [2005] UKLH 66; [2006] 1 AC 396 .................................................................................126–7 R (on the application of Quintavalle) v Secretary of State for Health [2001] EWHC Admin 918; [2001] 4 All ER 1013 ........................................................................................... 23 R (on the application of Quintavalle) v Human Fertilisation and Embryology Authority [2005] UKHL 28; [2005] 2 AC 561 ..............................................................25, 27, 30 R (on the application of Unison) v Monitor [2009] EWHC 3221 (Admin) ................................... 148 T-Mobile (UK) Ltd and Telefónica 02 Ltd v Office of Communications [2008] EWCA Civ 1373; [2009] Bus LR 794 ....................................................................... 165 Taranissi v Human Fertilisation and Embryology Authority (QBD 9 November 2007) .................42 YL v Birmingham City Council [2007] UKHL 27; [2008] 1 AC 95 ............................................ 127 United States Humphrey’s Executor v United States 295 US 602 (1935) ............................................................226 Sierra Club v Costle 657 F.2d 298 (DC Cir 1981) ..............................................................226, 228

Table of Statutes Care Standards Act 2000 s 22 ........................................................ 118 s 23 ........................................................ 118 s 104 ......................................................120 Communications Act 2003 s 1(1) ...................................................... 156 (9) ...................................................... 156 s 3 .................................................. 156, 160 (1) ............................... 155, 158, 160, 164 (2) ...................................................... 158 (3) ...............................................158, 163 (4) ...................................................... 158 (6)–(9) ............................................... 159 s 5(3) ...................................................... 157 s 6 .............................................. 159, 163–4 s 7 ........................................... 159, 164, 172 (7) ...................................................... 172 s 8 .......................................................... 159 s 11 ..................................................159, 171 s 12 ................................................. 157, 172 s 13.................................................. 157, 172 s 16.................................................. 157, 172 s 17.................................................. 157, 172 (4) .................................................... 172 s 20 ........................................................ 172 s 21......................................................... 172 s 46 ........................................................ 165 s 47......................................................... 165 s 48 ........................................................ 165 s 49 ........................................................ 165 s 65 ................................................. 157, 167 s 66 ........................................................ 167 s 67......................................................... 167 ss 120–124 ............................................. 174 s 154(2) .................................................. 159 s 156 ...................................................... 157 s 192 ...................................................... 165 s 196 ...................................................... 165 s 264 .............................................. 162, 169 (4) ................................................. 169 (6) ................................................. 169 s 265 ...................................................... 169 ss 266–271 ............................................. 169 s 316 ...................................................... 162 s 317 ...................................................... 165 s 319 ...................................................... 159

s 321............................................... 166, 170 (5) .................................................. 170 (6) .................................................. 170 ss 369–372 ............................................. 160 ss 375–389 ............................................. 166 Competition Act 1998 ss 46–49................................................. 165 s 54 ........................................................ 187 Sch 10 .................................................... 187 Consumers, Estate Agents and Redress Act 2007 s 30 ........................................................ 199 ss 42–52 ................................................. 199 Control of Pollution Act 1974 ...................... 69 Deregulation and Contracting Out Act 1994 ............................................206 Education and Inspections Act 2006 ......... 114 Electricity Act 1989 s 3A ........................................ 184, 185, 192 (2) ................................................... 185 (3) ............................................185, 192 (5) ................................................... 185 (5A) ................................................. 185 s 3B ................................................ 180, 192 s 27A–F .................................................. 185 s 49A ...................................................... 185 Energy Act 2000 s 83 ........................................................ 194 Enterprise Act 2002 s 58(2A) ................................................. 167 s 204 ...................................................... 187 s 205 ...................................................... 187 Environment Act 1995 s 1(1) .................................................. 70, 72 (2) ........................................................ 70 (5) ........................................................ 70 s 4(1) .................................................. 77, 83 (2) .................................................. 72, 77 (3) .................................................. 72, 77 s 5 ............................................................ 78 s 6 ............................................................ 78 s 7 ............................................................ 78 s 9 ............................................................ 78 s 11 .......................................................... 85 s 12 .......................................................... 85 s 13 .......................................................... 85

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s 14........................................................... 85 s 15 ........................................................... 85 s 16........................................................... 85 s 17........................................................... 85 s 18........................................................... 85 s 39(1) ................................................ 78, 79 (1) ...................................................... 71 (2) ...................................................... 71 (3) ...................................................... 71 s 46 .......................................................... 71 s 56(1) ...................................................... 78 s 122 ........................................................ 71 Sch 1 ........................................................ 70 Environmental Protection Act 1990 ...................................69, 71, 80 Equality Act 2006 ss 11–12 ..................................... 204–5, 219 European Communities Act 1972 ............... 93 Food Safety Act 1990 ss 7–8 .......................................................54 ss 14–15 ...................................................54 s 16...........................................................54 s 40 ..........................................................54 s 48 ..........................................................54 Food Standards Act 1999 s 1 ...................................................... 49, 54 s 2(1) ........................................................ 49 (3) ........................................................ 49 (4) ........................................................ 49 s 3 ............................................................ 49 s 5 ............................................................ 49 s 6(1) ........................................................48 (2) ........................................................48 s 7(1) ........................................................48 s 8(1) ........................................................48 s 12(1) ......................................................48 s 19(1) ......................................................48 (3) ......................................................48 (4) ......................................................48 (5) ......................................................48 s 22(1) ...................................................... 55 (2) ...................................................... 55 (5) ...................................................... 55 (6) ...................................................... 55 s 23(3) ...................................................... 55 s 24 .................................................... 53, 55 s 25(1) ......................................................48 Sch 1 ........................................................ 49 Sch 2 ........................................................ 49 Gas Act 1986 s 4AA ..................................................... 184

(2) ................................................ 185 (3)................................................. 185 (5) ................................................ 185 (5A) .............................................. 185 s 4AB ............................................. 180, 192 s 30A–F ................................................. 185 s 38A ..................................................... 185 Health Act 1999 ........................................ 112 Health Act 2006 .......................... 115, 117, 118 Health Act 2009 s 2 ...........................................134, 148, 152 s 15 .....................................................138–9 Health and Safety at Work etc Act 1974 s 1(2) ........................................................ 95 s 2(2) ...................................................... 106 (4) ...................................................... 106 (7) ...................................................... 106 s 10 ..........................................................92 s 11 ..................................................... 91, 92 s 12 .......................................................... 91 s 14 .......................................................... 91 s 15 .......................................................... 93 s 16 .......................................................... 93 s 24 .......................................................... 93 s 44 .......................................................... 93 s 50 .......................................................... 93 s 82 .......................................................... 93 Sch 2 ........................................................92 Health and Social Care Act 2008 s 1 .......................................................... 119 (2) ...................................................... 133 s 2 .......................................................... 125 s 3(1) .......................................121, 125, 130 (2) .......................................121, 125, 130 s 4 .......................................................... 121 (1) .............................................. 130, 133 (2) ...................................................... 119 s 5 .................................................. 122, 133 s 18 ........................................................ 116 s 20 ........................................................ 119 s 45 ........................................................ 119 s 46 ........................................................ 119 s 67.........................................................122 s 68 ........................................................ 119 s 145 ...................................................... 127 s 160 ...................................................... 119 s 161 ....................................................... 119 s 162 ...................................................... 119 s 86 ........................................................ 116 s 87 ........................................................ 116 Sch 1 ...................................................... 119

Table of Statutes Health and Social Care (Community Health and Standards) Act 2003 s 12 .................................................143, 145 s 41 ........................................................ 117 s 42 ........................................................ 118 s 46 ........................................................ 117 s 48 ........................................................120 s 49 ........................................................120 s 50 ........................................................ 117 s 51 ........................................................120 s 52 ........................................................120 s 53 ........................................................ 118 s 54 ........................................................ 118 s 59 ........................................................ 118 s 61 ........................................................ 118 s 76 ........................................................120 ss 102–119.............................................. 118 s 103 ......................................................120 s 120 ...................................................... 119 s 130 ...................................................... 118 s 131 ....................................................... 119 s 132 ...................................................... 118 s 133 ...................................................... 119 s 134 ...................................................... 118 s 135 ...................................................... 119 Sch 6 ...................................................... 117 Sch 7 ...................................................... 118 Human Fertilisation and Embryology Act 1990 s 3 ............................................................24 s 4 ............................................................24 s 5 ..........................................22–23, 24–25 s 6 ............................................................ 25 s 8 ...................................................... 25, 30 s 8ZA .......................................................30 s 9 ............................................................ 41 s 11 .....................................................24–25 s 12(1) ................................................ 34, 42 s 13(5) ......................................................38 s 20 .......................................................... 41 s 21........................................................... 41 s 25..................................................... 26, 38 s 26 ..........................................................26 s 39...........................................................42 s 40 ..........................................................42 Sch 1 ......................................22–23, 24–25 Sch 3 ........................................................34 Human Fertilisation and Embryology Act 2008 s 4 ............................................................ 41 s 6 ............................................................30

xiii

s 7 ............................................................ 32 s 8 ............................................................36 s 10 ..........................................................42 s 11 ....................................................24–25 s 12 .......................................................... 25 s 13 .......................................................... 25 s 14 .................................................... 25, 35 s 15 .......................................................... 25 s 21 ..........................................................27 s 23 .......................................................... 35 s 24 .......................................................... 37 s 28 ..........................................................42 Sch 2 .................................................. 25, 30 Sch 5 .................................................. 25, 42 Human Rights Act 1998 ..................15, 31, 34, 81–2, 126, 127, 128, 155, 214, 218, 219 Legislative and Regulatory Reform Act 2006 s 1(3) ......................................................208 (4) ..................................................208–9 s 2 ..........................................................209 s 3(2) ......................................................209 s 21.........................................................209 s 22 ........................................................209 s 23 ........................................................209 s 24 ........................................................209 Local Government and Public Involvement in Health Act 2007 ............................. 131, 151 National Health Service Act 2006 s 1 .............................................. 142–3, 148 s 3 ......................................................142–3 s 31 ........................................................ 139 s 32 ............................................ 142–3, 148 s 35 ........................................................ 143 s 37 ........................................................ 143 s 38 ........................................................ 143 s 41 .................................................143, 145 s 43 ................................................ 143, 148 s 44 ................................................ 143, 148 s 45................................................. 143, 148 s 46 ........................................................ 143 s 52 ........................................................ 143 s 53 ........................................................ 143 s 54 ........................................................ 143 s 55 ........................................................ 143 s 56 ........................................................ 143 s 61 ......................................................... 149 s 258 ..................................................142–3 Sch 7 ...................................................... 143 Sch 8 ...............................................139, 150 National Health Service Reform and Health Care Professions Act 2002

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s 12 ........................................................ 113 s 13 ........................................................ 113 s 14 ........................................................ 113 Office of Communications Act 2002 .....................................154, 156 Pollution Prevention and Control Act 1999 ........................................ 70, 72 Railways Act 1993 s 4(1) ...................................................... 186 (3) .............................................. 186, 195 (5) .............................................. 182, 187 (6) ...................................................... 187 s 57A ...................................................... 187 Railways and Transport Safety Act 2003 s 15 ............................................ 177–8, 180 s 16 .................................................... 177–8 Sch 1 .......................................... 177–8, 180 Railways Act 2005 s 2 .................................................... 90, 187 s 19 ......................................................... 198 s 32 ........................................................ 195 Sch 3 ................................................ 90, 187 Sch 4 ...............................................183, 195 Regulatory Enforcement and Sanctions Act 2009 s 72 ........................................................ 217 Sch 5 ...................................................... 213 Regulatory Reform Act 2001 s 3(1) ......................................................206 (2) ......................................................206 Sustainable Energy Act 2003 ..............185, 190 Transport Act 2000 s 225 ...................................................... 187 Sch 8 ...................................................... 187 Tribunals, Courts and Enforcement Act 2007 .........................................191, 213 Utilities Act 2000 s 1 ...................................................177, 179

s 2 .......................................................... 177 s 4 .......................................................... 177 s 5A ................................................185, 190 s 9 ........................................... 177, 184, 192 s 10 ......................................... 177, 180, 192 s 13 ......................................... 177, 184, 192 s 14 ......................................... 177, 180, 192 s 13 ........................................................ 177 s 42 .................................................177, 185 s 59 ........................................................ 185 s 87 ........................................................ 177 s 95 ........................................................ 185 Sch 1 ...............................................177, 179 Sch 2 ...................................................... 177 Water Act 2003 .................................70, 75, 76 s 34 ........................................................ 180 s 37(4) .................................................... 195 s 38 ........................................................ 186 s 39(3) .................................................... 185 s 40 ........................................................ 182 s 48 ........................................................ 186 s 51 ......................................................... 186 Sch 1A ................................................... 180 Water Industry Act 1991 s 2A ....................................................... 182 s 2(2A) ................................................... 185 (2B).................................................... 186 (2C) ................................................... 186 (3) ...................................................... 186 (4) ...................................................... 186 ss 22(A–F) ............................................. 186 s 61(1A) .................................................. 194 ss 192A–B .............................................. 186 s 195A .................................................... 186 Sch 4A ................................................... 194 Water Industry Act 1999 s 1 .......................................................... 194 s 2 ...................................................194, 195

Table of European Legislation Directive 89/391/EEC on the introduction of measures to encourage improvements in the safety and health of workers at work [1989] OJ L183/1 ............................................ 94, 99 Directive 85/337/EEC on the assessment of the effects of certain public and private projects on the environment [1985] OJ L175/40 .......................................................... 85 Directive 96/61EC concerning integrated pollution prevention and control [1996] OJ L257/26 ..................................................................................................... 70 Directive 2003/4/EC on public access to environmental information [2004] OJ L41/26 ........... 86 Directive 2003/35/EC providing for public participation in respect of the drawing up of certain plans and programmes relating to the environment [2003] OJ L156/17 .................. 85 Directive 2004/23/EC on setting standards of quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells [2004] OJ L102/48 ............................................................................ 29 Directive 2007/58/EC on the development of the Community’s railways [2007] OJ L315/44 .................................................................................................. 184 Directive 2007/65/EC on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities [2007] OJ L332/27 ........................................................ 158 Directive 2008/1/EC concerning integrated pollution prevention and control [2008] OJ L24/8 ................................................................................................... 70, 86 Directive 2009/72/EC concerning common rules for the internal market in electricity [2009] OJ L211/55................................................................................................ 225

1 Introduction: Two Visions of Regulation and Four Regulatory Models Regulation has entered both political and academic debate in a way almost unimaginable a couple of decades ago; indeed it is convincingly claimed that we now have a ‘regulatory state’.¹ This debate has been hugely beneficial in raising the profile of previously neglected areas of social and economic life, and in focusing attention on how their operation can be improved. However, much of the debate has suffered from a serious lack of focus. Particularly in political debate, the meaning of regulation has often been simplistic and taken for granted; it is treated in a deceptively simple manner as imposing a burden, as the opposite of free markets. Thus, whilst regulation may be needed, it is portrayed as a secondbest choice for social organization; in principle free markets giving us economic freedom and consumer choice should be preferred wherever possible. Regulation is thus an always regrettable means of correcting market failures. This concept of regulation is, by implication, a narrow one; regulation is part of economic management. The paradigmatic regulatory bodies are those concerned with public utility services such as water and energy where problems of natural monopoly prevent markets from operating freely on their own.² There are other areas of market failure, for example in the case of financial services, but here also regulation performs economic functions of protecting savers and investors, maintaining market confidence and making markets work smoothly and transparently. In quite different developments from those in political debate, academic writing has developed a concept of regulation which has become ever wider. This is evident in the range of institutions which are counted as engaged in regulation; it has expanded from government departments to independent agencies, to ‘selfregulation’ and ‘co-regulation’, and finally to regulation by private organizations.³ ¹ See Majone, G., ‘The Rise of the Regulatory State in Europe’ (1994) 17 West European Politics, 77–101; Moran, M., The British Regulatory State: High Modernism and Hyper-Innovation (Oxford: Oxford University Press, 2003). The latter gives a particularly comprehensive account of these developments. The literature is, of course, far wider than can be acknowledged here. ² For an earlier example of concentration on these regulators at the expense of others, see Prosser, T., Law and the Regulators (Oxford: Clarendon Press, 1997). ³ See Scott, C., ‘Private Regulation of the Public Sector: A Neglected Facet of Contemporary Governance’ (2002) 29 Journal of Law and Society, 56–76. A particularly good analysis of this ‘decentering’ of regulation is Black, J., ‘Decentering Regulation: Understanding the Role of Regulation and Self-Regulation in a “Post-Regulatory” World’ (2001) 54 Current Legal Problems 103–46.

The Regulatory Enterprise. Tony Prosser. © Oxford University Press 2010. Published 2010 by Oxford University Press.

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It is also apparent in an acceptance of the variety of goals of regulation, and in a dissociation of regulation from the economic sphere. Thus earlier definitions of regulation stressed its role in relation to markets; regulation was ‘fundamentally a politico-economic concept and, as such, can best be understood by reference to different systems of economic organization and the legal forms which maintain them’.⁴ However, more recent accounts have expanded regulation to include a wide range of other types of social control, incorporating insights from sociology as well as economics.⁵ One definition shows this broad approach particularly clearly: regulation is the sustained and focused attempt to alter the behaviour of others according to defined standards or purposes with the intention of producing a broadly identified outcome or outcomes, which may involve mechanisms of standard-setting, information-gathering and behaviour-modification.⁶

The theoretical debates are themselves made more complex through the growing importance not just of economic theories of regulation, but of the salience of social theory as well. Th is has in itself shifted the nature of the debates; ‘[e]conomic theories of regulation have tended to follow economic thinking generally in positing a sharp distinction between markets and regulation . . . Sociological analysis, oriented towards the analysis of power in its diverse forms, has tended to reject this sharp distinction’.⁷ Such theory is far too complex to analyse in any depth here.⁸ Important strands include the legal theory of autopoiesis, particularly associated with the work of Gunther Teubner and derived from that of Luhmann, governmentality theories finding their origin in the work of Foucault, and responsive regulation, particularly associated with the work of Ayres and Braithwaite.⁹ This broadening of the concept of regulation has been very welcome, both in permitting a wider variety of institutions to be compared, and in accepting the ⁴ Ogus, A., Regulation: Legal Form and Economic Theory (Oxford: Clarendon Press, 1994), 1 (footnote omitted). ⁵ See, eg Jordan, J. and Levi-Faur, D., ‘The Politics of Regulation in the Age of Governance’ in Jordan and Levi-Faur, (eds), The Politics of Regulation (Cheltenham: Edward Elgar, 2004), 1–28, esp 1–5; Scott, C., ‘Regulation in the Age of Governance: The Rise of the Post-Regulatory State’ in the same volume, 145–74. ⁶ Black, J., ‘Critical Reflections on Regulation’, LSE Centre for the Analysis of Risk and Regulation Discussion Paper 4 (2002), 20 (emphasis retained) at: (consulted 7 December 2009), also published as ‘Critical Reflections on Regulation’, Australian Journal of Legal Philosophy 27 (2002), 1–37. ⁷ Scott, ‘Regulation in the Age of Governance’, 146. ⁸ A useful summary is Scott, ‘Regulation in the Age of Governance’, esp at 150–60. For a rather different sociological approach to regulation, see Prosser, T., ‘Regulation and Social Solidarity’ (2006) 33 Journal of Law and Society, 364–87. ⁹ For accounts of each see eg Teubner, G., Law as an Autopoietic System (Oxford: Blackwell, 1993); O’Malley, P., Weir, L., and Shearing, C., ‘Governmentality, Criticism, Politics’ (1997) 26 Economy and Society, 501–17; Ayres, I. and Braithwaite, J., Responsive Regulation: Transcending the Deregulation Debate (Oxford: Oxford University Press, 1992).

Introduction

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wide range of different rationales for regulation extending far beyond the economic. This new approach is more realistic than the more restrictive one, given that one of the most important characteristics of regulation in recent years has been the creation of a considerable number of regulatory institutions with social rather than economic responsibilities, or indeed with a mix of the two. Thus the economic regulator of the public utilities is no longer the paradigmatic regulatory body, and there is no new single paradigm. Indeed, a major theme of this book will be to develop this approach further by including regulatory bodies which perform social functions, do not operate on any predominantly economic logic based on mimicking market outcomes, and which are not restricted to areas where there are definable market failures. Instead, regulation may be a first choice to administer an area of social provision for which markets are considered in principle inappropriate. Moreover, unlike in the case of the economic regulators, the concept of regulatory independence may have limited application in these areas; instead they may be involved in a regulatory partnership with government. However, this broadening of the concept of regulation also carries with it a danger; that the focus of the regulation debates is lost.¹⁰ If regulation is wide enough to extend to almost all types of social control, what principles can we have for assessing how it should work? Are we restricted to pragmatic examination of what works on the ground within a specific context? That is not likely to be enough, for how do we determine what ‘working’ or ‘working successfully’ mean, and how do we know what to extract as relevant from the complexity of any social context? In the political debate, there are many examples of how good regulation should work, but these are almost exclusively procedural.¹¹ Substantively, the assumption is often that the less regulation the better (‘less is more’ to quote the title of an influential publication from the Better Regulation Task Force¹²); regulation imposes burdens which must be lightened. In much of the economic work on regulation, economic principle itself gives guidance to regulators; they should promote market forces where possible and mimic them where it is not.¹³ Otherwise, social regulation is at the whim of politicians or of elected majorities; the economists’ ‘words “merits” and “equity” are names for black holes. You have no substantive account of these . . .’.¹⁴ Then how do we judge the success of noneconomic regulation? This is a particularly pressing concern where regulation is undertaken by agencies which are to various degrees autonomous from elected government; if they cannot claim electoral accountability, what other sources are ¹⁰ For a similar argument, see Black, ‘Critical Reflections on Regulation’. ¹¹ See notably the UK Government Better Regulation Executive’s Principles of Good Regulation: (consulted 7 December 2009). ¹² Regulation-Less is More: A BRTF Report to the Prime Minister (Better Regulation Task Force, 2005). ¹³ The classic statement of this philosophy was of course the Littlechild report which was enormously influential in shaping the design of the British utility regulators: Littlechild, S., Regulation of British Telecommunications’ Profitability (London: Department of Trade and Industry, 1984). ¹⁴ Brown, P., ‘The Failure of Market Failures’ (1992) 21 Journal of Socio-Economics, 1–24, at 19.

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there for their legitimacy? This question of legitimacy in spoken or unspoken form haunts much of the debate. The major theme of this book will be to suggest that it is possible to classify regulation and assess its performance in ways which acknowledge its developed social role. This can be done first by mapping the position of different regulatory bodies and examining their relations with government and other institutions; are they engaged in partnership or is independence the guiding principle? Secondly, we can accept a variety of different regulatory rationales, and draw from them models which can be used for classificatory purposes. We can also draw from these rationales principles of regulation, both procedural and substantive, which have a normative role and tell us what regulators ought to do to achieve legitimacy. The principles do not provide easy answers to particular regulatory problems, and may often come into conflict; one of the most interesting questions is how deliberative institutional arrangements can be created for attempting to resolve such conflicts. Nevertheless, these models and principles should promote better ways of understanding regulation, and will permit greater clarity whilst keeping the advantages of the expanded concept of regulation described above. The implications of the models will be assessed through applying them to 10 regulatory institutions dealing with highly varied subject matters, both economic and social. The first stage in developing this new understanding is to point to two radically different visions of regulation in the current literature: regulation as infringement of private autonomy; and regulation as a collaborative enterprise.

Two regulatory visions As the discussion above suggests, the increased salience of regulation in political and academic debates has not been accompanied by any unanimity about its meaning or its legitimate role. Indeed, there are wide divergencies between different versions of regulation and, in particular, different conceptions as to its legitimacy. A major distinction is between regulation as infringement of private autonomy and regulation as a collaborative enterprise.¹⁵ Each vision of regulation is associated with a cluster of different characteristics. Thus regulation as intrusion on private autonomy sees the major, or even the sole, objective of regulation by regulatory agencies to be the maximizing of economic efficiency; social or ¹⁵ Cf. Prosser, T., ‘Regulatory Agencies, Regulatory Legitimacy and European Private Law’ in Cafaggi, F. and Muir Watt, H. (eds), Governance in European Private Law (Cheltenham: Edward Elgar, 2008), 235–53, where they are termed ‘private law’ and ‘public law’ visions of regulation. There are also similarities with Elizabeth Fisher’s ‘rational-instrumental’ and ‘deliberativeconstitutive’ paradigms; see her Risk: Regulation and Administrative Constitutionalism (Oxford: Hart Publishing, 2007), 27–35. Bronwen Morgan has also pointed to a somewhat similar distinction between ‘transactional’ and ‘political’ regulatory frameworks in ‘The North-South Politics of Necessity: Regulating for Basic Rights Between National and International Levels’ (2006) 29 Journal of Consumer Policy, 465–87, 468–71.

Introduction

5

distributive concerns are to be left to elected governments. Secondly, in designing institutional arrangements independence is the key principle; this assures investors of a framework of stability and calculability free from unpredictable government intervention. Thirdly, such stability may also require that so far as possible regulatory tools take the form of rules; a good example would be the price controls applied to public utilities over a period of years. However, rules imposed by regulators are not appropriate for all regulatory contingencies, and may be unnecessarily constraining. Fourthly, alongside rules, private contracting may be an adequate mechanism for social coordination and as such an adequate substitute for direct regulatory interventions through creating appropriate incentives; an aim of the regulator should be to encourage the creation of mechanisms which require the minimum of public intervention, through systems of self- or co-regulation. Fifthly, the relationship between regulator and regulated themselves can be seen as analogous to a contract, so establishing stability and calculability for private investors. Sixthly, where deliberation and taking account of outside interests is necessary, this will take the form of the regulator receiving evidence through consultation procedures rather than direct participation of stakeholders in the regulatory agency itself. To do more than this would risk regulatory capture. The final element in this vision is an emphasis on the use of ordinary private law mechanisms, for example tort actions, as a means of regulatory accountability. This vision thus emphasizes the values of private autonomy, the role of self-correcting markets, and the facilitation of contractual stability. By contrast, the alternative vision is one of regulation as an enterprise. In this vision, regulators are ‘governments in miniature’.¹⁶ They have responsibility for both economic and social or distributive goals, which are anyway inseparable. Secondly, regulatory independence is not the key principle of institutional design, because regulation is a collaborative enterprise between regulatory agencies and other government bodies; although there may be particular contingent reasons for creating independent agencies, their responsibilities are shared with government and other bodies and may overlap in a complex ‘regulatory space’.¹⁷ Thirdly, legitimacy is the product of government delegation; discretion may be more important than rules and its exercise can be held accountable through procedural means. Fourthly, on this view there is no such thing as pure self-regulation based on private autonomy. Self-regulation simply reflects further delegation to enable regulatory tasks to be carried out more effectively. Fifthly, rather than relations between regulator and the regulated being analogous to a contract, they form part of a complex network of interaction between a large number of stakeholders who ¹⁶ This phrase originates in nineteenth-century accounts of regulation, quoted in Arthurs, H., Without the Law: Administrative Justice and Legal Pluralism in Nineteenth-Century England (Toronto: University of Toronto Press, 1985), 169. ¹⁷ For the origins of this metaphor, see Hancher, L. and Moran, M., ‘Organizing Regulatory Space’ in Hancher and Moran (eds), Capitalism, Culture and Economic Regulation (Oxford: Clarendon Press, 1989), 271–99.

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inhabit the broader regulatory space. Sixthly, deliberation can take place through direct representation of stakeholder interests within the regulatory agency itself, for example through board membership, and through the policy-making of the regulator being undertaken publicly. Capture is less of a danger than lack of regulatory responsiveness. Finally, regulators should, at least in part, be immune from ordinary private law liability; instead, accountability should be secured through public law mechanisms of proceduralization, Parliamentary scrutiny and judicial review; accountability is more a matter of ensuring good governance than of compensating for private wrongs. These competing visions are comprised of clusters of characteristics; no individual regulator will display all of them, and indeed there may be internal tensions between them, for example between reliance on calculable rules and support for self-regulation. Nevertheless, the distinction between the visions is of considerable importance in practice as well as in theory, especially when it comes to matters of institutional design.

Regulatory legitimacy The visions of regulation discussed above raise major issues of regulatory legitimacy. One solution characteristic of the first vision is to say that non-economic decisions characteristic of the second vision of regulation are inherently political and so should be left to democratically elected governments, and influential commentators have argued that independent regulation is only appropriate for economic- or efficiency-based decisions. Thus Foster has maintained that for the regulator to mix economic and social decisions ‘inevitably leads to an incoherence where it becomes progressively harder for a regulator to defend what he is doing without contradiction’.¹⁸ Majone has also argued that ‘the familiar distinction between efficiency and redistribution . . . provides a sound conceptual basis for deciding whether the delegation of policy-making authority to an independent regulatory body has at least prima facie authority’.¹⁹ This approach is closely connected with the vision of regulation as intrusion on private autonomy. However, this is not an adequate approach to regulation in general for a number of reasons. First, there is no clear dividing line in regulatory practice between economic decisions which can be resolved through expertise and social decisions based on value judgments; this distinction may be extremely useful for analytical purposes, but is difficult to apply to the major regulatory remits covered in this book which, as we shall see, characteristically involve a use of both. Moreover, ¹⁸ Foster, C.D., Privatization, Public Ownership and the Regulation of Natural Monopoly (Oxford: Blackwell, 1992), 7 and ch 9. ¹⁹ Majone, G. ‘Regulatory Legitimacy’ in Majone (ed), Regulating Europe (London: Routledge, 1996), 284–301, at 294.

Introduction

7

even decisions such as those relating to public utility price controls have major distributive implications.²⁰ Secondly, the concept of government is itself problematic; in a similar context, Fisher has noted how ‘in alluding to “the state” in grandiose and vague terms, there is little discussion of institutional context’.²¹ It is by now a truism that government is increasingly multi-levelled, with key decisions made by transnational bodies. In our case the major actor is of course the European Union, but others such as the Organisation for Economic Co-operation and Development (OECD), the World Trade Organization, and the Council of Europe also have an important role to play. Rather than pointing to one institution of government subject to democratic accountability, we have a complex of different bodies subject to multiple and varied accountabilities. Similarly, national government is comprised not only of ministerial departments but of a network of different bodies, including regulatory agencies but with many other institutional forms. A celebrated image reflecting it is that of the ‘hollowing-out’ of the state.²² Thus ‘to call one institution to account for how it has operated is to disregard key features of the differentiated polity. Policy is the responsibility of no one institution but emerges from the interaction of several’.²³ In these conditions a contrast between unaccountable regulator and accountable government appears far too simplistic; what is necessary instead is to map the position of the regulator within the ‘regulatory space’ of a range of different institutions subject to different accountability mechanisms.²⁴ Indeed, I undertake such mapping in each of the chapters of this book covering individual regulators. This will be done in two different ways: first inter-institutional mapping, examining each regulator’s relations with central government, with the European Union and other institutions, and secondly normative mapping, examining the patterns of norms governing each regulator, for example its statutory duties and corporate objectives. This mapping will be a central task in each chapter of the book. A further reason for rejecting a stark decision between decisions based on efficiency and those based on distribution is that, even where regulatory decisions are clearly social in nature and are taken by government, there is no direct electoral legitimacy for any particular solution to them. Elections form the basis for selection of personalities and of broad approaches to social issues whereas regulatory decisions are much more specific and unpredictable. Thus the emphasis should be on the nature of the regulatory decision-making process itself and the extent to which it permits proper deliberation rather than on any question of ²⁰ See Prosser, Law and the Regulators; cf. Majone, ‘Regulatory Legitimacy’, 295. ²¹ Fisher, Risk: Regulation and Administrative Constitutionalism, 16. ²² Rhodes, R., Understanding Governance: Policy Networks, Governance, Reflexivity and Accountability (Buckingham: Open University Press, 1997), esp 17–19, 53–5, and ch 5. ²³ Rhodes, R., Beyond Westminster and Whitehall (London: Unwin Hyman, 1988), 404. ²⁴ See Hancher and Moran, ‘Organizing Regulatory Space’; for a similar application of the regulatory space metaphor, see Hall, C., Scott, C., and Hood, C., Telecommunications Regulation: Culture, Chaos and Interdependence Inside the Regulatory Process (London: Routledge, 2000), ch 5.

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electoral mandate, except possibly for the general direction of regulatory activity and for intransigent decisions involving clashes of fundamental regulatory values. Finally, and linked to the last point, the growing tendency to entrust regulatory decisions not directly to elected politicians but to specialist regulatory agencies has in part been due to a perception that such agencies may actually be more accountable than government departments, for example through being less open to capture and having the ability to employ innovative techniques for responsiveness (the Food Standards Agency is a notable example). Thus the idea that economic but not social decisions are appropriate subjects for independent regulators is both simplistic and misleading. Once we accept that regulatory decisions involve values, and values which are often conflicting, we have to find other sources for their legitimation. One way of claiming such legitimation would be to say that the role of the regulator is to implement the mandate given to it by Parliament. This is also too simplistic.²⁵ The whole point of establishing a regulator is to give it discretion based on its own expertise. The extent of such discretion may vary, and indeed that will be one subject for examination in my mapping of the position of different regulators in the regulatory space. The discretion may be limited largely to matters of implementation, or may involve substantial freedom to determine matters of policy, as we shall see in many examples later in this book. However, in either case, regulation is best thought of not as the application of rules laid down by a principal for the regulatory agent to enforce, but as part of a regulatory enterprise which will involve collaboration between different levels of government, including the regulator. A more useful approach is in the extension of procedural values in regulation to achieve a process of regulatory deliberation through which a mutually agreed consensus can be reached, and this will now be considered in more detail.

Participation, deliberative regulation, and risk Both in the policy process and in more theoretical writing there has been an increasing emphasis on the importance of regulatory transparency and deliberation.²⁶ In the first, this has come at an international as well as national level, for example the OECD, after earlier stressing that regulation should where possible be cut back, has more recently emphasized the importance of improving regulatory

²⁵ For a detailed critique of this view and for the implications of abandoning it, see the classic discussion by Stewart, R., ‘The Reformation of American Administrative Law’ (1975) 88 Harvard Law Review 1667–1813. See also Black, ‘Proceduralizing Regulation’ (2000) 20 Oxford Journal of Legal Studies, 597–614 and ‘Part II’ (2001) 21 Oxford Journal of Legal Studies, 33–58, 613–14. ²⁶ For important European academic work in this area, see the European Commission funded project on Reflexive Governance in the Public Interest at: (consulted 7 December 2009).

Introduction

9

governance rather than deregulation.²⁷ Similarly, the European Commission has become concerned with governance issues of this kind, both in relation to its own work and that of regulatory bodies for public services.²⁸ At the UK level there has been a flurry of recommendations from government for increased regulatory transparency, including its Principles of Good Regulation.²⁹ There will be a full discussion of these reforms in Chapter 10 below, but here the point to be made is that one of their central themes is to open up the regulatory process to its environment and to make it more responsive to the views of those regulated. A concern with regulatory transparency at the policy level has been mirrored in academic writings. To take only one influential example, Julia Black has described a deliberative vision of regulation, in which she draws on the work of Habermas to move beyond procedures aimed at bargains and compromises to participation oriented towards ‘the mutuality, consensus, and inter-subjective understanding of deliberative democracy’.³⁰ One of her main themes is that different visions of democracy may have fundamental implications for the role of participation in regulatory governance; there is no single agreed meaning for such participation.³¹ Nor is the application of a deliberative version of participation straightforward, requiring a major effort in the ‘translation’ of different participatory discourses on the part of the regulator. The role of deliberation in regulation will be a central theme of later discussion in this book, and will provide one of the models through which regulation will be examined in detail. The most important point for now, however, is that both at the political and at the theoretical level the concept is problematic if taken alone. Whilst in politics the stress has been on deliberation through impact assessment as part of the process for making regulatory bargains, at the theoretical level deliberation has been seen as going far beyond this towards ensuring that ‘the requirements of public reason are met and that access to the deliberation occurs on an equal basis’.³² Deliberation will give us one model for our later discussion, but it will need supplementing by others. In particular, we shall have to do more to see if substantive regulatory principles can be found to feed into the deliberation, and indeed to set limits to it where necessary.³³ Without such principles, even the most open and reflexive deliberation will not be enough.³⁴ A related concern to that of deliberation has been that of the concept of risk regulation; indeed, ‘ “[r]isk” is fast becoming the central organising principle in regulation and public service delivery. Central government in the UK is currently ²⁷ Cf. OECD, The OECD Report on Regulatory Reform: Synthesis (Paris: OECD, 1997) and OECD Guiding Principles for Regulator Quality and Performance (Paris: OECD, 2005). ²⁸ Commission White Paper on European Governance, COM (2001) 428, 25 July 2001; Green Paper on Services of General Economic Interest, COM (2003) 270 final, esp ch 4. ²⁹ Better Regulation Executive, Principles of Good Regulation. ³⁰ Black, J., ‘Proceduralizing Regulation’, 599. ³¹ Ibid, 607. ³² Ibid, 34. ³³ Black acknowledges this issue and the potential role of substantive values; see 598, 602, 604. ³⁴ Brownsword, R., Rights, Regulation and the Technological Revolution (Oxford: Oxford University Press, 2008), 126–31.

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awash with initiatives to promote risk management’.³⁵ Such a concern with risk has developed at a number of different levels. The first is at the level of social theory, where a number of different risk-based approaches have attempted to explain the role of regulation in the modern state.³⁶ However, the analysis of risk has also profoundly influenced regulators themselves, who have all committed themselves to risk-based approaches to regulation, as we shall see when we examine regulatory institutions in later chapters.³⁷ However, once more the apparent simplicity obscures deeper ambiguities. At the level of social theory, there are contending theories of risk regulation based on very different premises; as a result, ‘ “risk” as an idea . . . has suffered the fate of other key concepts: lost sharpness of meaning and become itself a site of contestation’.³⁸ At the institutional level, ‘ “there is no such thing as risk society, only different risk regulation regimes” . . . the actual politics of risk management are characterised by extraordinary variety’.³⁹ As Julia Black has pointed out, even in its practical application to regulation, the term ‘risk-based regulation’ has two distinct meanings.⁴⁰ The first is that of regulation of risks to society; in many areas of regulation covered in this book (for example food standards, the environment, health and safety) regulators will have to assess the size of the risk and allocate resources accordingly. The second meaning refers to ‘regulatory or institutional risk: risks to the agency itself that it will not achieve its objectives’.⁴¹ This is, for example, characteristic of financial services regulation. There is clearly some overlap between the two versions of risk-based regulation, but they do have some important differences. Thus the first will involve assessing the outside environment; the second the internal organization of the regulator itself. In both, risk-based regulation is essentially a procedural prescription for how the regulator balances different priorities and interests. It may have implications for which regulatory principles are relevant in any particular decision, but it does not in itself provide such principles.⁴² In its more mechanical form of risk-based cost-benefit analysis, risk regulation certainly does not provide solutions on its own to regulatory dilemmas, something that actual regulators are quick to acknowledge, and a theme which will

³⁵ Black, J., ‘The Emergence of Risk-Based Regulation and the New Public Risk Management in the United Kingdom’ [2005] Public Law, 512–48, at 512. There is considerable literature on regulation and risk; see eg Sunstein, C., Risk and Reason: Safety, Law and the Environment (Cambridge: Cambridge University Press, 2002). ³⁶ See Moran, The Rise of the British Regulatory State, 26–31. The literature is enormous and no attempt will be made to be comprehensive here; one important example is Fisher, Risk: Regulation and Administrative Constitutionalism. ³⁷ For an overview see Black, ‘The Emergence of Risk-Based Regulation’, 516–18. ³⁸ Moran, The Rise of the British Regulatory State, 30. ³⁹ Moran, The Rise of the British Regulatory State, 31, quoting Hood, C., Rothstein, H., and Baldwin, R., The Government of Risk: Understanding Risk Regulation Regimes (Oxford: Oxford University Press, 2001), 171 (emphasis retained, footnotes omitted). ⁴⁰ Black, ‘The Emergence of Risk-Based Regulation’, 516. ⁴¹ Ibid. ⁴² Cf. Black, ‘The Emergence of Risk-Based Regulation’, 519.

Introduction

11

be developed more fully in Chapter 10 below.⁴³ Once more, risk regulation is an approach to regulation which may have important implications for the ways in which regulators work, but does not in itself provide a set of principles for determining difficult issues of substance in regulation.

Regulatory rationales Proceduralism and a concern with risk thus do not in themselves provide means of resolving issues of substance in regulation. However, I shall argue in this book that it is possible to discover some over-arching principles which can be derived from our constitutional arrangements and which have to be weighed against each other in making regulatory decisions.⁴⁴ As a preliminary to suggesting such principles we need to establish what the rationale of the regulatory enterprise might be. That will lead us to establish regulatory models as a means of classifying different types of regulation, from which normative principles can in turn be derived. In this section I shall outline the key regulatory rationales which will form the basis for the different models of regulation to be used in this book. Rather than the examination in the later chapters revealing an incoherent mass of different purposes depending on the wording of individual statutes, it will be possible to find patterns in both the tasks given to regulators and the ways they perform these tasks. To quote another writer who has attempted something similar: If modern regulation is approached in these terms, it emerges not as a crazy-quilt but as a series of patterns with integrity and coherence of their own. We have seen that social and economic regulation has been designed to promote economic efficiency, to redistribute resources in a public-spirited fashion, to reduce or eliminate social subordination, to reflect collective aspirations, to protect future generations from irreversible losses, and to alter preferences that are produced by various motivational or cognitive defects. . . . Nothing is to be gained by treating regulatory regimes as undergirded by a single rationale or as mere interest-group transfers. Approaches that begin from laissezfaire premises and rely exclusively on neoclassical economics are bound to misinterpret the modern regulatory state, relying as they do on criteria that cannot capture the diverse legitimate reason for regulatory controls.⁴⁵

I am not the first to attempt this; apart from Sunstein’s attempt to identify regulatory principle just cited, Roger Brownsword has done something similar in ⁴³ See notably the Health and Safety Executive, Reducing Risks, Protecting People – HSE’s Decision-Making Process (London: HSE Books, 2001), paras 101–8 and App. 3. ⁴⁴ For an attempt to develop such principles in a very different constitutional context, see Sunstein, C., After the Rights Revolution – Reconceiving the Regulatory State (Cambridge, Mass: Harvard University Press, 1993), esp ch 7. ⁴⁵ Sunstein, C., After the Rights Revolution, 228–9.

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relation to the regulation of bioethics.⁴⁶ Moreover, one of the regulators covered in detail in this book has pointed to three ‘pure’ criteria for reaching regulatory decisions, these being an equity-based criterion, a utility-based criterion, and a technology-based criterion.⁴⁷ The aim will be to identify principles at a sufficiently high level of generality to apply across the wide range of regulatory bodies to be covered here, and yet which are sufficiently clearly specified so as to contribute to regulatory decision-making and its criticism.

Regulation to maximize efficiency and consumer choice The first regulatory rationale is a familiar one from the utility regulators and the institutions of competition law. It suggests that legitimate regulation is that which aims to maximize economic efficiency and consumer choice. It can do so in two ways; first, where there are remaining monopoly elements in an industry, either because of natural monopoly or due to market dominance, the regulator can attempt to mimic market forces through, for example, setting price controls or quality standards. Secondly, the regulator can act to increase competition more directly, by acting as a specialist competition and consumer protection authority. These tasks have been central to the work of the utility regulators. Early on they acted to limit the effects of the dominance of the major privatized utilities through controls on price and quality.⁴⁸ In many areas this role has now lapsed due to the creation of competitive markets and the reduction of dominance of former monopolists; examples are electricity and gas supply and retail telecommunications services. However, in other areas of natural monopoly, notably the bulk transmission of electricity and transport of gas and access to the rail network, price and quality controls will remain indefinitely, so retaining a permanent regulatory presence here. Indeed, the initial vision of regulation withering away with the creation of competition has not occurred; instead regulators have acquired a new role of policing competition and protecting consumers through ensuring the free working of competitive markets. For example, as we shall see in Chapter 9 below, the utility regulators have acquired ‘concurrent powers’ with the general competition authorities which permit them to enforce in their own sectors the prohibitions in the Competition Act 1998 of anti-competitive agreements and abuse of a dominant position.⁴⁹ Moreover, the duties of the utility regulators have been amended in more recent legislation to give them a single primary duty ‘to

⁴⁶ Brownsword, R., Rights, Regulation and the Technological Revolution, esp ch 2. ⁴⁷ Health and Safety Executive, Reducing Risks, Protecting People, paras 118–27. ⁴⁸ The importance of this role was a major theme in the influential Littlechild recommendations in Regulation of British Telecommunications’ Profitability. ⁴⁹ Section 54 and sch 10; they also have some concurrent powers under the Enterprise Act 2002, notably to undertake market investigations; see ss 204–205 and sch 9 Part 2.

Introduction

13

protect the interests of consumers . . . , wherever appropriate by promoting effective competition’.⁵⁰ This regulatory rationale thus gives the regulators the same ultimate objectives as the general competition authorities: to maximize productive and allocative efficiency through open markets and support for consumer choice.⁵¹ Its philosophical background is a utilitarian one. It might appear applicable only to the utility regulators. However, as we shall see, promotion of markets has been a theme in the case of a number of other regulatory bodies which we shall discuss, for example in healthcare where there has been a growing emphasis on regulation to support consumer choice in competitive markets. Even in the least likely areas, such as bioethics, echoes of this approach can be found; as Roger Brownsword has documented, one approach is a utilitarian one, which, if not directly using the institution of the market, appeals to a similar underlying philosophy.⁵² Even the Human Fertilisation and Embryology Authority has consumer protection functions! It is also important to note that, in much of the regulatory reform work by government, the concern is to make regulation more compatible with freely operating markets, on which regulation is seen as intrinsically a burden. Indeed, in some of this work it appears that the only acceptable rationale for regulation is the promotion of efficiency. This approach to regulation thus covers that directly based on efficiency goals and promoting consumer choice, and a style of regulation which emphasizes the lifting of regulatory burdens which prevent the free operation of markets.

Regulation and human rights A second, radically different, rationale for regulation is that one role of regulators is to protect basic rights. This is less familiar than the economic, competitionbased rationale.⁵³ However, it has clearly played a part in some regulatory decision-making. For example, the Health and Safety Executive has emphasized that, alongside the utility-based criterion it uses to assess costs and benefits of intervention, it also uses ‘an equity-based criterion, which starts from the premise that all individuals have unconditional rights to certain levels of protection’. As a result some risks may be unacceptable whatever their benefits.⁵⁴ As we shall see, other regulators to which rights may be particularly relevant will be the Human ⁵⁰ See, eg the Utilities Act 2000, ss 9, 13. ⁵¹ For further discussion, see Prosser, T., The Limits of Competition Law: Markets and Public Services (Oxford: Oxford University Press, 2005), 17–28. The subject is dealt with in greater depth in the competition law texts; see eg Jones, A. and Sufrin, B., EC Competition Law (3rd edn, Oxford: Oxford University Press, 2007), ch 1. ⁵² See Brownsword, Rights, Regulation and the Technological Revolution, 36–7. ⁵³ But see Morgan, B., (ed), The Intersection of Rights and Regulation (Aldershot: Ashgate, 2007) and Brownsword, Rights, Regulation and the Techological Revolution, 22–5. ⁵⁴ Health and Safety Executive, Reducing Risks, Protecting People, para 119.

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Embryology and Fertilisation Authority, those relating to the environment, and those for health and social care. Rights may be relevant in several different ways. First, the role of the regulator may be to protect the rights of service users directly, through developing standards reflecting these rights and monitoring their application through inspection. Thus the Care Quality Commission, the new combined regulator for health and social care, has a rights-based approach built into its statutory remit. A related point, as we shall see in the environmental field, is that regulators may implement a statutory scheme which involves them balancing the rights of members of the public against good reasons for restricting those rights because of limited resources.⁵⁵ Their use of rights has been documented by Sunstein as the ‘rights revolution’ through the legislative creation of ‘legal entitlements to freedom from risks in the workplace and in consumer products, from poverty, from long hours and low wages, from fraud and deception, from domination by employers, from one-sided or purely commercial broadcasting, and from dirty air, dirty water and toxic substances’.⁵⁶ A second way in which rights may be relevant may be where they impose substantive restrictions on the permissible decisions which regulators may take by, for example, preventing them from taking action which impinges on private property rights. This also been a major concern in US regulatory jurisprudence, but is now finding its way into European regulation, partly as a result of the European Convention on Human Rights. The third way in which rights may be relevant is the application of procedural rights concerned with the way regulators operate, and permitting degrees of participation by those affected by decisions. These rights thus contribute to the deliberative vision of regulation; indeed, Black has noted that this vision both presupposes rights for its operation and generates them through the deliberative process.⁵⁷ The relevant rights may be drawn from a number of sources.⁵⁸ Most obviously, they may come from the particular statutes setting up the regulatory scheme, or they may be broader citizenship rights. The efficiency and consumer choice rationale discussed above views citizens solely in their capacity as consumers; ‘[e]mphasis is placed on the role of the citizen as the discriminating purchaser of goods and services, as the maker and enforcer of economically sound and rational consumer contracts’.⁵⁹ The consumerist version of citizenship is also essentially non-egalitarian, concerning the conditions of participation in markets rather than the distribution of wealth; we do not come to markets as equals. In ⁵⁵ See Marcic v Thames Water Utilities [2003] UKHL 66; [2004] 2 AC 42. ⁵⁶ Sunstein, After the Rights Revolution, 12–13; see also 21–2, 24–31, 55–73. ⁵⁷ Black, ‘Proceduralizing Regulation’, 610. ⁵⁸ For further discussion, see Prosser, The Limits of Competition Law, 28–34. ⁵⁹ Freedland, M., ‘Law, Public Services and Citizenship – New Domains, New Regimes?’ in Freedland, M. and Sciarra, S. (eds), Public Services and Citizenship in European Law (Oxford: Clarendon Press, 1998), 1–34 at 10.

Introduction

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contrast, arguments drawn more directly from citizenship rights assume that we have them as equals, the very nature of a citizenship right means that is universalizable. One of the regulators to be discussed in this book, Ofcom, has a specific reference to such citizenship rights in its first statutory duty, which is ‘to further the interests of citizens in relation to communications matters’.⁶⁰ As we shall see in Chapter 8, this has resulted in tensions with its second duty (of equal force) ‘to further the interests of consumers in relevant markets, where appropriate by promoting competition’.⁶¹ The source of citizenship rights may go beyond individual statutory schemes. Thus the UK is party to a number of international instruments which require that key social rights are protected.⁶² The most important of these is of course the European Convention on Human Rights, made directly enforceable against public authorities by the Human Rights Act 1998. The rights contained in the Convention are of relevance to regulatory decisions both procedurally (the right to a hearing before an independent tribunal in Article 6) and substantively (notably Article 8’s protection of the right to respect for family and private life and the highly qualified right to the peaceful enjoyment of possessions in Article 1 of the First Protocol). Further relevant rights are contained in the Council of Europe’s European Social Charter of 1961. Of particular relevance are Article 11 on the right to health and Article 16 on the right of the family to social, legal, and economic protection. The EU Charter of Fundamental Rights adopted at the Nice Summit in December 2000 also includes rights to healthcare and to medical treatment, and to access to services of general economic interest.⁶³ Important questions of course exist concerning the legal enforceability of such rights, but their existence is nevertheless important as constraints on the state which has agreed to them, and, as we shall see, are thus of considerable relevance for regulatory decision-making.

Regulation and social solidarity The next regulatory rationale, the promotion of social solidarity, is less familiar in common-law jurisdictions than that of the promotion of human rights.⁶⁴ It is much more familiar, however, in Continental Europe, where the concept of public service and the public service law derived from it are much more highly developed.⁶⁵ Rather than starting from individual rights, this approach starts from the duties of the community to secure inclusiveness, resting both on a moral sense of ⁶⁰ Communications Act 2003, s 3(1)(a). ⁶¹ Section 3(1)(b). ⁶² See Ewing, K., ‘Constitutional Reform and Human Rights: Unfinished Business?’ (2001) 5 Edinburgh Law Review 297–324. ⁶³ For discussion of the meaning of the latter term, see Prosser, The Limits of Competition Law, chs 6–7. ⁶⁴ For an extended discussion, see Prosser, ‘Regulation and Social Solidarity’. ⁶⁵ See Prosser, The Limits of Competition Law, ch 6. The Continental literature is, of course, enormous.

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equal citizenship and a more prudential goal of minimizing social fragmentation. Its theoretical basis can be found in the work of Durkheim and Duguit. Once more, Roger Brownsword has pointed to something similar (though with very different substantive implications from the public service approach) in his discussion of dignitarianism in the regulation of bioethics.⁶⁶ An understanding of the concepts of public service and social solidarity are also essential to appreciate the role of the concept of services of general interest in Community law. Social solidarity is not, however, purely a Continental European concept. Thus Sunstein has stressed related principles apparent in US regulation: the promotion of collective desires and aspirations transcending individual consumption decisions and safeguarding non-commodity values.⁶⁷ Moreover, the concept of ‘social inclusion’ closely linked to New Labour in the UK has some similar themes to other social solidarity-based work.⁶⁸ Social solidarity can play different roles in regulation. One is to create the essential social underpinning of mutual trust and expectation which is necessary for markets to function.⁶⁹ In this sense it is allied to the first regulatory rationale in creating the necessary pre-suppositions for economic efficiency and consumer choice. The second role of the social solidarity-based approach is, however, to prevent or limit the socially fragmenting role of markets. For example, regulatory interventions may attempt to ensure equal treatment of those dependent on public services on the grounds of citizenship and inclusiveness, such as through requiring geographically averaged tariffs for public utility services. More specific examples are the assurance of universal service, covering both urban and rural areas and rich and poor consumers, and the protection of uniform standards of service quality through inspection. Clearly, in such cases there is an overlap with the promotion of individual rights, but the element of social inclusiveness is also strong. Social solidarity is also particularly relevant in healthcare in the context of the National Health Service (perhaps the most celebrated expression of values of social solidarity) and in public service broadcasting. One important question of institutional design is the degree to which particular regulators are able to promote these values or whether such promotion is best left to government with a broader electoral mandate and the ability to coordinate a number of different policies combating social exclusion. Finally, a growing theme of regulatory work is the promotion of sustainability, and we shall see below that this now has an important place in the work of many of the regulators studied, and not just those concerned with conventional ⁶⁶ Rights, Regulation and the Technological Revolution, 39–41. ⁶⁷ After the Rights Revolution, 57–60, and Stewart, R., ‘Regulation in a Liberal State: The Role of Non-Commodity Values’ (1983) 92 Yale Law Journal, 1537–1590. ⁶⁸ See Levitas, R., The Inclusive Society? Social Exclusion and New Labour (2nd edn, Basingstoke: Palgrave Macmillan, 2005). ⁶⁹ For discussion of the concept of trust in this context, see Hollis, M., Trust Within Reason (Cambridge: Cambridge University Press, 1998).

Introduction

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environmental regulation. According to the UK government, ‘[t]he goal of sustainable development is to enable all people throughout the world to satisfy their basic needs and enjoy a better quality of life, without compromising the quality of life of future generations’.⁷⁰ Achieving sustainability is thus also best categorized under the heading of regulation for social solidarity.

Regulatory participation and deliberation The final regulatory rationale has already been discussed; it is that of the regulator providing a forum in which participation and deliberation can take place. In many ways it is the easiest of the rationales to apply, being already a commonplace in regulatory debates and in academic accounts of regulation.⁷¹ Key characteristics are regulatory transparency, regulatory consultation, accountability, and openness in general. This is not to say, of course, that this purpose is free from controversy. Apart from the question of the relationship between regulatory participation and the need to take clear and rapid regulatory decisions, the concept of participation itself covers several different approaches (as will be evident in the discussion of individual regulators below), and one especially important question is whether participation represents a means to better decisions through the effective assembling of information by the regulator, or is an end in itself. Most accounts assume the former, however more sophisticated accounts of this area have pointed to regulatory deliberation which seems to represent an end in that it represents either a recognition of the value of each participant as a form of autonomy right, or a means of discovering basic moral principles. Black has made the distinction clearly: In pragmatic discourses, preferences are formed exogenously, and participants argue from their own self-interested perspectives; there is no public reason. The question “what ought we to do?” is for each the question “what is good for me?”. In the rational form of pragmatic discourse, goals are weighed rationally in the light of accepted value preferences; means chosen from the standpoint of efficiency or expertise. In ethical discourses, in contrast, the question “what ought we to do” takes the form of “what kind of society do we want to be; what is good for us?”. . . . Finally, in moral discourse, the question “what ought we to do” takes on a further meaning: “what is good for us all?”⁷²

Again, the development of participation and deliberation by regulators may perform different functions. Regulators are first responsible for organizing deliberative procedures for their own decisions; indeed, it is through deliberation that the inevitable conflicts between different regulatory principles will have to ⁷⁰ The UK Government Sustainable Development Strategy (Cm 6467 2005), 16. ⁷¹ See, eg Prosser, Law and the Regulators. For a more recent detailed examination of the utility regulators taking this approach, see the House of Lords Select Committee on the Constitution, ‘The Regulatory State: Ensuring Its Accountability’ HL 68, 2003–4. ⁷² Black, ‘Proceduralizing Regulation’, 41–2.

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be resolved. They are also responsible for developing procedures which directly produce more responsive services, for example by ensuring openness of service providers to the views of users, and for representing the views of users to service providers. These latter functions have been particularly important in healthcare regulation.

Models of regulation I have thus now identified four different rationales underlying regulation. Of course, they are likely to come into conflict, and one of the issues to be considered in this book will be that of the best institutional arrangements for resolving such conflicts. The purposes provide us with the basis for four models of regulation derived from them; the four models are: (a) regulation for economic efficiency and consumer choice, both through creating and policing open markets and, where this is not possible, mimicking the way markets would work; (b) regulation to protect rights, including rights to healthcare and other essential services; (c) regulation for social solidarity, to avoid the fragmenting effects of markets and to promote universal access to public services of consistent quality; (d) regulation as deliberation, with the major role of the regulatory institution being to provide procedural means for resolving problems, either through a forum for compromise of different views or a source of learning to seek a consensus. After mapping the position of each regulator in regulatory space, the second major purpose of this book will be to examine its operation through using these models. The models will perform two different but related functions.⁷³ First, they are analytical in the sense of providing ideal types of different sorts of regulation. They provide a means of classifying, and so making sense of, the different activities undertaken by regulators and the different arguments used to justify regulatory decisions. These classificatory models are particularly important given the expansion of the concept of regulation noted at the beginning of this chapter. This expansion, as already noted, creates a dilemma. On the one hand, recent regulatory debates have shown that an acceptable definition must be a broad one, but adopting such a broad approach means that the focus of the debate may be lost. Through combining a broad concept of regulation with competing models ⁷³ Their role is not that of theoretical economic modelling, but something closer to the sort of models set out by Martin Hollis in his Models of Man: Philosophical Thoughts on Social Action (Cambridge: Cambridge University Press, 1977).

Introduction

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of regulatory activity it is hoped that this focus can be restored without forcing analyses of regulation into an unduly narrow and restrictive single model. The classificatory role of the models should also assist in a comparison of different regulatory bodies; how do different combinations of the models appear in each of them? It is essential to recall that the models are derived from different regulatory rationales. Th is means that it is easier to make the leap from their classificatory role to their second, normative role; basing them on rationales ensures that they are already value-laden. Thus the models will provide us with principles of how regulators ought to decide, the extent to which the different regulatory purposes are met, and which institutional arrangements are most suitable for achieving their various objectives. They will also permit us to discuss how the confl icts between different principles may be resolved (for example, asking whether deliberative procedures provide the solution where there is a confl ict between competition and social solidarity) and what are the most appropriate institutional arrangements for resolving such confl icts in practice. One important example will be the relationship between regulators and elected government. For example, is only elected government properly placed to determine issues of social solidarity as part of a general strategy for combating social exclusion? It may seem unusual to be discussing regulatory principles which are both general (in the sense of not being derived directly from the specific statutory mandate of each regulatory body) and substantive (in the sense of not being limited to better regulatory procedures). Yet this is not new; as mentioned above, in some accounts of regulation maximization of economic efficiency performs precisely this role.⁷⁴ Sunstein has also proposed a set of interpretative principles of regulation with a strong normative role. Reflecting their US origins, these are more court-oriented than the principles proposed here, but they do represent an attempt to develop criteria for broad judgements about regulatory performance in promoting constitutional values and deliberative government. These ‘interpretative principles’ thus provide ‘a basis for understanding and evaluating the principles that underlie the fabric of the modern regulatory state’ for government, the agencies themselves, and ordinary citizens.⁷⁵ Th is is precisely the role envisaged for the models and normative principles to be used in this book. Putting it succinctly, ‘good regulation’ will be regulation which best achieves the most appropriate combination of the normative principles drawn from the four models of regulation. What is appropriate will depend on the statutory remit, the social context, and the applicable rights in each area of regulation.

⁷⁴ See Foster, Privatization, Public Ownership and the Regulation of Natural Monopoly, Majone, ‘Regulatory Legitimacy’. ⁷⁵ After the Rights Revolution, 232; see also 147–54, 160–92.

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The scheme and scope of the book I shall now proceed by examining 10 different regulators using these models as the classificatory and normative basis of the study. There will be a broadly common structure for each chapter. After an introduction to the history and function of each agency, it will then be located within regulatory space through a brief mapping exercise of the agency’s relations to different levels of government, both domestic and European, and its governing norms in statute and elsewhere. There will then follow discussion of the agency’s policies and work, structured by the four models developed above: regulation for economic efficiency consumer choice; regulation and human rights: regulation and social solidarity: and deliberative regulation. The emphasis on each will obviously vary from agency to agency, but in all cases there will be a mix of models rather than associating individual agencies with a single one. The regulatory bodies have been deliberately chosen to give a wide range of different regulatory subject-matter and approaches, but, inevitably, some areas of regulation will not be covered in this book, both to keep a clear focus and to ensure that it is of manageable size. One is regulation in and by government departments themselves; not only has this been covered well elsewhere,⁷⁶ but the emphasis on this book is very much on the role of regulators which are not themselves directly subject to democratic accountability and have a (varying) degree of independence from government. For similar reasons, European regulation will not be covered directly, and I shall not include coverage of the general competition authorities nor of the regulation of financial services; once more, these matters have been covered well elsewhere.⁷⁷ The exclusion of the latter is a particular regret given the apparent failure of financial services regulation in the context of the financial crisis of 2008–09, but fortunately other work discusses this with fuller specialist analysis of the context than would be possible as one chapter in this book. There is also extensive political debate on the changing structures of financial services regulation in a way that there is not for many of the regulators discussed in this book. ⁷⁶ See, eg Daintith, T. and Page, A., The Executive in the Constitution (Oxford: Oxford University Press, 1999); Hood, C., Scott C., James, O., Jones, G., and Travers., T., Regulation Inside Government (Oxford: Oxford University Press, 1999). ⁷⁷ See, eg Knill C. and Lenschow, A., ‘Modes of Regulation in the Governance of the European Union: Towards a Comprehensive Evalulation’ in Jordana and Levi-Faur, The Politics of Regulation, 218–44; Ferran E. and Goodhart, C. (eds), Regulating Financial Services and Markets in the 21st Century (Oxford: Hart Publishing, 2001); and in particular Black, J. ‘The Credit in Crisis and the Constitution’, in Oliver, D., Prosser, T., and Rawlings, R. (eds), The Regulatory State: Constitutional Implications (Oxford: Oxford University Press, forthcoming, 2012).

2 The Human Fertilisation and Embryology Authority In the previous chapter, a key concern was the legitimacy of regulators in areas of social regulation. The first regulatory body for discussion, the Human Fertilisation and Embryology Authority (HFEA) could not provide a better example, as it is situated in an area of major social conflict based on moral and religious beliefs. If social regulation is hard to justify, and if controversial social decisions should only be entrusted to elected governments, we should expect this to be illustrated vividly in the Authority’s experience. Given this context, it is perhaps not surprising that estimates of the success of the HFEA have varied widely. On the one hand, according to the Department of Health, ‘[t]he HFEA model has been a successful one. It has operated to international acclaim for 15 years . . .’.¹ One of the leading figures in embryo research has stated ‘I have always held this up as the model regulatory environment for doing embryonic stem cell research and embryo research in general’.² Other assessments have been less complimentary; a highly critical (and split) select committee included as one of its conclusions that ‘[t]he principles of good regulation adopted by the Better Regulation Task Force are appropriate and valuable. We regret that in many areas the HFEA falls short of these ideals’.³ Such differences of view are to be expected in such an area of basic disagreement about the appropriate ethical approaches to be taken, especially in relation to embryo research.⁴ It is a subject on which views are particularly entrenched. However, there are two themes in the critical discussion which take us beyond ethical choices into matters of regulatory design. The first is one of institutional competence; to what extent should controversial decisions (especially those perceived as involving rights) be entrusted to Parliament, or to a specialist body with considerable expertise in the area? The answer is of course that both should have ¹ Department of Health, Review of the Human Fertilisation and Embryology Act – Proposals for Revised Legislation (Cm 6989 2006), para 3.21. ² Dr Stephen Minger, in evidence to the Joint Committee on the Human Tissues and Embryos (Draft) Bill, HL 169-I, HC 630-I, 2006–07, para 73 and q 598. ³ Science and Techology Committee, ‘Human Reproductive Technologies and the Law’, HC 7, 2004–5, para 290 (emphasis retained). ⁴ For discussion of some contrasting approaches, see Brownsword, R., Rights, Regulation and the Technological Revolution (Oxford: Oxford University Press, 2008), esp ch 2.

The Regulatory Enterprise. Tony Prosser. © Oxford University Press 2010. Published 2010 by Oxford University Press.

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a role, but the division of responsibilities has proved highly controversial. The second is the extent to which the HFEA has shown itself a competent regulator; there have been criticisms of delay, inconsistency, and lack of transparency. It should be noted, however, that it is often difficult to separate such criticisms of lack of good administration from underlying disputes as to the ethical legitimacy of HFEA decisions; debate on human fertilisation and embryology is pervaded by the sound of the grinding of axes.

The background of the HFEA The Authority had its origins in the Warnock Report of 1984, which recommended the establishment of a new statutory licensing authority for infertility services and research.⁵ There should be a significant representation of scientific and medical interests among the membership, but it should not be exclusively, or even primarily, a medical or scientific body as ‘[i]t is concerned essentially with broader matters and with the protection of the public interest’. Thus membership should be wide-ranging, with substantial lay representation. In view of this it is surprising that the immediate form of regulation set up was self-regulation through a Voluntary Licensing Authority; however in late 1987 the government issued a White Paper proposing the establishment of an independent statutory licensing authority.⁶ An alternative would have been to entrust decisions directly to ministers, an option supported by some who favoured prohibiting research involving human embryos. In second reading debate on the resulting Human Fertilisation and Embryology Bill, the Secretary of State rejected this option on that grounds that it would place Ministers and the House in a permanently difficult position if, as a semipolitical issue, it was said that Ministers should take this or that view on medical or scientific matters . . . the code of practice of the authority will have to be submitted to the Secretary of State and laid before the House, but some independence in medical and scientific matters is in the interests of Parliament and the Secretary of State.⁷

This question of the appropriate division of labour between the Authority, ministers, and Parliament has been central to later controversies. The HFEA was finally established by the Human Fertilisation and Embryology Act 1990, in a form similar to other regulators; it takes the form of a body corporate not acting on behalf of the Crown but appointed by the minister; the chair, deputy chair, and at least half the members must not be doctors or engaged

⁵ Report of the Committee of Inquiry into Human Fertilisation and Embryology (Cmnd 9314, 1984), paras 13.3–13.14. ⁶ Department of Health and Social Security, Human Fertilisation and Embryology: A Framework for Legislation (Cm 259, 1987). ⁷ 170 HC Deb (2 April 1990), cols 919–20.

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in the activities regulated.⁸ Further important changes have been made by later legislation, thus the Human Reproductive Cloning Act 2001 created an offence of placing a human embryo in a woman other than by fertilisation after a High Court decision that the Authority had no powers to refuse a licence for cell nuclear replacement.⁹ The Human Fertilisation and Embryology Authority (Research Purposes) Regulations 2001¹⁰ extended the purposes for which licences could be granted for embryo research beyond reproductive purposes to include increasing the knowledge of embryos and of treatments for serious disease, allowing therapeutic cloning. The context in which the HFEA works is a rapidly changing one, and a government review in 2006 (after an earlier review of Department of Health arm’s length bodies recommending rationalization) proposed major reform to merge the Authority into a Regulatory Authority for Tissue and Embryos.¹¹ This proposal was dropped after criticism of the scope of the new Authority; the Joint Select Committee on the draft Bill found a large majority of witnesses to be hostile to the proposals, and itself found the evidence against them ‘convincing and overwhelming’.¹² The Human Tissue and Embryos Bill which had already been drafted was modified to make more modest changes, and re-named the Human Fertilisation and Embryology Bill. Not only were provisions on embryo research controversial, but the Bill also provided an opportunity to debate issues of abortion, and these delayed its passage through Parliament, to the frustration of the HFEA. Reform in these controversial areas is never a straightforward matter. Whilst making important substantive reforms to the law, the resulting Human Fertilisation and Embryology Act 2008 kept the existing institutional arrangements largely intact.

The HFEA’s functions The functions of the HFEA can be summarized as follows (further details of the legal provisions will be given later). According to its Annual Report, [w]e are the UK’s independent regulator of treatment using eggs and sperm, and of treatment and research involving human embryos. We set standards for, and issue licences to centres. We provide authoritative information to the public, in particular for people seeking treatment, donor-conceived people and donors. We determine the policy framework for fertility issues, which are sometimes ethically and clinically complex.¹³ ⁸ Human Fertilisation and Embryology Act 1990, s 5 and sch 1, para 4. ⁹ R (on the application of Quintavelle) v Secretary of State for Health [2001] EWHC Admin 918, [2001] 4 All ER 1013. The decision was later reversed by the Court of Appeal and House of Lords; see [2002] EWCA Civ 29, [2002] QB 628 and [2003] UKHL 13, [2003] 2 AC 687. ¹⁰ SI 2001/188. ¹¹ Department of Health, Review of the Human Fertilisation and Embryology Act. ¹² Joint Committee on the Human Tissues and Embryos (Draft) Bill, paras 64, 92. ¹³ Human Fertilisation and Embryology Authority, ‘Annual Report and Accounts 2008/09’, HC 693, 2008–09, 8.

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As the final sentence suggests, the regulatory responsibility for policy is particularly controversial. The statutory functions are: • licensing and inspecting clinics carrying out IVF and donor insemination treatment; • licensing and inspecting establishments undertaking human embryo research; • licensing and inspecting the storage of gametes (eggs and sperm) and embryos; • maintaining a formal register of licences granted; • producing and maintaining a Code of Practice providing guidelines to clinics and research establishments about the proper conduct of licensed activities; • keeping a formal register of information about donors, licensed treatments, and children born as a result of those treatments; • maintaining a register of certain serious adverse events or reactions; • investigating serious adverse events and reactions and taking appropriate control measures; • responding to a request from an authority in another EU/EEA state to carry out an inspection relating to a serious adverse event or reaction; and • collaborating with the competent authorities of such states. Some more general functions include: • publicizing the Authority’s role and providing advice to the donor-conceived, donors, clinics, research establishments, and patients; • reviewing information about embryos and developments in embryo research, and the provision of fertility treatment services and activities; and • advising the Secretary of State for Health on request upon developments in these fields.¹⁴

The Authority in regulatory space: the institutions Some of the activities set out above will be relatively uncontroversial, and resemble those carried out by other regulatory bodies. Moreover, the HFEA is similar to other regulators to be discussed in this book in its basic structure. Thus the Human Fertilisation and Embryology Act 1990 set out a series of prohibitions of unlicensed activities in relation to embryos, and gametes, and these are now substantially amended by the 2008 Act.¹⁵ The Authority is established as a body corporate not acting on behalf of the Crown but appointed by the minister, ¹⁴ ‘Annual Report 2008/09’, 8–9. ¹⁵ Human Fertilisation and Embryology Act 1990, ss 3–4.

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and is given licensing powers.¹⁶ Members are appointed for a maximum of three years, although the appointment may be renewed, and may be dismissed only for absence from meetings for six months, bankruptcy, or for being unable or unfit to discharge the functions of a member.¹⁷ Other statutory provisions set out the general conditions to be included in licences and list the activities for which licences may be granted; further changes are made to these provisions by the Human Fertilisation and Embryology Act 2008.¹⁸ The 1990 Act also requires the Authority to keep under review information relating to embryos and treatment services and to provide advice.¹⁹ The accounts of the HFEA are audited by the Comptroller and Auditor-General.²⁰ However, it is when one moves outside these fairly standard regulatory provisions that controversy has been strongest; in particular, the policy-related role of the Authority has given rise to problems. Thus a highly critical Parliamentary committee pointed to potential conflict between its roles of regulation, providing advice to ministers and issuing guidance, claiming that on occasions the Authority had crossed the boundary into campaigning for legislative change. Thus ‘while the regulatory role obliges it to work within the Act and discharge its duties accordingly, the advisory function challenges it to find fault with the legislation on behalf of the Government . . . It is reasonable for the Authority to draw attention to problematic areas in legislation, indeed it would be negligent if it were not to do so, but there is a clear distinction between drawing attention to problems and inconsistencies and espousing solutions.’²¹

Other regulators also provide advice to ministers, as we shall see, without attracting such strong criticism. This is, in fact, one example of a more general problem; the Authority is criticized for taking decisions on highly-contested issues which are alleged to be properly for Parliament. One answer would be for policy to be more explicitly clarified in legislation, but this is impracticable in such a rapidly changing field, although the government has accepted that legislation should be more explicit and should clarify the policy-making role of the regulator.²² Under the existing legislation, the House of Lords has emphasized that the Authority has a wide discretion and an important role exercising ethical judgment: ‘[t]he Authority was specifically created to make ethical distinctions and, if Parliament should consider it to be failing in that task, it has in reserve its regulatory powers . . .’.²³ ¹⁶ Sections 5, 11 and sch 1; see also the Human Fertilisation and Embryology Act 2008, s 11. ¹⁷ Schedule 1, para 5. ¹⁸ Sections 12–15 and sch 2. ¹⁹ Section 8. ²⁰ Section 6. ²¹ Science and Technology Committee ‘Human Reproductive Technologies and the Law’, paras 208–17 (emphasis retained). ²² Department of Health, Review of the Human Fertilisation and Embryology Act – A Public Consultation (2005), paras 2.14–2.15. ²³ R (on the Application of Quintavalle) v Human Fertilisation and Embryology Authority [2005] UKHL 28, [2005] 2 AC 561, [28] per Lord Hoff man. The concluding reference is to the minister’s power to make regulations on the subject of the litigation in question.

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Turning first to the relationship between the HFEA and the minister, in many ways the Secretary of State has a similar role to that in relation to other regulatory bodies. He or she is responsible under statute for appointments, though in practice this is now largely a matter for the NHS Appointments Commission. Appointments are a particularly important matter because of the allegations of a failure to appoint to membership those opposed to current policies. The House of Commons Science and Technology Committee stated that ‘[w]e have sympathy with the view that those with principled opposition to assisted reproduction . . . have been unreasonably excluded from a place at the principal forum for debates on assisted reproduction and embryo research’, although it considered any change in appointments policy to reflect this should only be as part of more fundamental reform.²⁴ In fact, as the basic policies on assisted reproduction are laid down in statute, it is difficult to see how the position could be otherwise, as it would seem odd to require the administration of a regulatory scheme by those opposed to its fundamental principles. The problem once more is that of the division of labour between the Authority, the Secretary of State, and Parliament. The Act does contain important requirements on the membership of the Authority; there must be a lay chair, deputy chair, and lay majority of members.²⁵ A further important ministerial power is that of approval of the Code of Practice.²⁶ The Science and Technology Committee noted that the Code is the most important means in practice of communicating policy decisions. Although not legally binding in itself, a licence may be refused if the Code is not observed.²⁷ It is revised periodically and updated by letters from the HFEA. The Code requires both ministerial approval and laying before Parliament, a potentially important means both of ensuring that the matters set out in the code do comply with policy decisions taken by government and of securing some Parliamentary scrutiny; this is however limited as no further requirement beyond that of laying is included. Should the minister reject the Code he must give reasons to the Authority. No amendments of substance to these provisions are made by the 2008 Act. A new, revised 7th edition of the Code was issued in 2007, attempting to adopt a more principles-based approach to regulation in line with better regulation expectations and to take into account the European Tissues and Cells Directive, and an 8th edition took effect with the main provisions of the 2008 Act in October 2009. The Secretary of State also has important rule-making powers under the 1990 Act in a number of different areas. Thus, in the judicial decision quoted above emphasizing the extent of the Authority’s discretion on matters of ethical principle, Lord Hoffman noted the power of the minister to issue regulations ²⁴ See, ‘Human Reproductive Technologies and the Law’, para 207 (emphasis retained). ²⁵ Schedule 1, para 4. ²⁶ Sections 25–26. ²⁷ ‘Human Reproductive Technologies and the Law’, para 221.

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(in this case requiring an affirmative resolution of each House of Parliament) which would add new activities to the list of those prohibited.²⁸ The Act also empowered the Secretary of State to issue regulations concerning the proceedings of the Authority’s licence committees and on the handling of any appeals by the Authority itself; these powers are retained in amended form in the 2008 Act.²⁹ A particularly striking example of the scope of regulation-making powers occurred in relation to the creation of human-animal hybrid or chimera embryos, one of the most ethically fraught matters in embryology. The government proposed to use the Human Tissue and Embryos Bill to clarify the law in this area but also to prohibit the creation of such embryos, whilst leaving the door open for their legalisation through the use of regulations later. This was heavily criticized by the House of Commons Science and Technology Committee; ‘[w]e find the Government proposals . . . unnecessarily prohibitive and recommend the Government ensure that its draft Bill reflects the liberal view it claims to be taking in opening the door to research using human-animal chimera or hybrid embryos’.³⁰ Similar criticisms were made by the Joint Committee on the draft Bill.³¹ As a result of the two reports and other criticism, the government decided to revise the Bill to devolve decision-making to the regulator to permit or refuse licences in relation to inter-species embryos subject to the limitations imposed by legislation. After strongly divided debate, this provision was approved by Parliament; it contains regulation-making powers to permit the Secretary of State to amend the relevant definitions.³² In this case, then, a government proposal to determine issues of basic principle through later regulations was not implemented after strong criticism; however, considerable scope still exists for using regulations to make important decisions determining the scope of the policy now included in the Act. Further examples of the complex relationship between the HFEA and the Secretary of State will be discussed in the section on deliberation below when considering consultations carried out in parallel by both. Moving on to relations between the Authority and Parliament, this is where the issues of legitimacy have arisen in their starkest form. To give some examples, the House of Commons Science and Technology Committee in 2002 took issue with the assertion of a former chair of the HFEA that its having taken a controversial decision on preimplantation genetic diagnosis ‘ “protects Members of Parliament from direct involvement in that sort of thing” ’. According to the Committee, ‘Parliament does not need protecting and democracy is not served by unelected quangos taking decisions on behalf of Parliament. . . . we cannot ²⁸ R (on the Application of Quintavalle) v Human Fertilisation and Embryology Authority [2005] UKHL 28, [2005] 2 AC 561, [29]. ²⁹ 2008 Act, s 21; see now the Human Fertilisation and Embryology Authority (Appeals) Regulations 2009, SI 2009/1891. ³⁰ ‘Government Proposals for the Regulation of Hybrid and Chimera Embryos’, HC 272, 2006–07, para 88 (emphasis retained). ³¹ Joint Committee on the Human Tissues and Embryos (Draft) Bill, paras 161, 178. ³² 2008 Act, s 4.

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accept that Parliament should not be asked to consider major ethical issues for fear that elected representatives might come to a view that is different from that of the scientific community’.³³ The split report in 2005 from the Committee made similar points about Parliament’s role and concluded that ‘[a]n arms’ length body such as the HFEA has certain advantages. It is insulated against political pressures and vagaries and . . . it can make changes fairly rapidly. . . . [however] [w]e remain convinced that a larger role for our democratically elected Parliament would give the public greater confidence that the big ethical issues of the day are being given adequate attention.’³⁴

This criticism was in part accepted by the government in its proposals for a new regulatory body. It stated that, whilst accepting that the current model with Parliament setting prohibitions and parameters within which the licensing authority operates had worked well, future legislation should be more explicit with greater powers for Parliament to debate and amend the law, and clarification of the extent of any policy-making role of the regulator.³⁵ As mentioned above, there has been some attempt to achieve this after pressure on the government on the question of hybrid and chimera embryos. A more developed set of proposals for improving the relationship came from the Joint Committee on the Human Tissue and Embryos (Draft) Bill which recommended that the Bill be amended to provide a new framework based on the principle of ‘devolved regulation’, by which legislation should devolve regulatory authority and decision-making to the regulator, which in turn should be given the power in legislation to define areas of exemption within its regulatory remit, thus providing a framework of ‘permitted regulation’ giving greater freedom and authority to the regulator and to clinicians except where there was good reason to do otherwise.³⁶ Th is proposal was, however, rejected by the government. It claimed that such a framework would create a lack of accountability; the applicable EU Directive would prevent excluding standard IVF treatment from regulation, and bringing all human-animal research within the Authority’s remit with a power to make exemptions would cause uncertainty about the scope of regulation, would be confusing and would open up the HFEA to increased litigation and judicial review. Instead, the Authority would be required to adopt lighter touch regulation and have regard to better regulation principles.³⁷ Despite the breadth of some of the powers granted to the HFEA by the new legislation, such a broad system of delegation would ³³ ‘Developments in Human Genetics and Embryology’ HC 791, 2001–02, paras 26, 28. ³⁴ ‘Human Reproductive Technologies and the Law’, para 356 (emphasis retained). ³⁵ Department of Health, Review of the Human Fertilisation and Embryology Act – A Public Consultation, paras 2.14–2.15. ³⁶ Joint Committee on the Human Tissues and Embryos (Draft) Bill, para 56; see also paras 105, 132, 178. ³⁷ Government Response to the Report from the Joint Committee on the Human Tissue and Embryos (Draft) Bill (Cm 7209, 2007), paras 8–13.

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have represented a step too far for both the government and Parliament. Rather similar proposals from the Science and Technology Committee for delegation incorporating a power for the Secretary of State to stop new procedures for a limited period whilst deciding whether or not to make regulations were also not taken forward in the new legislation.³⁸ Apart from these high-level issues of the relationship between the HEFA, government and Parliament, there are also other jurisdictional problems and uncertainties, for example between the Authority and the UK Stem Cell Bank.³⁹ These cannot be discussed in detail here, but other examples of closely related bodies include the Human Tissue Authority, the Medicines and Healthcare Products Regulatory Agency (an executive agency of the Department of Health), the Care Quality Commission (Chapter 6 below), and ethical oversight bodies for research and treatment.⁴⁰ As in the case of other regulators considered in this book, the EU dimension has also become important through the European Tissues and Cells Directive.⁴¹ This came fully into force in the UK in July 2007 and inter alia requires that all assisted conception services involving gametes and embryos are regulated and meet certain standards. The Directive was one reason for the now abandoned proposal to merge the HFEA with other bodies to create a new Regulatory Authority for Tissue and Embryos. Despite the failure to carry this forward, the HFEA has reported that the Directive has been successfully implemented through a process of relicensing for existing clinics and services new to regulation. As with other regulators, then, the HFEA is part of a web of different regulatory bodies and different levels of government; the regulatory space is highly complex. As Roger Brownsword has put it, an agency ‘will typically form part of an institutional set, comprising the agency, the legislature, the executive and the courts. The significance of this is that we want the set as a whole, not simply the agency in isolation, to make regulatory sense’.⁴² These relationships have proved the source of great controversy and of serious problems of legitimacy, and the problems remain unresolved. I shall return to this point in my conclusion and shall ask whether the difficulties do suggest that social regulation through independent agencies is illegitimate, or whether the reality is actually more nuanced than this.

³⁸ ‘Government Proposals for the Regulation of Hybrid and Chimera Embryos’, para 100; see Brownsword, Rights, Regulation and the Tecnhological Revolution, 289. ³⁹ For a detailed discussion, see Morgan, R., ‘A Lack of Foresight? Jurisdictional Uncertainties in the Regulatory Interface Between the HFEA, the UK Stem Cell Bank and Beyond’ (2007) 27 Legal Studies, 511–35. ⁴⁰ For a summary of the roles of these bodies, see Science and Technology Committee, ‘Human Reproductive Technologies and the Law’, paras 322–55. ⁴¹ Directive 2004/23/EC on setting standards of quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells [2004] OJ L102/48. ⁴² Rights, Regulation and the Technological Revolution, 300.

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The Authority in regulatory space: the duties Compared to other regulators in this book (in particular the public utility regulators), the HFEA is unusual in that there are relatively limited general duties applying to it contained in the legislation. There are, of course, strong prohibitions in the 1990 legislation and these are substantially redrafted in the 2008 Act, reflecting, for example, the decision to permit research involving interspecies embryos. The 1990 Act also sets out the functions of the Authority in section 8 (amended also in the 2008 Act), but does not provide a list of duties. Indeed, the HFEA itself in evidence to the 2005 select committee inquiry suggested that there might be a case for revisiting section 8 to define more clearly the Authority’s regulatory aims.⁴³ Reflecting this, as mentioned above, the House of Lords in litigation against the Authority emphasized the broad scope of its discretion, especially on ethical matters.⁴⁴ The 2008 Act at first sight appears to remedy this absence through inserting a new section 8ZA into the 1990 Act. However, this is concerned only with better regulation principles, providing that the Authority must carry out its functions effectively, efficiently, and economically and have regard to the principles of best regulatory practice. Section 6 of the 2008 Act requires the Authority itself to maintain a statement of the general principles which it believes should be followed in carrying out its functions, and to promote compliance with the requirements of the Act and the Code of Practice. The Act also requires that no research licence be granted except for a number of statutory purposes, such as promoting advances in the treatment of infertility, but this is far from providing a set of general normative principles.⁴⁵ Thus the HFEA has to take its decisions in a surprising normative vacuum. There are important international obligations in the area but these are of limited force in relation to regulatory decision-making. The UK is not a signatory to the 1997 European Convention on Human Rights and Biomedicine, whilst the UN Universal Declaration on the Human Genome and Human Rights and UNESCO’s Universal Declaration on Bioethics and Human Rights remain at a high level of normative generality, more specific norms having proved impracticable due to fundamental ethical disagreement on the permissibility of reproductive cloning for research purposes.⁴⁶ The European Convention on Human ⁴³ ‘Human Reproductive Technologies and the Law’, evid 208. ⁴⁴ R (on the Application of Quintavalle) v Human Fertilisation and Embryology Authority [2005] UKHL 28, [2005] 2 AC 561. The implications are discussed in Brownsword, Rights, Regulation and the Technological Revolution, 174–84. ⁴⁵ Schedule 2, para 3(2) as amended by the Human Fertilisation and Embryology Authority (Research Purposes) Regulation 2001, SI 2001/188. See now the 2008 Act, sch 2, para 6. ⁴⁶ For the Unesco Declaration see Brownsword, Rights, Regulation and the Technological Revolution, 31–5.

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Rights, which is of course enforceable in UK courts as a result of the Human Rights Act, will be considered below. The 2005 Select Committee was dismissive of international agreements in general; ‘[c]harters, declarations and treaties no doubt keep diplomats busy and fulfilled but there are some ethical issues which are the domain of nation states and cultures. . . . Such charters can only produce vague, lowest common-denominator agreements that are of questionable clarity and dubious eff ectiveness’.⁴⁷ The exception is, of course, the European Tissues and Cells Directive, which contains a number of binding obligations applying to competent authorities in Member States, for example proper supervision of human tissue and cell procurement, the accreditation or licensing of tissue establishments, organizing inspections, and control measures, etc. Even in this case, however, there is nothing resembling a clear set of normative obligations to shape how the authorities take their decisions. The overall position of the HFEA is thus an apparently paradoxical one; its decisions involve basic ethical considerations much more than those of any other regulator considered in this book, yet it is provided with little normative guidance on how it is to decide. The reason for the apparent paradox lies in the problems discussed earlier. The ethical disagreements are particularly intense and divisive in this field, and government has proved reluctant to provide clarification. The HFEA has of course had to develop its own objectives through the process of corporate planning, but these are largely procedural in nature covering, for example, commanding stakeholder confidence and informing patient choice.⁴⁸

The Human Fertilisation and Embryology Authority and the regulatory models Regulation for efficiency and consumer choice At first sight the work of the HFEA would appear to have little in common with that of economic regulators, discussion of which has dominated much of the regulatory literature. Indeed, one of the major bases of regulation in the area of fertilisation is that ‘we should view children as gifts, not as products’ and the same argument is consistently made about human embryos.⁴⁹ One of the first issues to face the Authority was that of payments to gamete donors, prohibited by the Act without the Authority’s consent.⁵⁰ The latter issued directions limiting the value of money or other benefits. It later consulted on a possible total ban, and the current position is that there may only be payment of reasonable expenses and compensation for loss of earnings (though this may soon be reviewed because of ⁴⁷ ‘Human Reproductive Technologies and the Law’, para 387 (emphasis retained). ⁴⁸ See Human Fertilisation and Embryology Authority, Business Plan 2009–2010 (2009), 7. ⁴⁹ ‘Human Reproductive Technologies and the Law’, para 112, quoting Professor Alastair Campbell, evid q 357. ⁵⁰ Section 12(1)(e).

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shortage of donors). Thus this is one area where a quite deliberate decision has been taken that market considerations are inapplicable. Having said this, we can see a utilitarian and cost-benefit approach in operation in some other areas regulated by the Authority. As Brownsword has identified, one of the strands within the current debates on cloning and embryo research is a utilitarian one, central to which is a calculus of costs and benefits and within which the central right is one of consumer choice.⁵¹ Indeed, as early as the Warnock Report in 1984, this strand was identified as important in relation to human fertilisation, and was central to its recommendations.⁵² This view of course gives a substantial role to the market, and this is recognized through market provision in some of the matters which the Authority regulates, for example competition between fertility clinics in the provision of services. The HFEA has no role in enforcing competition law, for this will be for the general competition authorities were clinics to engage in, for example, price fi xing, but it does have a major consumer protection role. This is central to its function of enforcement and inspection of clinics, which provide services for payment and for which there is a market, and raises questions both of the adequacy of service standards and of economic exploitation relating, for example, to whether adequate information and counselling services are provided to those seeking treatment.⁵³ The HFEA now requires patients to be provided with costed treatment plans, and publishes performance information about treatment success rates and clinic performance. Turning to the style of regulation, given this role which is analogous to that of the economic regulators, it is not surprising that the HFEA is required to have regard to the principles of better regulation, especially as in the past it has been seriously criticized for failing to meet their requirements.⁵⁴ The Authority has repeatedly emphasized its commitment to the principles.⁵⁵ Further provision is made by the Human Fertilisation and Embryology Act 2008, s 7 of which requires the Authority to carry out its functions effectively, efficiently, and economically, and to have regard to the principles of best regulatory practice (including those under which regulatory activities should be transparent, accountable, proportionate, consistent, and targeted only at cases in which action is needed). The HFEA is also subject to the Regulators’ Compliance Code (to be discussed in Chapter 10 below). The HFEA also follows approaches characteristic of the economic regulators in adopting a risk-based approach to regulation. Thus in the Annual Report for 2004–05 it stated that ‘in line with the government’s call for “better regulation”, we are increasingly moving towards a risk-based process that allows ⁵¹ Rights, Regulation and the Technological Revolution, 36–7. ⁵² Paragraph 4. ⁵³ Code of Practice (8th edn, 2009), sections 3 and 4. ⁵⁴ Science and Technology Committee, ‘Human Reproductive Technologies and the Law’, paras 283–90. ⁵⁵ See, eg Human Fertilisation and Embryology Authority, ‘Annual Report 2005/06’, HC 1444, 7–8.

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well-performing clinics to “earn autonomy” by lighter touch regulation. This will allow more support and attention to be focused on clinics experiencing difficulties’.⁵⁶ In a related development, the Authority has developed a model process for conducting impact assessments and for costing the implications of simplification plans, which includes the assessment of potential equalities impacts for all new major activities and projects.⁵⁷ A report on the HFEA’s implementation of the Hampton principles (see Chapter 10 below) concluded that it demonstrated good compliance with them in some areas but that there was room for improvement in others, including the consideration of risk in its decision-making and more effective use of sanctions.⁵⁸

Regulation and human rights A utilitarian approach with an emphasis on consumer choice does not, however, provide the only, or even the major, set of underlying principles in this area. As the Warnock approach identified, alongside it is a different approach based on rights: ‘[m]oral questions, such as those with which we have been concerned are, by definition, questions that involve not only a calculation of consequences, but also strong sentiments with regard to the nature of the proposed activities themselves’.⁵⁹ This concern has grown since: ‘Warnock is driven by a utilitarian ethic with a certain amount of hedging . . . the culture today is less utilitarian, I think, because politically we are committed more to a human rights’ agenda and maybe that is where we should be starting our thinking about these matters in terms of individual rights rather than in terms of general utilities’.⁶⁰ This may move us away from choice: ‘it may be necessary to regulate against the apparent enhancement of choice for fear that we will otherwise transform the setting in which choice itself is valued – and knowing where to draw the line truly would be a dilemma for regulators’.⁶¹ Of course, many of the international instruments in this area are expressed in terms of basic rights.⁶² For example, the Unesco Universal Declaration on Bioethics and Human Rights starts from the principle that ‘[h]uman dignity, ⁵⁶ Human Fertilisation and Embryology Authority, ‘Annual Report 2004/05’, 13. See also its Corporate Plan 2004–9 (2004), para 5.2. ⁵⁷ Human Fertilisation and Embryology Authority, ‘Annual Report 2007/08’, HC 611, 12. ⁵⁸ Department for Business, Innovation and Skills and Better Regulation Executive, Human Fertilisation and Embryology Authority – A Hampton Implementation Report (2009). ⁵⁹ Paragraph 4. ⁶⁰ Brownsword, in evidence to the Joint Committee on the Draft Human Tissues and Embryos Bill, q 2. For discussion of the role of a rights-based approach in this context, see Brownsword, Rights, Regulation and the Technological Revolution, 37–9. ⁶¹ Brownsword, ‘Regulating Human Genetics: New Dilemmas for a New Millennium’ (2004) 12 Medical Law Review 14–39, at 22. ⁶² For a useful summary, see Science and Technology Committee, ‘Human Reproductive Technologies and the Law’, 15–23.

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human rights and fundamental freedoms are to be fully respected’.⁶³ From the point of view of a regulator, the European Convention on Human Rights will be of particular importance, given that it is enforceable against public authorities in domestic courts by virtue of the Human Rights Act 1998. The most relevant rights are Art 2 (the right to life), Art 8 (the right to respect for private and family life) which is potentially applicable to reproductive decisions, Art 12 (the right to marry and form a family), and Art 14 (the prohibition of discrimination). So far the European Court of Human Rights has resisted attempts to draw it into the most fundamental issue of all, that of whether a right to life extends to the embryo itself. In an important case on the future of frozen embryos where one partner refused consent for their implantation, the majority of the Grand Chamber accepted that the embryos had no independent rights or interests in English law and so no right to life within the meaning of Art 2. The Court also accepted that the margin of appreciation to be afforded to national authorities in this area had to be a wide one and there had been no breach of Art 8; it could not undertake proportionality review of the principled decision in the statute to require both parties’ consent.⁶⁴ The case raised not only the right to life but also the question of the right to informed consent. This is particularly central to rights-based approaches: ‘human rights theorists hold that what counts is respect for individual autonomy, entailing recognition of the right of individuals to make their own choices, to exercise control over their own person, property, and privacy, and to say “yes” or to say “no”. Taking individuals seriously, taking rights seriously, means taking consents and refusals seriously’.⁶⁵ Informed consent also illustrates vividly how rights not only provide a constraint on the regulator’s role, but how the regulator has as one of its central roles the protection of the right.⁶⁶ Indeed, the prohibition of payments to donors for gametes referred to above is an element in protecting this right through avoiding ‘undesirable commercialization’.⁶⁷ The importance of the right to informed consent in the context of the work of the HFEA is shown by the requirement in the domestic legislation that it must be included as a condition in all licences.⁶⁸ These provisions formed the basis for a decision by the High Court recognizing that ‘the 1990 Act sets an absolute, clear and bright line which prevents storage [of gametes] for use in the UK, and use in the UK, without effective consent’.⁶⁹ This strong position

⁶³ Article 3(1); for discussion see Brownsword, Rights, Regulation and the Technological Revolution, 32–5. ⁶⁴ Evans v UK (2008) 46 EHRR 34. ⁶⁵ Brownsword, Rights, Regulation and the Technological Revolution, 73. ⁶⁶ See the Code of Practice, section 5. The issue of informed consent is discussed at length from a rights viewpoint in Brownsword, Rights, Regulation and the Technological Revolution, ch 3. ⁶⁷ House of Lords Select Committee on Stem Cell Research, ‘Stem Cell Research’, HL 83, 2001–02, para 21. ⁶⁸ Human Fertilisation and Embryology Act 1990, s 12(1)(c) and sch 3. ⁶⁹ L v Human Fertilisation and Embryology Authority [2008] EWHC 2149 (Fam); [2008] 2 FLR 1999 [77] per Charles J.

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was held to be compatible with the European Convention in the Evans case, given the extensive margin of appreciation provided by Art 8.⁷⁰ Other rights arguments underlie much of the debate in issues of substance for the Authority; for example, the consultation relating to the welfare of the child principle in fertility treatment, to be discussed in detail below, was concerned centrally with the issue of whether the current provisions involved discrimination through the requirement to consider the need of the child for a father, including a possible breach of Arts 8, 12, and 14.⁷¹ The issue has now been resolved through legislative action after extensive debate.⁷² A further issue of potential importance is that of EU law. The EU Charter of Fundamental Rights includes in Art 3 the right to respect for physical and mental integrity, and the right to informed consent; it also prohibits eugenic practices, making the human body or body parts the source of financial gain, and reproductive cloning. In the past the areas regulated by the HFEA were outside EU competence, but the European Tissues and Cells Directive now applies in some of these areas. Finally, in common with other regulators, the HFEA will be subject to the procedural rights in Art 6 of the Convention insofar as its decisions involve civil rights and obligations. According to the government, the Human Fertilisation and Embryology Bill was Convention compliant on these rights (and also on the substantive rights referred to above). This will depend on the extent to which the new committees of the authority which will take licensing decisions are effectively independent, and the extent to which the appeal right to the Authority, and on point of law to the courts from it, satisfies Art 6.

Regulation and social solidarity We have seen above that the HFEA is largely a rights-based regulator which also has important functions relating to consumer protection and consumer choice. Its role in promoting social solidarity may appear less obvious, but it can be seen as doing so in two ways. First, all the areas in which the Authority works are highly contentious and potentially divisive. Even the very existence of the Authority means that some attempt can be made to avoid the most divisive consequences of the arguments; ‘[o]ne of the benefits of regulation is that it can secure and maintain consensus in a controversial area’.⁷³ As the otherwise critical report of the Science and Technology Select Committee put it, ‘we accept that assisted reproduction and research involving the embryo of the human species both remain legitimate interests of the state. Reproductive and research freedoms must be balanced against the interests of society but alleged harms to society, too, should be based on evidence’.⁷⁴ ⁷⁰ ⁷¹ ⁷² ⁷³ ⁷⁴

Evans v UK, at [89]. ‘Human Reproductive Technologies and the Law’, paras 98–104. Human Fertilisation and Embryology Act 2008, ss 14(2) and 23. Annual Report 2005/06, HC 1444, 3. ‘Human Reproductive Technologies and the Law’, para 46 (emphasis retained).

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Thus the role of mediating and seeking an evidence base for arguments is a crucial justification for the Authority’s role. Another way in which social solidarity is relevant is potentially much more divisive. As Roger Brownsword has demonstrated, alongside the utilitarian and rights-based approaches there is one which he characterizes as that of the dignitarian alliance; one element within this is a communitarian one. Thus ‘if the dignitarian perspective were to be expressed in communitarian terms, it would be said that human dignity is a good which must not be compromised and that any action or practice that compromises the good is unethical irrespective of welfare-maximizing consequences (contrary to utilitarianism) and regardless of autonomy rights or informed consent of the participants (contrary to human rights thinking)’.⁷⁵ Currently, the legislative scheme is incompatible with much of this approach (and this explains the failure to appoint to the Authority those who take it). However, elements in it do go some way to explain restrictions on the free play of markets in this area and also restrictions on permissible scientific research even if justified by its utilitarian consequences. In this sense, the work of the regulator can be seen as partially based on a version of social solidarity with dignitarian roots. This is particularly so in relation to embryo research, where a human rights-based justification is difficult to apply in the absence of recognition of a right to life on the part of the embryo, something which the European Court of Human Rights has refused to grant.⁷⁶

Deliberation Just as the Act does not contain substantive duties to shape the discretion of regulators, it is also markedly lacking in procedural duties in relation to general consultation and policy-making, as distinct from in the individual licensing function. Even in the case of the Code of Practice, which as we have seen is absolutely central to the Authority’s regulatory tasks, the only duties are to send a draft to the Secretary of State for approval and to lay it before Parliament, nothing more is required.⁷⁷ Nor is this changed by the 2008 Act, except insofar as one can imply consultative duties from the new requirement to have regard to the principles of best regulatory practice, including transparency and accountability.⁷⁸ In this sense, the legal structure of the HFEA is primitive in comparison with that of later regulators such as the Financial Services Authority where more demanding consultation requirements are included in the statute; this is particularly to ⁷⁵ ‘Regulating Human Genetics’, 20; see also ‘Human Reproductive Technologies and the Law’, 39–41. ⁷⁶ Caulfield, T. and Brownsword, R., ‘Human Dignity: A Guide to Policy-Making in the Biotechnology Era?’ (2006) 7 Nature Reviews Genetics, 72–6. ⁷⁷ Sections 25–26. ⁷⁸ Section 8.

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be regretted given the strong conflicts of views in relation to the areas which the HFEA regulates. Nevertheless, as with other regulators, the HFEA has emphasized its commitment to an open and participative approach. Thus its corporate plan for 2004–09 includes as strategic goals ‘being an open organisation, through excellent communications and working in partnership with stakeholders’ and includes in the corporate goals ‘consulting stakeholders comprehensively on regulation and policy decisions, and giving explanations of decisions . . .’.⁷⁹ It has also made this commitment in evidence to Parliamentary committees, thus in evidence to the 2005 Science and Technology Committee inquiry, the Authority pointed to its wide consultation on its corporate plan and redrafted Code of Practice, the holding of some of its meetings in public, the recruitment of a patient advisory panel, consultation on sex selection which included a MORI poll and focus groups and attracted over 700 written responses, and the commissioning of research on the formation of opinions by stakeholders. It also stated that, whilst the early years of the Authority were characterized by a strong emphasis on confidentiality and at times even secrecy, policy and practice would now be communicated more effectively than in the past.⁸⁰ Indeed, earlier lack of openness had attracted criticism, though some of this came from partisan groups who considered that their views had been ignored, something that is hard to avoid in such an argumentative context as this. However, criticism had also been voiced by the Independent Steering Group which led a consultation in 2002 on the future of the Authority.⁸¹ More recently, even the highly critical 2005 report of the Science and Technology Select Committee acknowledged that ‘[t]he current regime has shown a greater willingness to consult with the professionals and interact with Parliament, which is welcome’; transparency had improved since 2002 with a more comprehensive website, publication of minutes, and agendas of Authority meetings on the Internet and better presentation of policy formation, although according to the Committee the activities of committees, in particular the licensing committees, remained opaque.⁸² Further measures have been taken to increase transparency more recently, thus the 2008 Act requires that donors, the donor-conceived, and researchers have access to the HFEA’s register of data, and it has decided to publish inspection reports on major incidents in fertility clinics.⁸³ The Hampton implementation report in 2009 concluded that effective mechanisms for consultation with stakeholders were in place with a very good two-way communications network; overall its examination suggested that transparency was now far stronger than earlier examinations had suggested.⁸⁴

⁷⁹ Paragraphs 1.3, 5.3. ⁸⁰ ‘Human Reproductive Technologies and the Law’, evid 209–11. ⁸¹ Corporate Plan 2004–9, para 3.4. ⁸² ‘Human Reproductive Technologies and the Law’, paras 286, 288. ⁸³ Section 24. ⁸⁴ Department for Business, Innovation and Skills and Better Regulation Executive, Human Fertilisation and Embryology Authority.

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Before discussing policy-making and licensing decisions in greater detail, what participatory mechanisms does the HFEA now employ? Examples are the establishment of an on-line Patient Consultative Panel to feed patients’ ideas into the decision-making process, holding stakeholder events (eight in 2005–06) including an annual conference for stakeholders, media, and the public and an Annual Research Conference.⁸⁵ Discussions are also held to gather information from a Licensed Centres Panel. The White Paper which led to the Bill undertook that Expert Advisory Panels would be established to provide a more formal source of expertise. This was required in the original draft Bill but was removed when it was redrafted because of the abandonment of the merger proposals. We have seen already that it is in relation to policy-making that the role and legitimacy of the HFEA have been particularly controversial. What are the arrangements for consultation and participation in policy-making? It should first be noted that the HFEA is not the only institution with a role here; apart from that of the Secretary of State, that of the Human Genetics Commission is also important. This is an advisory non-departmental body set up to analyze current and potential developments in human genetics and to advise ministers, and also to consult the public and other stakeholders and to encourage debate on human genetics technologies.⁸⁶ The Commission has used a variety of consultative techniques, including setting up a Consultative Panel composed of people affected by a genetic disorder which holds regular events with the Commission, use of a Citizens’ Jury, and establishing a Public Involvement Monitoring Group to co-ordinate public engagement. It has also established a Citizens’ Inquiry into the forensic use of genetic information. It will now be helpful to examine a couple of examples of consultation by the HFEA itself in highly controversial areas. The first is the Welfare of the Child consultation, launched in the publication Tomorrow’s Children in 2005.⁸⁷ The Act required that account must be taken of the welfare of any child who might be born as a result of treatment, including the need of that child for a father, and that this must be included in HFEA’s own Code of Practice providing more detailed guidance.⁸⁸ This meant that there was a division of labour between the Authority and Parliament on principle and implementation. The HFEA noted that it needed a ‘new steer from Parliament’ as well as considering the detailed matters of implementation. However, whilst we welcome views on the welfare principle itself, the primary purpose of this consultation is not to solicit suggestions on how the Act might be amended; the Department ⁸⁵ ‘Annual Report 2005/6’, HC 1444, 2005–06, 9, 13, 15. ⁸⁶ See Science and Technology Committee, ‘Developments in Human Genetics and Embryology’ (2002), paras 9–13. ⁸⁷ Human Fertilisation and Embryology Authority, Tomorrow’s Children: A Consultation (2005). Characteristically, the Science and Technology Committee’s 2005 report could not resist a sneer, referring to the ‘grandly entitled’ paper: ‘Human Reproductive Technologies and the Law’, para 95. ⁸⁸ Human Fertilisation and Embryology Act 1990, ss 13(5), 25(2).

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of Health is carrying out its own review of the Act and will be conducting a public consultation . . . It is expected that the Department’s review will include consideration of the welfare provision in the Act. . . . This consultation is designed to gather views on how the Authority’s guidance contained within the Code of Practice could be updated.⁸⁹

Inevitably, in considering future guidance, the consultation included discussion of different interpretations of Parliament’s intention in the statute and different interpretations of the statutory provision. The process of consultation involved, first, research through a literature review, comparison with other countries and a survey of clinics and patients. Then a number of options for revising the guidance were put out for responses and four consultative workshops were held in Glasgow, London, Manchester, and in Parliament. There was also a survey of GP’s views. From the process, four different interpretations of the welfare of the child principle emerged, two of which would involve legislative change and so could not be implemented through new guidance. The report accepted an option which created a presumption of treatment to all those who request it, unless there was evidence that the child to be born would face a risk of serious medical, physical, or psychological harm, and appropriate changes to the Code were made.⁹⁰ Alongside this, the government’s review of the statute was taking place, itself involving a public consultation exercise in the latter part of 2005 which received 535 formal responses from around 100 stakeholder groups and organizations; inevitably this involved a large number of other issues including embryo research and the future regulatory structure. The resulting White Paper proposed retaining the welfare of the child principle in the statute, but removing the reference to the need for a father.⁹¹ This proposal was included in the draft Bill; it was considered by the Joint Select Committee which recommended a free vote, whilst proposing retaining the requirement to take into account the need for a father in an amended form to make it clear that it referred to ‘a second parent’ to avoid discrimination.⁹² The issue was hotly debated during the passage of the Bill, and the outcome was that the statutory provision was amended to require ‘supportive parenting’.⁹³ What are we to make of this process? Inevitably there was some confusion reflected in the process between the policy-making role of government and the implementation role of the HFEA. However, the Authority’s consultation was well-focused and played a major role in clarifying the issues and in amassing evidence for Parliament, as well as being concerned with implementation itself. In this sense, rather than Parliament ‘giving a steer’ to the HFEA, the Authority ⁸⁹ Paragraph 1.1. ⁹⁰ Human Fertilisation and Embryology Authority, Tomorrow’s Children – Report of the Policy Review of Welfare of the Child Assessments in Licensed Assisted Conception Clinics (2005). ⁹¹ Department of Health, Review of the Human Fertilisation and Embryology Act, paras 2.20–2.26. ⁹² Paragraph 243. ⁹³ 2008 Act, ss 14(2), 23.

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‘gave a steer’ to Parliament through pushing a difficult and controversial question onto its agenda and providing a better evidence base for its debate. It could not be argued that the Authority pre-empted Parliament’s decision, for Parliament remained free to adopt a different conclusion from that advocated by the HFEA; what the Authority did was to prevent the issue from being ignored and also use more focused, developed, and sophisticated consultation techniques than those possible in the general consultation on a wide range of issues. Despite the legitimacy issues discussed earlier in this chapter, on this occasion the process worked well. The sometimes difficult relationship between HFEA consultation and the role of Parliament was illustrated even more vividly in the case of the consultation on human/animal hybrid and chimera embryos. In this case the consultation followed applications for research licences for using such embryos; the Authority decided to postpone consideration of these until a consultation had been held on matters of general principle. The legal position on the licences was not completely certain, although the Authority believed that it did have power to issue them. However, the purpose of the consultation was not to seek views on the particular licence applications but to seek the views of the public, interest groups, and the scientific community on the broad context of this sort of research.⁹⁴ According to the Select Committee on Science and Technology, the decision to consult was also an attempt to avoid creating grounds for judicial review of the licensing decisions.⁹⁵ In addition to issuing the consultation paper itself, 12 deliberative groups and a public opinion poll were used. Once again, the Department of Health also undertook consultation as part of its general review of the Act; its proposals were criticized by the Select Committee as noted above. The Committee was also critical of the Authority’s approach; [w]e agree with HFEA that the wider issue of whether human-animal chimera or hybrid embryos should be allowed for research should be decided by Parliament. However, it is the role of HFEA to make judgements in areas considered to be within spirit of the HFE Act where its legal advice indicates that it is reasonable to do so. Not to do so undermines the eff ectiveness of an independent regulator.⁹⁶

It was particularly critical of any attempt to use public consultation to clarify the legal position, but had more sympathy with using it to develop broad policy in this area, welcoming consultation on matters of general principle, although according to the Committee it was unfortunate that that the Authority had waited until it had received the licence applications before doing so.⁹⁷ After the consultation the Authority decided to proceed with the licensing process. Once more the issue was strongly contested in the Parliamentary debates ⁹⁴ Hybrids and Chimeras: A Consultation on the Ethical and Social Implications of Creating Human/Hybrid Embryos in Research (2007). ⁹⁵ Paragraph 74. ⁹⁶ Paragraph 64 (emphasis retained). ⁹⁷ Paragraphs 72–6.

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on the Bill, with an eventual decision to permit research on human admixed embryos under strict conditions, again after extremely heated debate.⁹⁸ In this case we see the Authority once more both constrained by the statute but also able to make a useful contribution to the continuing debate in a more focused form than the general consultation which led to the new Act. As the Select Committee noted, it was unfortunate that the consultation only commenced after the research applications were received but nevertheless the Authority’s consultation had a major role to play in the process of education to enhance public understanding of the issues.⁹⁹ Indeed, this consultation was to win in 2009 the Sciencewise award for Excellence in Public Dialogue. The Committee recommended a further means for such education through the creation of a new Parliamentary Standing Committee on Bioethics which would undertake annual scrutiny of the regulatory bodies, make recommendations on the need to amend, or introduce new legislation and scrutinize draft legislation.¹⁰⁰ In the absence of such a committee, the HFEA will have an important role in contributing to education and debate not only on matters directly within its own remit but on possible legislative change, something that is clearly well within its general functions of providing information and advising the Secretary of State. Less needs to be said about the taking of individual licensing decisions by the Authority, although questions of transparency and legitimacy have also arisen here. Under the 1990 Act these decisions were for the Authority’s licence committees, which had to include a lay member. There was a right of appeal to the Authority itself and further appeal to the High Court on point of law.¹⁰¹ There was a right to attend the appeal hearing and to be represented; reasons were to be given.¹⁰² Despite these requirements, the procedures were criticized both by the wider community and by the Science and Technology Committee. Thus, according to the latter’s 2005 report, ‘[in] the past, the workings and membership of licence committees have been shrouded in mystery’.¹⁰³ This was because of difficulties in determining their membership, meeting times, and agendas, and refusals to allow patients to discuss their treatments with the committee. There were also particular problems in the area of preimplantation tissue typing, where decisions ‘undermined our confidence in the HFEA’s understanding and/or use of the law’. In this latter case, part of the problem was, again, one of unsatisfactory legislation.¹⁰⁴ However, the Committee also noted progress on improvements, and in its Annual Report for 2005 the Authority described a streamlining of the research licence application procedure to increase transparency; this included ⁹⁸ Human Fertilisation and Embryology Act 2008, s 4. ⁹⁹ Paragraph 114. ¹⁰⁰ Paragraph 44. The same recommendation had been made by the previous Committee in its 2005 report. ¹⁰¹ Human Fertilisation and Embryology Act 1990, ss 9, 20–1; Human Fertilisation and Embryology Authority (Licence Committees and Appeals) Regulations 1991, SI 1991/1889. ¹⁰² Section 2(4)–(5). ¹⁰³ ‘Human Reproductive Technologies and the Law’, paras 201, 239–42. ¹⁰⁴ Paragraph 248.

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a process for presenting public comments to the licence committee, and since 2005 minutes of the licence committee are published in the Authority website together with the inspection report. The White Paper after the review of the Act proposed abolishing separate licence committees and under the 2008 Act licensing decisions are to be taken by the Authority, but new provision is also made for decisions to be delegated to committees, which may include persons who are not members of the Authority.¹⁰⁵ There is a right to reconsideration of decisions by an appeal committee (whose members are not members of the Authority itself) with appeal to the High Court on point of law; procedural protections before the committee include the rights to a hearing and to be represented, and it is required to give reasons.¹⁰⁶ The Authority has substantial powers of entry.¹⁰⁷ The exercise of this power was subject to a successful judicial review and a libel action settled out of court when the Authority had made statements to the BBC about the search.¹⁰⁸ The 2008 Act re-enacts these provisions in an amended form, making intentional obstruction of the exercise of the powers an offence.¹⁰⁹ It should also be mentioned that the HFEA is included in the regulatory bodies which may be given powers to impose civil penalties under the Regulatory Enforcement and Sanctions Act 2008, to be discussed in Chapter 10. The Hampton implementation report singled out the imposition of sanctions as currently a problematic area, being long-winded and perceived as inconsistent.¹¹⁰

Conclusion The work of the HFEA is in many ways very different from that of the other regulators examined in this book. It has to regulate an area of major moral and religious conflict, and it is particularly important that it must both implement rights and be conscious of the limits rights impose on its decisions. The rights include the right to life itself, and the right to informed consent is of particular importance. In the latter case the importance of protecting the right is strongly emphasized in the domestic legislation, and this has proved compatible with the European Convention. Alongside this rights-based remit the Authority also has an important role as a consumer protection authority. A cynical view might be that the role of the independent regulator in this context it to avoid government itself having to take tough decisions and face the ¹⁰⁵ Section 10. ¹⁰⁶ Section 21, and see the Human Fertilisation and Embryology (Appeals) Regulations 2009, SI 2009/1891. ¹⁰⁷ Sections 12(1)(b), 39–40. ¹⁰⁸ See Taranissi v Human Fertilisation and Embryology Authority (unreported, QBD 9 November 2007). ¹⁰⁹ Section 28 and Sch 5. ¹¹⁰ Department for Business, Innovation and Skills and Better Regulation Executive, Human Fertilisation and Embryology Authority.

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resulting criticism. However, if this was the intention, it has signally failed to protect government, which is still at the centre of the intense debate, as was shown in the legislative proceedings leading to the 2008 Act. If we take the view of regulation as a collaborative enterprise, however, the arrangements make much greater sense. It is inevitable that there is some division of labour between government and a specialist licensing authority to implement decisions. It is in the area of policy-making that much of the difficulty of the division of labour has arisen, but even here it is important to have an independent authority to amass information to provide an evidence base for policy decisions, to develop expertise, and crucially to nudge government into taking decisions which it might otherwise be unprepared to do for reasons of potential political unpopularity. Some untidiness and overlap of responsibilities is inevitable, but at least the authority is able to play an expert part in shaping debate through public dialogue with government as well as in implementing difficult decisions.

3 The Food Standards Agency In the case of the Food Standards Agency (FSAg), there are two immediate departures from the view of regulation as control by an independent agency, with problems of legitimacy because of its distancing from elected government. The first is that, as we shall see in a moment, the FSAg was established in an attempt to solve legitimacy problems in a government department, a department which was seen as opaque, unaccountable, and captured by producer interests. Though the FSAg has the status of a non-ministerial government department, it shares this with the utility regulators, normally seen as the most independent of the agencies. The second (not unrelated) theme is that the FSAg gives us a most striking example of regulation as a collaborative enterprise. Not only is the regulatory space in which it works peculiarly complex and occupied by an exceptionally wide range of different institutions, but it has emphasized the importance of working in partnership with others. The FSAg Strategic Plan emphasizes the Agency’s role in ‘working with’ a large number of different organizations, including central and local government, and with industry and consumers.¹ This is not a regulatory style characterized by working in isolation, nor is it one of imposition of alien command and control, but one of a complex enterprise which needs mapping and may be subject to complex modes of accountability.

The origins of the Food Standards Agency The Labour election manifesto for the 1997 election included a promise to reform the Ministry for Agriculture, Food and Fisheries and to create a new food standards body.² As is so often the case with regulatory design, this was largely improvised: ‘[a] few months before the 1997 election, all that Labour had by way of detail on this important restructuring of government was two press releases, amounting to a total of four pages’.³ The background, however, was one of serious food scandals which had completely undermined trust in ¹ Food Standards Agency, Strategic Plan to 2010 – Putting Consumers First (2007), 16, 21. ² For an excellent brief account of the background, see Barling, D. and Lang, T., ‘A Reluctant Food Policy? The First Five Years of Food Policy Under Labour’ (2003) 74 The Political Quarterly, 8–18. ³ Ibid, 10.

The Regulatory Enterprise. Tony Prosser. © Oxford University Press 2010. Published 2010 by Oxford University Press.

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regulation by the ministry. Thus ‘[a]n oft-recited litany of food safety crises within the UK food supply during the 1980s and 1990s – from pesticide residues, to salmonella in eggs, to BSE (with costs to the public purse estimated at over £4 billion) and E. coli 0157 – had generated a loss of public confidence in public institutions and food governance’.⁴ These failures were attributed to a number of reasons connected to regulatory design, thus the Ministry was expected to regulate food safety as well as ‘actively to support the commercial and industrial objectives of farmers and the food industry, and to give that goal a very high priority within its overall portfolio’.⁵ Moreover, Conservative policy also emphasized both deregulation and self-regulation by the industry, and as a result trust in regulatory effectiveness was easily undermined by food scandals.⁶ It became clear that the existing system of regulation by a Department with broader promotional responsibilities could not continue after the BSE crisis.⁷ In March 1997 the leader of the opposition commissioned a report into a possible Food Standards Agency, and the interim report in 1997 found that [m]any national surveys reveal that the public has lost confidence in the safety of British food. Secrecy characterises decision-making and inappropriate political and industrial interests are perceived to determine decisions on food safety to the detriment of public health and consumer interests. . . . The fragmented nature of the system and its complex fi nancial and regulatory management systems also limit rational preventative action.

The interim report proposed a new agency as a Non-Departmental Public Body modelled on the Health and Safety Executive and Commission, reporting to the Department of Health, with a remit to ensure public health in all matters of national food policy, including food standards and labelling.⁸ Behind the formation of the agency were thus huge issues of lack of legitimacy and trust in regulation carried out by government, especially because of regulatory capture by industry and because of excessive secrecy.⁹ As a result, the development of a greater degree of trust and openness than that achieved by the ministry was central to the agency’s role right from the beginning. It was also necessary that it showed its independence from a discredited area of government and from an industry responsible for the major scandals. This was a demanding requirement, as we shall see, given the complex division of responsibilities in managing food safety which makes collaboration with other bodies inevitable. ⁴ Ibid, 9. ⁵ van Zwanenberg, P. and Millstone, D., ‘BSE: A Paradigm of Policy Failure’ (2003) 74 The Political Quarterly, 27–37, at 28. ⁶ Barling and Lang, ‘A Reluctant Food Policy?’, 9–10. ⁷ For details see the Philips inquiry, The BSE Inquiry Report (2000), esp vol 1, 226–48. ⁸ Food Standards Agency: An Interim Proposal by Professor Philip James (Rowett Research Institute, 1997), Executive Summary, paras 2–13. ⁹ See also Select Committee on Science and Technology, ‘Science and Society’, HC 38, 1999–2000, paras 1.1, 2.36–2.37, 2.45–2.47.

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A White Paper was issued on plans for the new Agency at the beginning of 1998.¹⁰ The Paper developed the James proposals with a stress on openness, for example guiding principles to be set out in the legislation were to emphasize that decision-making processes were to be ‘open, transparent and consultative’ and, importantly, it would be free to publish its advice to ministers who would then have to explain in public their reasons for not adopting that advice.¹¹ It would also hold its meetings in public. One difference from the James Report was, however, that the model of the Health and Safety Executive and Commission was not followed directly. Instead, a single body would be set up and all staff would be civil servants, although the report had recommended that the Chief Executive should be a Crown Office Holder not in a civil service career path.¹² Health ministers were to be given powers of direction over the Agency if it ‘appears to act outside the terms of its specific legal framework’.¹³ Funding was to be through a levy on the industry. ¹⁴ Draft legislation was subject to consultation and was examined by a special Select Committee on Food Standards.¹⁵ The Committee noted that the proposed Agency’s power to publish advice to ministers ‘was one of the principal reasons for the strong support for the Agency amongst consumer groups’, though some concern had been expressed about the use of commercial confidentiality as a limit to such publication.¹⁶ There was also concern about the minister’s power of direction, which seemed to be available in the case of serious disagreement with the Agency.¹⁷ A further issue was strong industry opposition to the proposed flat-rate levy on food premises as the principal means of funding. The levy system was abandoned later that year, and replaced by funding from general taxation. The Food Standards Agency was established by the Food Standards Act 1999 in April 2000. Its first chairman was Sir John Krebs, who had a background in academic science and had previously advised the ministry; the Chief Executive, Geoffrey Podger, had been a career civil servant in the ministry and in the Department of Health. The detailed legal position under the Act will be considered below, but first it will be helpful to say something about the FSAg’s functions.¹⁸

¹⁰ The Food Standards Agency: A Force for Change (Cm 3830, 1998). ¹¹ Ibid, paras 2.4, 6.15. ¹² The Food Standards Agency: A Force for Change, paras 6.20–6.24; for criticism by Professor James of this point, see , Food Standards Agency (nd). ¹³ Paragraph 6.16. ¹⁴ The Food Standards Agency: A Force for Change, ch 8. ¹⁵ The Food Standards Agency: Consultation on Draft Legislation (Cm 4249, 1999); Food Standards Committee, ‘Food Standards: First Report’, HC 276, 1998–99. ¹⁶ Ibid, paras 52–4. ¹⁷ Ibid, para 62. ¹⁸ For a good overall summary of the Agency’s work, see the account by its second chair, Dame Deirdre Hutton, ‘Food Standards Regulation’ in Centre for the Study of Regulated Industries, Regulatory Review 2006–7 (Bath: CRI, 2007), 91–111.

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Functions of the Food Standards Agency The Corporate Plan of the FSAg lists the following functions: • negotiating food law in the EU on behalf of the UK government; • acting as the UK’s competent authority for implementing the vast majority of EU food and feed legislation; • ensuring that food legislation is effectively implemented through work with local authorities and other enforcement agencies, and with government departments, agencies, and the devolved administrations; • providing information and advice on food safety and nutrition for the public, health professionals, the food industry, other parts of government, and the media.¹⁹ As this suggests, important responsibilities relating, for example, to nutrition, are shared with the Department of Health. Indeed, ‘[t]he Agency is both a government department and a regulator, with responsibilities for negotiating in the European Union on behalf of the UK Government’.²⁰ In view of this, the Agency has committed itself to the aims of the modernizing government programme.²¹ In the area of food safety, its responsibilities are to reduce foodborne illness, to manage the risk to human health from BSE, to protect consumers against harmful exposure to chemicals in food, and to ensure that food products are safely produced. In relation to public information, objectives are to promote honest labelling, to initiate, develop, agree internationally, and to implement rules on food composition, labelling and advertising, and to protect consumers by controls on health foods or other foods such as baby foods.²² The Agency is also responsible for food law enforcement, but it is important to note that this is carried out in conjunction with local authorities which act independently in their own areas. The FSAg seeks to provide a national overview of problems and to help local authorities to target their work through developing innovative methods to monitor food standards. The Agency also acts through its own executive agency, the Meat Hygiene Service, which enforces food law in licensed meat premises.²³ A further function which the FSAg has acquired from 2006 is that of ensuring that EU wine regulations are enforced in the UK. The Food Standards Act 1999 sets out the statutory functions of ‘developing policies (or assisting in the development by any public authority of policies) relating to matters connected with food safety or other interests of consumers in ¹⁹ Food Standards Agency, Corporate Plan 2007–10 – Putting Consumers First (2007), 8. ²⁰ National Audit Office, ‘Improving Service Delivery: The Food Standards Agency’, HC 524, 2002–3, 15. ²¹ Food Standards Agency, ‘Protecting the Interests of Consumers: Annual Report 2006/07’, HC 572 (2006–07), 38–9. ²² National Audit Office, ‘Improving Service Delivery’, 17, 21. ²³ Ibid, 24.

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relation to food’ and ‘providing advice, information or assistance in respect of such matters to any public authority’. It is under a duty to comply with requests from government departments to perform these functions.²⁴ It also has the function of providing advice and information to the public or to any person not a public authority relating to food safety or other interests of consumers in relation to food.²⁵ The Agency is required to obtain, compile, and keep under review information relating to these matters, including monitoring scientific developments and carrying out or commissioning research.²⁶ The FSAg is required to monitor enforcement action by other authorities (in practice local authorities are most important) including setting standards of performance either generally or for particular authorities.²⁷ As was mentioned earlier, an important element through which the Agency claimed legitimacy when it was established was its policy of publishing advice to ministers, something the government had included as a White Paper commitment. The Act gives the FSAg the right to publish any advice given under the powers mentioned above, specifically including advice to ministers. However, before doing so it must consider whether such publication would be in the public interest on the basis of whether the interest in publication is outweighed by considerations of confidentiality (mirroring provisions in the Freedom of Information Act 2000).²⁸ Confidentiality cannot, however, be claimed by an enforcement authority itself or its staff.²⁹ Publication is not to take place where it is prohibited by an enactment, but the minister is given power to amend such an enactment by order to permit publication.³⁰

The Food Standards Agency in regulatory space: the institutions The FSAg thus has a wide range of different functions. Some are concerned with basic consumer protection and making markets work better, for example those concerned with the provision of information to individual consumers, aiding consumer choice, and prohibiting sale of food which imposes externalities through health risks. Others seem rather different, for example those relating to the improvement of nutrition and health, which seem to be based on a concern to improve general social standards of well-being. Just as important is the fact that the agency must work closely with other authorities; its function of providing advice to ministers is of central importance (and indeed it negotiates internationally on behalf of government), and in enforcement it is responsible for monitoring work largely carried out by local authorities. This suggests that the regulatory space it occupies will be a singularly complex one. ²⁴ Section 6(1)–(2). ²⁸ Section 19(1), (4).

²⁵ Section 7(1). ²⁹ Section 19(5).

²⁶ Section 8(1). ²⁷ Section 12. ³⁰ Sections 19(3), 25(1).

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The Agency is a non-ministerial government department, it performs its functions on behalf of the Crown, and it falls within the scope of audit and valuefor-money work of the National Audit Office.³¹ From the beginning it has taken the form of a commission acting through a board and chief executive, though the model of the separate Health and Safety Executive and Commission recommended by James was not implemented as the government considered that the range of interests affected by the new Agency was so wide that membership could not cover all the relevant fields, and the Agency board itself would be directly involved in significant operational matters and so should be directly accountable for them, making a separate commission unworkable.³² Turning to the question of appointments and membership, this was also a matter of important controversy before the passing of the Act. In the White Paper, the government noted that in its consultation there had been clear support from most respondents (other than industry interests) for a majority of public and consumer interests in the membership.³³ However, the government decided that there should be no such special requirements as to membership, and this is reflected in the Act, which provides that the Agency is to consist of a chairman, deputy chairman, and between eight and twelve other members; the only special provisions are that one is appointed by the National Assembly for Wales and two by the Scottish Ministers.³⁴ Ministers making appointments are, however, required to have regard to the desirability of securing that a variety of skills and expertise is available in the Agency, including experience in matters related to food safety or other interests of consumers in relation to food. They must also consider whether any financial interest of an appointee would prejudice the exercise of his duties.³⁵ Further provision is made for the appointment of a chief executive and for directors for Wales, Scotland, and Northern Ireland.³⁶ Consumer Focus has noted that consumer interests are represented on the board; indeed, the second chair, Dame Deirdre Hutton, had a strong background in the consumer movement.³⁷ Members of the board may be removed by the ministers acting jointly in the case of bankruptcy, failing to carry out the duties of the office, or being otherwise unable or unfit to carry out those duties.³⁸ The Act also requires that the Agency establish advisory committees for Wales, Scotland, and Northern Ireland. The Secretary of State may also direct that a committee be set up for England, or for the English regions.³⁹ The latter has not been established, although as we shall see below other non-statutory advisory committees play a major part in the Agency’s decision-making procedures. It will be recalled that, on a non-statutory basis, the Agency is responsible for an ³¹ Food Standards Act 1999, s 1. ³² The Food Standards Agency: A Force for Change, paras 6.6–6.9. ³³ Ibid, para 6.4. ³⁴ Section 2(1). ³⁵ Section 2(3)–(4). ³⁶ Section 3. ³⁷ Brooker, S. and Taylor, A., Rating Regulators – Food Standards Agency (London: Consumer Focus, 2008), para 4.8. ³⁸ Schedule 1, para 2(4). ³⁹ Section 5 and sch 2.

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executive agency, the Meat Hygiene Service, which has an important enforcement role, including verification and audit of businesses’ own plans, and is responsible for enforcing the regulations on BSE; it is the competent authority for the purposes of implementing EU requirements. It is already clear that the Agency operates in a particularly complex regulatory space and that its role is more varied than that of most other regulators. It has functions more analogous to those of ordinary government departments, yet, given the unsatisfactory earlier history of food standards regulation by the ministry, it is expected to show considerable independence of government in its regulatory activities. The position is made even more complex by the role of other related bodies. The most important of these are of course the EU institutions. Most food standards law in fact is made at a European level; thus in 2005 over 95 per cent of the legislation handled by the FSAg originated from the EU, compared with 40 per cent of all UK legislation.⁴⁰ Most of it is in the form of regulations, leaving little room for discretion in implementation. As noted above, an important role of the FSAg is to represent the UK in European-level negotiations relating to food and animal feed. It also works closely with the European Food Safety Authority (of which the FSAg’s chair was vice-chair), which undertakes risk assessment and risk communication. Other EU-related responsibilities include submitting health claims for inclusion in those permitted under the Nutrition and Health Claims Regulations, and, as mentioned above, enforcing wine standards. In addition to the EU, the World Trade Organization is also of importance in relation to food standards issues, and Codex Alimentarius, a joint World Health Organization and Food and Agriculture Organization body, produces international standards to facilitate trade and provide protection for industry and consumers. The FSAg runs the National Codex Consultative Committee for the UK, and is responsible for negotiations on behalf of government. Other international bodies in which the FSAg has an interest are the World Health Organization and the Food and Agriculture Organization of the UN themselves and the World Organisation for Animal Health.⁴¹ Indeed, the international role of the FSAg can only increase in the presence of ‘an increasingly global food chain’, as the chair had noted in her forward to the annual report.⁴² Apart from the complex international position, we have already seen that the FSAg’s responsibilities are shared with other organizations at a national level. In particular, responsibility for nutrition is shared with the Department of Health. The select committee which examined the draft legislation in 1999 was critical of the limited role of the proposed Agency in this respect, which fell short of the ⁴⁰ Dean, B., 2005 Review of the Food Standards Agency (2005), paras 2.4.2, 6.9.1. For a useful discussion of the context, see Flynn, A., Marsden, T., and Smith, E., ‘Food Regulation and Retailing in a New Institutional Context’ (2003) 74 The Political Quarterly, 38–46. ⁴¹ Food Standards Agency, ‘Safe Food and Healthy Eating for All: Annual Report 2007/08’, HC 805, 2007–08, 50. ⁴² ‘Safe Food and Healthy Eating for All: Annual Report 2007/08’, 4.

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James Report’s recommendation that it should have a major role in developing policy on the nutritional quality of diets and their impact on health; it made similar points on health promotion, and concluded that ‘[w]e are concerned that the responsibility for an overall, consistent food-related health promotion message is unclear’.⁴³ In this respect the Agency acts as an adviser to government rather than having full policy-making responsibilities of its own.⁴⁴ It does, however, ‘have a distinct role in ensuring consumers have the information they need to make informed, healthy dietary choices’ through research and by the provision of information through education and working with the industry on nutritional information on labels.⁴⁵ In other areas the Agency works with different government departments, including the Department for Food, Environment and Rural Affairs (eg on sustainability) and the devolved administrations. On food safety, we have already seen that the great majority of enforcement action is taken by local government. This has given rise to difficulties; in the past it was thought that the FSAg was ‘somewhat remote’ from local authorities and had adopted too directive an approach, though as we shall see in a moment a major initiative has now been undertaken to improve relations. In addition, it should not be forgotten that in the food sector there is a particularly important role for private regulation, in particular through the supermarkets imposing quality requirements on suppliers.⁴⁶ This particularly complex regulatory space is coordinated in two ways. The first consists in an emphasis by the FSAg on ‘working with’ other organizations. Thus its Strategic Plan states that it wants to achieve further reductions in foodborne illness by working with the Department for Environment, Food and Rural Affairs, agriculture departments in the devolved administrations, meat plant operators, local authorities, the Meat Hygiene Service, and local community, regional and national bodies. The reduction of diet-related illnesses will be achieved by working with: health departments and stakeholders to reduce salt intakes and saturated fats; health departments and the food industry to promote clear accurate nutritional information on labels; stakeholders to promote the awareness of balanced diets; and supporting the work of local community, regional and national bodies to deliver effective locally based food initiatives that address the needs of their community. Overall, the focus is on ‘delivery through partnership’.⁴⁷ Obviously this covers a hugely diverse pattern of different types of partnership with varying degrees of formality. The second means of coordination applies to more long-lasting and strategic forms of partnership, and is through the drafting and publication of ⁴³ ‘Food Standards – First Report’, HC 276, 1998–99, paras 25–9 (emphasis retained). ⁴⁴ See National Audit Office, op cit, 15. ⁴⁵ ‘Safe Food and Healthy Eating for All: Annual Report 2007/08, 25. ⁴⁶ See Scott, C., ‘Private Regulation of the Public Sector: A Neglected Facet of Contemporary Governance’ (2002) 29 Journal of Law and Society, 56–76. ⁴⁷ Strategic Plan to 2010, 16, 21, 28.

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concordats. These agreements are of growing importance in a number of areas of public administration (notably the relations between Whitehall and devolved administrations). In this context their importance was emphasized by the select committee which undertook pre-legislative scrutiny of the Food Standards Bill: ‘these concordats – which do not figure on the face of the Bill at all – would be of enormous significance in providing the general framework within which the Agency is to operate’. The Committee emphasized that these documents should be subject to scrutiny by Parliament and by the wider public, which should know who would have final responsibility for their content in the case of disagreement, who would oversee their implementation and monitor their effectiveness, and to what extent they would be made public.⁴⁸ A number of concordats has been agreed and published, though they do not provide any detailed structure for relations with the other bodies concerned. Thus, six concordats are listed on the website, two of which are with organizations overseas.⁴⁹ The most important concordat is that with the Department of Health. It consists of eight pages (plus appendices) and it begins by stating that it sets out an agreed framework for cooperation, but that it is not a legally binding agreement or contract, nor is it intended to cover every detailed aspect of the relationships between the two bodies. Rather, it is a statement of the principles which will guide working relationships to ensure sufficient communication and coordination to enable each to discharge their respective responsibilities effectively. It commits the parties to exchange information and to pursue opportunities for joint planning and funding of research and surveillance. It sets out their respective remits in general terms and clarifies responsibilities for Parliamentary business (where the Department will of course provide the primary contact). On nutrition, the FSAg will provide information on the nutritional content of individual foods whilst the Department will retain responsibilities for wider health policy issues. The Agency will also agree objectives and targets, including for nutrition, each year. Other areas covered are foodborne communicable disease, the Health Protection Agency (an executive non-Departmental public body), the Medicines and Healthcare Products Regulatory Agency, and other public bodies such as advisory committees. There is also brief discussion of the situation in relation to the EU and international arrangements, and handling emergencies. The concordat may be amended at any time by agreement between the parties.⁵⁰ This looks very different from the documents ‘of enormous significance’ envisaged by the Select Committee. Given this, it is not perhaps surprising that there have been important criticisms of the relations between the FSAg and government. Thus the Dean Review of the FSAg in 2002 was critical of the lack of clarity in the respective roles of the Agency and of the Department of Health in ⁴⁸ ‘Food Standards: First Report’, paras 63–5. ⁴⁹ (consulted 8 December 2009). ⁵⁰ Concordat Between the Food Standards Agency and the Department of Health, (2007).

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relation to nutrition.⁵¹ The House of Commons Public Accounts Committee was also critical of relations with the Department for Environment, Food and Rural Affairs, noting that the Agency had been unsuccessful in its declared aim of securing a transfer from the Department of responsibility for the administration of controls over legally imported meat, and that ‘[a] lack of clarity in the relationship of the Agency to other government departments and agencies creates a risk that important issues of food standards and safety could be missed or action not taken sufficiently quickly by any one body’.⁵² Most recently, Consumer Focus found that ‘stakeholders commented that there has long been a lack of clarity over the respective roles of the [FSAg] and the Department of Health around nutrition and health issues’ and this point was also made in a 2008 Cabinet Office report.⁵³ The Secretary of State has very substantial powers under the statute in case of disagreement with the Authority. Thus if he considers that the later has failed to perform any duty, he may issue directions to it; if they are not complied with, he may remove the members of the Agency from office and exercise its functions himself until new appointments are made.⁵⁴ The select committee examining the draft legislation considered that ‘given that the Agency has independence in its provision of advice, and given that the Government can disagree with that advice and act independently and contrary to it, it appears perverse that the Government can invoke such draconian powers when the Agency disagrees with its advice and acts accordingly’.⁵⁵ The concordat with the Local Authorities Coordinating Body on Food and Trading Standards, representing the enforcement bodies, was even briefer, running to only three pages plus three more of appendices and did little more than affirm a commitment to effective working relations and to set out respective remits in very general terms.⁵⁶ Much more important, however, is the Framework Agreement on Local Authority Enforcement agreed in 2001 and regularly updated.⁵⁷ This is a much more detailed document of 114 pages, which sets out the food planning standard and enforcement guidance stating good practice and the requirements of existing statutory codes of practice on enforcement issued under the Food Safety Act 1990. It also provides information on the monitoring scheme and audit by the FSAg. Operation is reviewed by a Framework Agreement Sub Group containing representatives of the Agency, of local authorities, and also of industry and consumers. This is much more satisfactory than ⁵¹ Dean, 2005 Review of the Food Standards Agency, para 2.1.2. ⁵² ‘Protecting Public Health and Consumer Interests in Relation to Food: The Food Standards Agency’, HC 708, 2002–03, paras 15–19, and conclusion 4. ⁵³ Brooker and Taylor, Rating Regulators, para 3.5 and Cabinet Office, Food Matters: Towards a Strategy for the 21st Century (2008), section 7.4. ⁵⁴ Food Standards Act 1999, s 24. ⁵⁵ ‘Food Standards: First Report’, para 62 (emphasis retained). ⁵⁶ Concordat Between the Food Standards Agency and the Local Authorities Coordinating Body on Food and Trading Standards (LACOTS) (nd). ⁵⁷ Framework Agreement on Local Authority Enforcement (2001, amended 2004). It is accompanied by a lengthy Food Law Code of Practice.

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the use of the vague and limited concordats, although the Parliamentary scrutiny envisaged by the select committee did not take place when the agreement was drafted or amended.⁵⁸ A major initiative has now been undertaken by the FSAg to reform the processes underpinning its relations with local authorities (the Changes to Local Authority Enforcement or CLAE project) aiming to give the authorities greater flexibility to deploy alternative enforcement strategies, and this will involve reviewing the Agreement. A revised Food Law Code of Practice for local authorities was published by the Agency in 2008 where local authorities are required to have regard to the code in their enforcement activities.⁵⁹ Regional offices have also been established by the FSAg and have improved relations with local government.

The Authority in regulatory space: the duties As noted, the main duty of the FSAg is ‘to protect public health from risks which may arise in connection with the consumption of food (including risks caused by the way in which it is produced or supplied) and otherwise to protect the interests of consumers in relation to food’.⁶⁰ A marked absence, especially in comparison with the utility regulators, is any requirement to pay special regard to the interests of vulnerable customers.⁶¹ The 1999 Act incorporates duties from the Food Safety Act 1990, itself the result of the scandal relating to salmonella in eggs. Part II of the Act creates a system of prohibitions enforced by the criminal law; in particular rendering food injurious to health, selling food not complying with food safety requirements, and selling food not of the nature or substance or quality demanded or falsely describing or presenting food.⁶² Further requirements are of course imposed by EU law. As noted above, substantive food safety law is overwhelmingly EU in origin. The 1990 Act provides enforcement powers, and extensive regulation-making powers for ministers.⁶³ A minister also has power to issue codes of practice and to enforce their provisions by directions to a food authority; both regulations and codes may be issued only after consultation with representative organizations.⁶⁴ Turning back to the Food Standards Act 1999, the Agency is required to prepare and publish a statement of general objectives and practices. Objectives must include securing that its activities are the subject of consultation with those affected or their representatives, and with members of the public, and that public records are kept of its activities and ‘made available with a view to enabling members of the public to make informed judgments about the way in which ⁵⁸ ⁵⁹ ⁶¹ ⁶³

For further details, see Flynn et al, ‘Food Regulation and Retailing’, 29–37. Food Safety Act 1990, s 40. ⁶⁰ Food Standards Act 1999, s 1(2). Brooker and Taylor, Rating Regulators, para 3.7. ⁶² Sections 7–8, 14–15. Section 16. ⁶⁴ Sections 40, 48.

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it is carrying out its functions’.⁶⁵ The draft statement of objectives and practices needs ministerial approval, and the minister may modify it after consulting the agency (a provision criticized in evidence to the select committee which examined the Bill);⁶⁶ it is to be laid before Parliament. Further controversy surrounded the requirement that the FSAg considers risks, costs, and benefits in carrying out its activities.⁶⁷ This is particularly important given the power, mentioned above, for the minister to give directions to the Agency if it fails to carry out its duties, and if they are not complied with, remove its members from office.⁶⁸ Consumer groups had expressed concerns to the select committee that the requirement to consider costs and benefits would ‘tie the Agency’s hands and compromise its independence and authority when, for example, publication of its advice might cause commercial damage and cost private companies significant sums of money. . . . It should be made clear that the prime consideration should be given to the costs and benefits to public health’.⁶⁹ The only qualifications to the cost-benefit requirement are that it does not apply to the extent that for it to do so would be unreasonable or impracticable in view of the nature or purpose of the power, and it does not affect the obligation of the Agency to discharge any other duties imposed on it.⁷⁰ The role of cost-benefit analysis in environmental decision-making has been highly controversial, but these powers go considerably beyond the usual controversies in their general implications, in particular taken with the ability of the minister to overrule the Agency in the case of disagreement. It was in relation to the decisions of the agency on ‘the magnitude and scale of risk to public health and the scientific basis for the Agency’s advice’ (along with misuse of funds) that the government suggested the powers would be most likely to be used. Turning now to normative commitments by the FSAg itself, the most basic of these are set out in its Strategic Plan. It commits the Agency to a vision of ‘safe food and healthy eating for all’, stating that ‘[e]verything we do reflects this vision, and our core values: • putting the consumer first; • openness and independence; • science and evidence-based.’⁷¹ These are then translated into a series of strategic targets on food safety (eg working with industry to achieve a 50 per cent reduction in the incidence of pigs testing positive for Salmonella by the end of 2010); eating for health (eg working with health departments and other stakeholders to reduce average salt intake form 9.5g to 6g per day by the same date), and choice (eg recommending a national scheme for publishing information to consumers on food hygiene in food businesses).⁷² ⁶⁵ Section 22(1)–(2). ⁶⁶ Section 22(5)–(6); ‘Food Standards: First Report’, para 53. ⁶⁷ Section 23. ⁶⁸ Section 24. ⁶⁹ ‘Food Standards: First Report’, para 61. ⁷⁰ Section 23(3). ⁷¹ Strategic Plan to 2010, 1–2. ⁷² Ibid, 4–5.

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Further normative commitments are included in relation to the delivery of the Agency’s work. For example, it undertakes that its actions will be proportionate, risk-based and outcome focused, in line with the principles of good regulation (see below), that it will be an open and transparent organization, making policy decisions in public and will proactively seek the views of consumers and stakeholders, and that it will build and maintain the trust of stakeholders in the handling of food safety issues.⁷³ Delivery will be through partnership and consultation, and will be undertaken sustainably.⁷⁴ These general commitments in the Strategic Plan are put into more precise form in a Corporate Plan.⁷⁵ This contains an extremely detailed set of targets and performance information. In addition, the FSAg publishes a brief Framework for Regulatory Decision Making in the Food Standards Agency.⁷⁶ This sets out similar core values to those above, and also key principles for decisions whether and how to intervene, including, for example, the scientific evidence of the extent of harm, or potential harm, to public health or to consumer interests, proportionality and the balance of risks, costs, and benefits to all concerned, and the risks of inaction. The Framework also lists 17 different regulatory tools for intervention, ranging from doing nothing through encouraging self-regulation and co-regulation and promoting effective and risk-based interventions to negotiating for changes to EU legislation. These publications represent a sophisticated means of translating statutory requirements into more specific undertakings whilst maintaining a clear normative vision. They result in the principles behind the Agency’s decision-making being highly transparent. In view if this, it is perhaps not surprising that the FSAg has come out well in the major reviews of its work. An early review by the Public Accounts Committee noted that greater clarity was needed about its role and responsiblities⁷⁷ However, in a report commissioned by the Agency itself, concentrating on stakeholders’ views, Baroness Dean concluded that ‘the general consensus was that the Agency has worked hard to deliver its objectives in accordance with its core values’. Most stakeholders agreed that the Agency had made significant progress towards improving food safety, gaining public confidence in food safety, and ‘creating a modern culture in which it is the norm for procedures, information, consultation, and decision-making to be in the public domain and to involve external stakeholders’. The report made 22 recommendations for improvement, all of which were accepted by the FSAg. A report by the Better Regulation Executive and National Audit Office on implementation of the Hampton Report (see Chapter 10 below) was also broadly complimentary, whilst the report by Consumer Focus found that the Agency ‘has a strong ⁷³ Ibid, 9, 10, 17. ⁷⁴ Ibid, 28–32. ⁷⁵ Corporate Plan 2007–2010 (2007). ⁷⁶ Available at (consulted 8 December 2009). ⁷⁷ Committee of Public Accounts, ‘Protecting Public Health and Consumer Interests in Relation to Food’; National Audit Office, ‘Improving Service Delivery: The Food Standards Agency’, HC 524 (2002–03).

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consumer-focused culture, operates transparently, works effectively in a devolved setting, and implements good practice evaluation techniques’.⁷⁸

The Food Standards Agency and the regulatory models Regulation for efficiency and consumer choice Facilitating informed consumer choice is at the heart of the FSAg’s approach and protecting the interests of consumers is part of its primary statutory duty.⁷⁹ For example, in its 2007/08 Annual Report the Agency emphasized ‘putting the consumer first’ as its core value and first priority: ‘[a]bove all, we work to give consumers the chance to make informed choices about the food they eat so they are able to understand the risks and benefits in different cases’. An entire chapter was devoted to ‘Choice’, including signposting, publication of hygiene scores in food premises, and surveying consumer attitudes.⁸⁰ Thus in relation to its responsibility for food standards, the FSAg is squarely in the model of making markets work better for consumers, more so than many other regulators, including the HFEA considered above. This is in marked contrast to the model which was associated with the Agency’s predecessor ministry, that of ‘productionism’ within which the emphasis was on encouraging the development of the industry and maximizing production.⁸¹ The FSAg has clearly adopted a consumer-based approach and has avoided the barrage of criticism faced by its predecessor ministry. Indeed, the report on implementing Hampton was somewhat critical of adopting an approach of ‘championing’ the consumer interest at the expense of engagement with business.⁸² As mentioned above, the second chair of the Agency, Dame Deirdre Hutton, was recruited from a background in consumer representation, unlike her predecessor whose background was in science. The Agency has also stated clearly its commitment to the ‘Better Regulation’ agenda, though some tensions have been perceived by stakeholders with its core concern of safeguarding public health.⁸³ As mentioned above, the statute requires that the FSAg consider risks, costs, and benefits in carrying out its activities. It has also adopted simplification plans to minimize bureaucratic requirements and a process of risk management to reduce food risks to those that a reasonable ⁷⁸ Better Regulation Executive and National Audit Office, Eff ective Inspection and Enforcement: Implementing the Hampton Vision in the Food Standards Agency (Better Regulation Executive, 2008); Brooker and Taylor, Rating Regulators, para 2.1. ⁷⁹ Section 1(2). ⁸⁰ ‘Safe Food and Healthy Eating for All: Annual Report 2007/08, 8 and ch 5. The same emphases are retained but in less detail in the most recent report, ‘Safe Food and Healthy Eating for All: Annual Report and Consolidated Accounts 2008/09’, HC 477, 2008–09. ⁸¹ Lang, T., ‘The Complexities of Globalization: the UK as a Case Study of Tensions Within the Food System and the Challenge to Food Policy’ (1999) 16 Agriculture and Human Values, 169–95, 171, 173. ⁸² Better Regulation Executive and National Audit Office, Effective Inspection and Enforcement, 7. ⁸³ Brooker and Taylor, Rating Regulators, paras 4.7, 6.10.

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consumer would find acceptable.⁸⁴ Its Framework for Regulatory Decision Making also emphasizes the range of techniques available apart from ‘command and control’ type enforcement and the importance of a proportional approach in deciding between them.⁸⁵ The chair emphasized her wish to move further towards risk-based regulation in enforcement matters, and in 2006 the Board approved a ‘New Vision’ for enforcement building on the Hampton principles; this was broadly endorsed by the Better Regulation Executive and National Audit Office report on implementation of the principles.⁸⁶ There is a Better Regulation Advisory Group to undertake independent external scrutiny and challenge of the Agency’s better regulation initiatives. Thus the FSAg has in common with other regulators in this book a commitment to regulatory simplification and a risk-based approach, which it sees as being ultimately in the interests of consumers, though it has emphasized that this must not compromise public health and consumer interests.

Regulation and human rights Perhaps surprisingly, specific international obligations are fairly limited in this area; the explanation is that they form part of more general environmental or health rights which will be considered in later chapters. Thus there are no specific statements of rights to food standards in the European Social Charter nor the EU Charter of Fundamental Rights, although the UN International Covenant on Economic, Social and Cultural Rights does include the right to an adequate standard of living including adequate food.⁸⁷ The Convention on the Rights of the Child includes rights to adequate nutritious foods and to clean drinking water. Clearly issues such as genetically modified foods raise questions relating to broader environmental rights which will be discussed in the following chapter. The emphasis in the work of the FSAg has thus been on procedural or process rights, such as consumer engagement, and on consumer rights in the market place rather than emphasizing broader human rights issues. The process rights will be considered below in discussing regulatory deliberation.

Regulation and social solidarity There are more features of regulation by the FSAg which are inspired by social solidarity than those inspired by rights. The most important is both ensuring that decisions are compatible with sustainability goals and providing information on sustainability. The Agency’s Strategic Plan commits it to delivering its activities ⁸⁴ National Audit Office, ‘Improving Service Delivery: The Food Standards Agency’, 42. ⁸⁵ See also Hutton, ‘Food Standards Regulation’, 96–9. ⁸⁶ Ibid, 109–10; ‘Protecting the Interests of Consumers: Annual Report 2006/07’, 30; Eff ective Inspection and Enforcement. ⁸⁷ Article 11.

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and policies taking into account their sustainable development implications by conducting sustainability assessments as part of its regulatory impact assessments, and guidance for staff has been produced for such assessment.⁸⁸ It regards the biggest challenge to be embedding sustainability considerations fully into policymaking, and in 2008 adopted a new approach to this after holding a series of stakeholder workshops with a commitment to adopt the most sustainable option unless there were exceptional circumstances to justify not doing so. The Agency has drafted a sustainable development action plan and reports on its achievements in sustainable development and on the sustainability targets it has met. In the field of nutrition the social solidarity approach is also important; indeed, here good nutrition may actually conflict with a policy of consumer choice, given the power of retailers and of advertising.⁸⁹ It is in this area of course that partnership with government is also most striking as a feature of the FSAg’s work, and government has taken the major initiative here, for example in its White Paper ‘Choosing Health’.⁹⁰ Nevertheless, the FSAg also has important responsibilities, and a Nutrition Strategy Steering Group has been established with the industry, consumer, and health groups to take these forward.⁹¹ Most initiatives have been on a voluntary basis, but the FSAg played a major role on the question of promotion of foods to children. It published a comprehensive review of research on the issue in 2003, concluding that advertising did have an effect on children’s preferences, purchasing, and consumption. It then developed a nutrient profiling model for use by Ofcom in restricting the advertising and promotion to children of foods high in fat, salt, and sugar.⁹² As we shall see in the discussion of Ofcom in Chapter 8 below, this was itself a controversial move in which the FSAg took the lead as regulator. It also has a particular concern for promoting consumer engagement by disadvantaged and vulnerable customers, although according to stakeholders it did not take sufficient account of vulnerability considerations in its decision-making.⁹³ This now brings us to the Agency’s broader consumer engagement strategy, in which, as Consumer Focus has confirmed, it is well ahead of other regulators.

Deliberation It will be recalled from the discussion above of the origins of the Food Standards Agency that openness and transparency were central to establishing its legitimacy. It was these values which would distinguish it from the discredited, ⁸⁸ Strategic Plan to 2010, 30. ⁸⁹ See Lang, T., ‘Food Control of Food Democracy? Re-engaging Nutrition with Society and the Environment’ (2005) 8(6A) Public Health Nutrition, 730–7, 734–5. ⁹⁰ Choosing Health: Making Healthy Choices Easier (Cm 6374, 2004). ⁹¹ ‘Protecting the Interests of Consumers: Annual Report 2006/07’, 17. ⁹² Food Standards Agency, ‘Putting the Consumer First – Annual Report 2005/06’ HC 1155, 2005–06, 3.13–3.17. ⁹³ Brooker and Taylor, Rating Regulators, para 6.18.

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captured, ministry from which it took over its responsibilities.⁹⁴ In view of this history, it is not surprising that the Agency emphasizes these values as central to its work. Thus in its Strategic Plan openness and independence form one of the three values reflected in everything it does, and this is re-emphasized in the Annual Report.⁹⁵ Indeed, the FSAg has produced a Code of Practice on Openness which, for example, commits it to treating the publication of information as the norm, undertaking consultation and publishing responses, and, most importantly of all, holding its decision-making meetings in public, something which clearly distinguishes the Agency from government departments and indeed from many other regulatory bodies. It also encourages openness on the part of its advisory committees.⁹⁶ A number of means are used to show the commitment to openness. As mentioned above, unlike other regulators, the FSAg is committed to the publication of its advice to ministers.⁹⁷ The holding of board meetings in public is accompanied by the publication of the agendas, minutes, papers, and decisions of the meetings; papers are published in advance of the meetings. A question and answer session is held at the end of the meetings, and meetings are webcast. In addition, minutes of meetings between senior staff and key stakeholder groups are made available on the FSAg website. The Dean Report noted complaints by stakeholders that, whilst a large volume of information was published, it was difficult to identify relevant issues, and it was difficult to see how or why the Agency reached its conclusions.⁹⁸ The Agency accepted the report’s recommendations that the arrangements for the meetings be improved to permit more in-depth and technical discussions, as well as that it should improve communications and stakeholder perceptions of communications.⁹⁹ All those meetings where the Agency’s strategy and policies are agreed are held in public; management meetings which are private are concerned only with internal matters, and many of their papers are published.¹⁰⁰ Details are also published of all meetings held or attended by the Chief Executive and directors. Advisory committees also have an important role in the Agency’s work, and a number of them have been established, they include: a General Advisory Committee on Science, a new Advisory Committee on Consumer Engagement, and (following a recommendation of the Dean Report) a Social Science Research ⁹⁴ For a further important report shaping its approach and emphasizing these values, see House of Lords Select Committee on Science and Technology, ‘Science and Society’, HC 38, 1999–2000, esp chs 2, 3, 9. ⁹⁵ Strategic Plan to 2010, 1; ‘Safe Food and Healthy Eating for All: Annual Report 2007/08’, 8. ⁹⁶ See (consulted 8 December 2009). ⁹⁷ For the current position see (consulted 8 December 2009). ⁹⁸ 2005 Review of the Food Standards Agency, paras 3.2.1, 3.5.2, 4.1.7. ⁹⁹ Ibid, recommendations 6–10. ¹⁰⁰ House of Commons Science and Technology Committee, ‘Scientific Advice, Risk and Evidence Based Policy Making’, HC 900, 2005–06, evid 188.

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Committee. The scientific advisory committees publish their agendas, papers, and minutes and in some cases hold public meetings.¹⁰¹ Indeed, commentators have noted that as a result of the Agency ‘boldly’ recommending open sessions for such bodies, together with a clear audit trail of how and why decisions were reached, it will be far harder for policy-makers to hide behind their scientific advisers and to promote the commercial interests of the food industry, both serious causes of the policy disasters in the response to BSE.¹⁰² Stakeholders also told the Consumer Focus Review that the scientific committees had led the way in opening up scientific advice and had shown that this could work.¹⁰³ The Advisory Committee on Consumer Engagement merits particularly detailed discussion. This was established after the FSAg had commissioned a report by consultants on how to set up such a committee to provide the Agency with quality assurance about its process of consumer engagement.¹⁰⁴ The report recommended that the remit of the new committee should be to audit the Agency’s day-to-day consumer engagement activities, to advise it on best practice drawing on experience both within and outside the Agency, to provide expert guidance, and to prepare and submit to the Board an annual report on consumer engagement on these issues (not on consumer policy outcomes). The recommendations were accepted, and the Committee set up composed of nine outside members with relevant experience. In its first report to the Board, the Committee found good examples of consumer engagement by the Agency, whilst concluding that engagement was not yet a fundamental part of how it operates, being seen as conveying information with a view to eliciting a response in terms of changed behaviour rather than as a genuine two-way dialogue. Consumer engagement should be taken into the harder areas of decision-making, notably corporate planning, and should apply to all policy development. There should also be a clearer understanding of engagement with the disadvantaged and vulnerable, and more collaborative work with organizations representing them.¹⁰⁵ The role of the Advisory Committee on Consumer Engagement is unique amongst the deliberative arrangements adopted by the regulators in this book in that it provides a permanent forum for self-reflexion by the Agency on its engagement processes, and adopts a sophisticated approach to engagement requiring mutual learning rather than the passive receipt of information by the regulator. It has been accompanied by other important developments, such as the publication of a guide to consumer engagement for staff and the adoption of techniques such as discussion groups, a school council network and citizens’ forums. Together ¹⁰¹ Ibid, para 130. ¹⁰² Zwanenberg and Millstone, ‘BSE: A Paradigm of Policy Failure’, 35–6. ¹⁰³ Brooker and Taylor, Rating Regulators, para 4.15. ¹⁰⁴ Westley Consulting Ltd, Quality Assurance of the Process of Consumer Engagement – Report to the Food Standards Agency (2007). ¹⁰⁵ Food Standards Agency, Advisory Committee on Consumer Engagement: Report to the Food Standards Agency Board (2008).

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these led Consumer Focus to describe the FSAg as ‘a model regulator’ in developing a consumer culture.¹⁰⁶ Similarly, the review by the Better Regulation Executive and the National Audit Office concluded that the FSAg ‘is a very transparent and accountable regulator’.¹⁰⁷ Despite this general consensus that the FSAg is an exceptionally open and transparent regulatory agency, there have been problems and criticisms in some specific areas, especially in the early days of the Agency. It is worth considering one of these in detail as, whilst by no means representative of most of the Agency’s work, it offers some lessons as to the potential problems with a participatory approach. This is that of future policy on GM crops, an area on which public mistrust of safety was particularly strong, and where the question of the extent to which food could be feasibly labelled as GM-free caused conflict between consumer groups and both industry and scientists. There was also an international context with pressure by the USA on the EU to accept GM commodities.¹⁰⁸ After hostility to GM foods by consumers, the government undertook a series of farm-scale evaluations to assess the effects of GM crops on the environment. Meanwhile the major retailers had taken actions themselves to implement traceability of GM food through the food chain, a position which the FSAg considered unworkable, preferring ‘GM-free’ labelling.¹⁰⁹ Against this conflictual background, the government decided to launch a public debate on the future role of GM crops. The debate, GM Nation? was run by a Public Debate Steering Board, and took place between 3 June and 18 July 2003.¹¹⁰ It included an economic review of costs and benefits by the Prime Minister’s Strategy Unit, and a scientific study led by the government Chief Scientific Adviser. The debate concluded with a report finding public unease and little support for early commercialization of GM crops; there was also a desire for further knowledge and research.¹¹¹ The government then decided not to support large-scale commercialization and to take decisions on a case-by-case basis.¹¹² Serious criticisms were made, however, of the process by the relevant House of Commons Committee and it was also highly critical of the FSAg’s role. The Agency had conducted its own consultation as a contribution to the debate; the Committee felt that this had created confusion, and sought an explanation. According to the Agency, the consultation was specifically to seek the views of hard to reach groups including the young and low-income consumers

¹⁰⁶ Brooker and Taylor, Rating Regulators, para 2.4. ¹⁰⁷ Eff ective Inspection and Enforcement, para 16 (emphasis retained). ¹⁰⁸ For the general political context, see Barling and Lang, ‘A Reluctant Food Policy?’, 15–17. ¹⁰⁹ Ibid, 17. ¹¹⁰ For discussion of the process, see Environment, Food and Rural Affairs Committee, ‘Conduct of the GM Public Debate’, HC 1220, 2002–03. ¹¹¹ Public Debate Steering Group, GM Nation? The Findings of the Public Debate (2003). ¹¹² Department for the Environment, Food and Rural Affairs, The GM Dialogue: Government Response (2004).

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whose views were not normally heard.¹¹³ The Agency’s consultation had been extensive and had included a citizens’ jury, a focus group report, surveys of views of those on low incomes and young people, and a schools debate. The citizens’ jury concluded by a majority that GM food should be available to buy in the UK, but unanimously that more time was needed to understand the long-term environmental implications of GM crops before farmers started growing them in the UK, and that growing them would be irreversible and might eventually reduce choice. It was also unanimous in requiring labelling of all products containing GM foods or derivatives.¹¹⁴ This caused considerable controversy as the press release announcing the outcome of the jury only referred to the first conclusion, and not the later unanimous ones. Moreover, the FSAg’s Consumer Committee was itself critical of the way in which the activities had been undertaken and of its own lack of involvement. The FSAg’s response was perceived as ‘spinning’ to support a pro-GM foods stance, a view reinforced by the fact that the then chair of the Agency had stated that GM foods were safe, and this view was stated on its website.¹¹⁵ The chair had also expressed scepticism in an interview as to the value of organic food. The result of the controversy was a considerable blow to the Agency’s reputation. According to the Dean Report: [e]arly references to organic food, and to GM food, were highlighted (unprompted by the Reviewers) by a number across the stakeholder groups. It is clear that these two issues are still heavily influencing stakeholders’ perceptions of the Agency. In respect of both issues, the perception of the vast majority was that the Agency had deviated from its normal stance of making statements based solely on scientific evidence, to give the impression of speaking against organic food and for GM food. This view was expressed not only by stakeholders representing organic and GM interest groups, but by those who would be regarded as supporters and natural allies of the Agency.¹¹⁶

A number of reasons can be traced for this debacle. The first is that, as emphasized earlier, the Agency is in a complex regulatory space and its relationship to government in the debate was not clear. There were parallel consultations, and that by the Agency was inevitably affected by the limitations associated with the more general government-sponsored debate. There is evidence that the Agency had in fact resisted pressure from government to adopt a stance more favourable

¹¹³ Ibid, paras 37–8; Food and Rural Affairs Committee, ‘Conduct of the GM Public Debate: Food Standards Agency Reply to the Committee’s Report’, HC 483, 2003–04. ¹¹⁴ FSA Citizens’ Jury, Should GM Food Be Available to Buy in the UK? Final Report (2003). ¹¹⁵ See, eg GeneWatch UK, ‘Food Standards Agency Hides Unanimous Finding of Citizens’ Jury that GM Crops Should Not be Grown in the UK Now’, 9 March 2003 at (consulted 8 December 2009). For a commitment to the principle that GM foods are safe see, eg Food Standards Agency Board Meeting Minutes, 13 March 2003, para 8. ¹¹⁶ 2005 Review of the Food Standards Agency, para 1.7.1; see also 6.1.

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to organic foods,¹¹⁷ but the accusations of ‘spinning’ and suppressing consumer views inevitably raised suspicions that the Agency was adopting a pro-producer approach characteristic of its discredited predecessor ministry. The other background problem was of course that there were seriously incompatible views both of the merits of GM crops and of the potential role of science in decision-making. No amount of consultation would resolve them, although it could have an important role in making information available permitting some degree of learning.¹¹⁸ As in the case of the HFEA examined in the previous chapter, there is value in an independent agency taking part in the process which leads to decisions of principle taken by government, but it is essential that it shows full openness and impartiality in doing so (impartiality does not of course mean that it cannot take its own view after ensuring that all other viewpoints have been properly considered). Given the major changes to consumer engagement by the Agency since 2003, and the greater openness adopted on scientific matters, it is highly unlikely that the problems of apparent pre-judgement would re-occur, but the relationship between government and the Agency remains a potential source of problems should parallel consultations be conducted in the future.

Conclusion The FSAg has fully justified its creation. It has shown a degree of openness and consumer engagement in its decision-making which goes beyond that adopted by any other regulator, and has avoided the dismal reputation of its predecessor ministry. Particularly important contributions to this success have been the publication of advice to ministers, the holding of open meetings and a generally receptive attitude to stakeholders, and the adoption of a strong consumer orientation with uniquely well-developed arrangements for monitoring how this is implemented and for encouraging the Agency to reflect on its experience. There have, however, been some problems; the events surrounding the consultation on GM foods show tensions behind a scientific approach to safety and openness to consumer views. They also suggested some confusion in relations with government. What is most striking about the Agency, as emphasized early in this chapter, is the complexity of the regulatory space in which it operates. In the previous chapter it was emphasized that a division of responsibilities between government and regulators is not necessarily problematic, for each can supplement the work of the other, and a regulatory body may be able to stimulate and assist governmental policy-making. Moreover, within this context the Agency seems to have ¹¹⁷ Centre for Business Relationships, Accountability, Sustainability and Society, The Food Standards Agency: Making a Diff erence? (Cardiff : Brass, 2004), 18–20. ¹¹⁸ For such incompatible views, see Lang, ‘The Complexities of Globalization’, 181; Barling and Lang, ‘A Reluctant Food Policy?’, 14–15, 17.

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retained its independence effectively. The danger is of course one of confusion of responsibilities. The FSAg, perhaps more than any other regulator covered in this book, shows how regulation may work as a collaborative enterprise involving different institutions; not merely the regulatory agency and government, but also consumer bodies and the industry. Its openness is particularly important in this context; what is needed is to be sure that there is a reasonably clear allocation of responsibilities between the different actors. The concordats which were originally to provide such an allocation are weak documents. The framework agreement on local authority enforcement is much more developed and this is an area on which further work is being conducted. It is in relation to the clarity of relations with other bodies, especially government, that the Agency has both its greatest potential through using its developed arrangements for genuine deliberation as part of the collaborative enterprise, and the countervailing potential danger of confusion through an unclear allocation of responsibilities.

4 The Environment Agency Like the Food Standards Agency, the Environment Agency (EA) was the product of controversy, though in this case it was not so much the result of serious scandals but of controversy over the degree to which there should be an umbrella agency for all environmental regulation rather than separate bodies covering, for example, waste disposal and river management. The creation of a single agency also had one unusual consequence; as well as being a regulator, the EA has substantial management responsibilities in relation to water, including river management, and flood protection. It also has a complex relationship with government. These concerns will be central to this chapter, as will the extent to which the creation of the agency has resulted in a major change to the distinctive British regulatory style in environmental matters.

The origins of the Environment Agency The immediate genesis of the Environment Agency can be found in an announcement by John Major, the Conservative Prime Minister, in July 1991 that his government intended to create a new agency bringing together the functions of the National Rivers Authority, Her Majesty’s Inspectorate of Pollution, and the waste regulation functions of local authorities; this was included in the Conservative Party manifesto for the 1992 general election.¹ Underlying this apparently simple proposal there was considerable earlier conflict as to the merits of such an agency, and this conflict was to continue over exactly what its responsibilities would be. The background is one of a distinct regulatory style in environmental policy and regulation in the UK. This was identified by Vogel in a celebrated 1986 study as more informal in Britain than in the United States, more flexible and more private. Regulatory officials are able to exercise considerable discretion and tend to make policy on a case-by-case basis rather than through the application of general rules and ¹ For more information on the politics behind the creation of the EA, see Carter, N. and Lowe, P., ‘Environmental Politics and Administrative Reform’ (1994) 65 The Political Quarterly, 263–74. I draw heavily on this excellent account here.

The Regulatory Enterprise. Tony Prosser. © Oxford University Press 2010. Published 2010 by Oxford University Press.

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standards. Little use is made of prosecution and much reliance is placed on securing compliance through informal mechanisms of social control, including, in many instances, self-regulation.²

This he contrasted with the more formalized, rule-based and adversary approach adopted in the United States. Similarly, Carter and Lowe identified five main features of the distinctive UK administrative system and style of policy-making in this context: government structures and laws were a fragmented accretion of common law, statutes, agencies, procedures, and policies with no overall environmental policy; regulation was highly devolved and decentralized; environmental control was pervaded by administrative rather than judicial procedures; a voluntarist approach was used based on negotiation and persuasion; and policy making took place in closed communities with a heavy representation of producer interests.³ The idea of a new agency did not fit easily into this model. Indeed, only 10 months before the establishment of the new agency was announced, the government had rejected a proposal for just such an agency made by the House of Commons Select Committee on the Environment.⁴ The subsequent government about-turn may partly be attributed to political considerations and establishing the government’s ‘green’ credentials, but also built on support for an inclusive agency by environmentalists and, in particular, by the Royal Commission on Environmental Pollution.⁵ Controversy continued after the announcement, and the 1992 election, as to which responsibilities should be acquired by the new Agency. In particular, it concerned the questions of whether the Agency should take on waste regulation duties of local authorities and the management duties of the National Rivers Authority. The latter (which had only been established as recently as 1989) was responsible not just for regulation but also for managing water resources on the basis of integrated catchment management which could lead to pollution, as well as for leisure traffic and land drainage. The government issued a consultation paper on various options, eventually deciding on one which included both waste regulation previously carried out by local authorities and all the responsibilities of the National Rivers Authority. Th is was despite opposition from the Environment Select Committee which had strongly supported separating the Authority’s regulatory and managerial responsibilities to prevent the new Agency acting both as ‘poacher and gamekeeper’.⁶ On the other hand, both environmentalists and the Authority itself had strongly opposed such a separation, pointing to the importance of integrated management in its work ² Vogel, D., National Styles of Regulation: Environmental Policy in Great Britain and the United States (Ithaca: Cornell University Press, 1986), 220. ³ ‘Environmental Politics and Administrative Reform’, 265–6. ⁴ See the White Paper, This Common Inheritance (Cm 1200, 1990); ‘Toxic Waste’, HC 22, 1988–9, para 12. ⁵ Carter and Lowe, ‘Environmental Politics and Administrative Reform’, 264–7. ⁶ ‘The Government’s Proposals for an Environment Agency’, HC 55, 1991–2, paras 98–102, 111.

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and opposing the alternative of giving the management functions to the then Ministry of Agriculture. As in the case of food standards, an independent agency was perceived as less open to capture by producer interests than was the government department. The new Agency took up its powers in April 1996 under the Environment Act 1995. This raises a key issue of regulatory design. The recent tendency, notably in EU regulatory requirements for the liberalized utility sectors such as electronic communications and energy, is to emphasize the importance of a complete separation of regulatory and management or operational functions. As the Select Committee emphasized, this is based on the principle that no authority is placed in the situation of having to regulate its own activities.⁷ However, there is also another approach: [t]he counter-argument underlined the merits of integrated river basin management and stressed that the NRA’s pollution control functions cannot easily be separated from its management functions. . . . Indeed, to prevent the gamekeeper-poacher conflict it is not necessary to separate control or enforcement roles from promotional roles, or to strip from regulatory authorities all their other executive functions. That would be to take an unnecessarily narrow view of regulation and diminish the scope for a ‘sticks-and-carrots’ strategy or for the pursuit of preventative policies.⁸

This latter view chimes well with a central theme of this book—that there is no single model for good regulation, and sometimes a collaborative approach may work better than attempts to secure complete regulatory independence at all levels of operation. Finally, in another respect the establishment of the EA shares the emphasis of that of the other regulatory bodies considered so far; there was a major stress on the importance of openness and deliberation in its procedures. Thus the Environment Select Committee recommended strongly that the Agency make public as much information as possible, including grounds on which applications for permits and consents are objected to and the process by which each is considered.⁹ This also applied beyond individual decisions, thus ‘if environmental regulation is conceived not simply as a policing function but as an active agent for the promotion of sustainable practices, it is vital that regulatory bodies establish working relationships with all those who control the management and exploitation of natural resources. This is, indeed, a characteristic feature of the various conservation agencies in Britain . . . which combine regulatory and management functions.’¹⁰

Once more the stress is on the necessity of regulation as a collaborative exercise.

⁷ Ibid, para 99. ⁸ Carter and Lowe, ‘Environmental Politics and Administrative Reform’, 271. ⁹ ‘The Government’s Proposals for an Environment Agency’, para 59. ¹⁰ Carter and Lowe, ‘Environmental Politics and Administrative Reform’, 273.

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Functions of the Environment Agency The remit of the EA has been summarized as follows: • preventing flooding and pollution incidents—flood protection requires by far the largest proportion of its budget;¹¹ • reducing industry’s impact on the environment; • ensuring waste produced is correctly disposed of; • advising on land use planning, including regional planning, development plans, and planning applications; • cleaning up rivers, coastal waters, and managing water resources; • improvement of contaminated land; • improving wildlife habitats; • improving and enhancing inland waterways and ensuring sustainable inland fisheries.¹² As with the case of the Food Standards Agency, the EA also emphasizes its role in working with others, including government and local authorities. It is thus clear that the mix of functions is very different from that of, for example, the public utility regulators. However, the EA does have regulatory functions of licensing in the form of operating permitting schemes, and inspection and enforcement. Currently, the permitting regimes take the form of its Environmental Permitting Programme which will eventually provide a common permitting regime for operators; Pollution Prevention and Control covering the discharge of damaging substances into the environment by businesses; Waste Management Licensing; and Water Abstraction and Water Discharge Licensing.¹³ Permitting also gives the EA a role in setting standards through imposing conditions, however, general standards are mainly set by the EU in the form of directives and the Secretary of State through regulations. The pattern of different regulatory institutions and functions is thus once more extremely complex in this area. A number of functions were transferred to the Agency on its establishment. These included all functions of Her Majesty’s Inspectorate of Pollution under the Environmental Protection Act 1990, for example that of enforcement authority in relation to a large number of processes prescribed by regulation and radioactive substances. The new Agency also acquired local authority waste regulation functions under the Control of Pollution Act 1974, and the ¹¹ The Flood and Water Management Bill announced in the 2009 Queen’s Speech will give the EA a strategic overview role in relation to flooding. ¹² Environment, Food and Rural Affairs Committee, ‘The Environment Agency’, HC 780, 2005–6, para 1. ¹³ Better Regulation Executive and National Audit Office, Eff ective Inspection and Enforcement: Implementing the Hampton Vision in the Environment Agency (2008), para 13.

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responsibilities of the National Rivers Authority relating to water resources management, control of pollution of water resources, flood defence, fi sheries, and navigation.¹⁴ The EA was also later to acquire further responsibilities through the implementation of EU law by the Pollution Prevention and Control Act 1999 (‘skeleton legislation’ giving broad regulation-making powers to the Secretary of State) and regulations made under it, aiming to integrate more fully the approach to pollution control over a wider range of processes. Most importantly, a new system of pollution control was introduced in 2000 using regulations made under the Act to implement the European Directive on integrated pollution prevention and control.¹⁵ The regime for water resources management was also changed by the Water Act 2003. As a result, both the law and the precise defi nition of pollution control functions are now highly complex, with 227 pieces of legislation and 16 EU Directives.¹⁶ Indeed, in 2003 the Department undertook a review of legislation which impeded integration within the Agency. Although it did not recommend further legislative change, it noted that the inheritance of a variety of mechanisms for environmental protection licensing unrelated to risk constituted a central barrier to more efficient regulation, and recommended a more graduated and risk-based approach to improve targeting of resources.¹⁷

The Environment Agency in regulatory space: the institutions The Agency itself is a statutory body corporate without Crown status.¹⁸ It is required have between eight and fifteen members appointed by the relevant minister and Secretary of State.¹⁹ The Board is currently comprised of 12 non-executive members and the chairman and Chief Executive; members represent ‘a broad cross-section of bodies and individuals with an interest in the environment’.²⁰ Members may be removed by the minister for failure to attend meetings for three months, for bankruptcy, or if they are unable or unfit to carry out their functions.²¹

¹⁴ Environment Act 1995, s 2. ¹⁵ Pollution Prevention and Control (England and Wales) Regulations 2000, SI 2000/1973, implementing the Directive EC 96/61 concerning integrated pollution prevention and control [1996] OJ L257/26; these are now replaced by Directive 2008/1/EC concerning integrated pollution prevention and control [2008] OJ L24/8, and the Environmental Permitting (England and Wales) Regulations 2007, SI 2007/3538. ¹⁶ Better Regulation Executive and National Audit Office, Eff ective Inspection and Enforcement, para 24. ¹⁷ Department for Environment, Food and Rural Affairs, Review of Legislation Aff ecting Integration Within the Environment Agency – Final Report (2003). ¹⁸ Environment Act 1995, s 1(1), (5). ¹⁹ Section 1(2). ²⁰ ‘Environment Agency Annual Report and Accounts 2007–8’, HC 843, 2007–08, 10. ²¹ Environment Act 1995, sch 1, para 1(3).

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Accounts are audited by the Comptroller and Auditor-General, who was made the EA’s auditor in 2003.²² It should be remembered that the Agency was designed to introduce a new system of integrated pollution control, taking over from no less than 86 predecessor bodies. In 2000 the Environment Select Committee found strong support for this integrated approach but that the Agency did not yet have a coherent vision of its over-arching role; there were continuing internal divisions and the legislation did not provide for a coherent regime.²³ As we shall see later, steps were taken to correct this by developing a clearer unified vision for the Agency. However, the legislative position has if anything become even more complex with the incorporation of EU requirements. In a further report in 2006, the Committee did not criticize internal integration between the different sections and found that there was now greater consistency in the Agency’s regulatory and enforcement functions, but pointed to tensions between the Agency’s roles as a regulator and as a ‘champion of the environment’.²⁴ This is, of course, different from the relationship between regulatory and operational responsibilities. Predictably, and perhaps reflecting the different economic and rights/social solidarity approaches to regulation, industry witnesses emphasized the former role and environmental witnesses the latter. The Committee concluded that ‘[g]iven the range of crosscutting environmental issues faced by Government, we strongly support the Agency’s role as a “Champion of the Environment”. However, it is important that there should be clarity between all the Agency’s diff erent functions, particularly between its regulatory and environmental champion roles’.²⁵ In its response to the Committee’s report, the government stated that it saw no contradiction between the roles of champion of the environment and regulator, although in terms of resources and prioritization the two needed to be appropriately balanced.²⁶ Ministerial powers in relation to the EA are extensive. Thus the Act gives the Secretary of State powers to issue directions of a general or specific character with respect to the carrying out of any of its functions, including implementing EU obligations and obligations under other international agreements. The directions must be published.²⁷ Directions may also be given under other statutes, such as the Environmental Protection Act 1990. Importantly, it is for the minister to define in more detail through guidance the contribution the EA is to make to achieving sustainable development, its principal aim, and to give guidance on

²² Environment Act 1995, s 46; Government Resources and Accounts Act 2000 (Audit of Public Bodies) Order 2003, SI 2003/1326. ²³ ‘The Environment Agency’, HC 34, 1999–2000, paras 10–11, 13–18, 25–31. ²⁴ ‘The Environment Agency’, HC 780, 2005–6, para 38. ²⁵ Ibid, para 17 (emphasis retained). ²⁶ Environment, Food and Rural Affairs Committee, ‘The Environment Agency: Government and Environment Agency Responses to the Committee’s Seventh Report’, HC 1519, 2005–6, 3. ²⁷ Environment Act 1995, ss 40(1)–(3), 122.

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other appropriate objectives.²⁸ As mentioned above, the Pollution Prevention and Control Act 1999 gives the Secretary of State sweeping powers both to implement EU requirements by regulation, and for ‘regulating, otherwise than in pursuance of that Directive, activities which are capable of causing any environmental pollution’.²⁹ A further role linked to government is that of the delivery of goals set out in Public Service Agreements agreed through the Public Spending Review.³⁰ When it is recalled that the Secretary of State has the major role in negotiating EU environmental law and standards, it is clear that relations with government are particularly close in this regulatory context. Indeed, these extend over several departments, including the Departments for Business, Innovation and Skills and for Energy and Climate Change, as well as the Department for Food, Environment and Rural Affairs (Defra). Criticisms of the EA’s relationships with government were made by the House of Commons Environment Select Committee in 2006, which noted that evidence it had received had pointed to a lack of distinction between the Department and the Agency in policy making, and that the Agency was too closely involved in the latter (it will be recalled that similar criticisms were made of the Human Fertilisation and Embryology Authority). The EA pointed to the incoherence and inconsistencies in the legislation which had created a policy void it had to fill, especially in the case of EU legislation, and the Committee stressed the need for greater legislative consistency and a common regulatory framework. A different criticism was that the Agency was not properly consulted by government in the development of policy; the Committee recommended earlier consultation.³¹ On another occasion, the Public Accounts Committee was critical of the constraint imposed on the Agency by ministerial guidance in relation to waste matters, for example the targeting of inspections of waste operators.³² The problem seems essentially to be one of a structure lacking coherence; the law is piecemeal and this had made effective cooperation difficult. The 2006 Environment Committee Report recommended the establishment of a common regulatory framework at both European and domestic level, but at the former level the proposal was rejected by the government and at the latter there has not been legislative change. However, a review by the Better Regulation Executive and the National Audit Office in 2008 found an ‘increasingly positive’ working relationship with Defra, whilst more work had to be done to improve joint working with the Department for Business.³³ Thus collaborative policy development with joint governance by the Department and EA takes place, as does joint consultation. ²⁸ Section 4(2)–(3). See Department for Environment, Food and Rural Affairs, The Environment Agency’s Objectives and Contributions to Sustainable Development: Statutory Guidance (2002). ²⁹ Section 1(1). ³⁰ Environment Agency, Corporate Plan 2008–11 (nd), 1–2. ³¹ Environment, Food and Rural Affairs Committee, ‘The Environment Agency’, HC 780, 2005–6, paras 62–77. ³² ‘Protecting the Public from Waste’, HC 352, 2002–3, para 3. ³³ Eff ective Inspection and Enforcement, paras 31–9.

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Relations with Defra are structured through a Management Statement which is more detailed and comprehensive than the Food Standards Agency’s Concordat.³⁴ The Statement emphasizes the partnership role of the EA with central government and other bodies. It also notes that the Agency has a contribution to make to the development of policy, although this is ultimately a matter for central government and the Welsh Assembly. It also sets out the respective roles of the Secretary of State and the EA’s chair and Chief Executive, together with requirements for strategic and corporate planning and reporting. Local government retains responsibilities in the environmental field as well as central government. Here a Local Government Performance Framework has been developed to assist collaboration and deliver shared targets; another example of informal structuring of collaboration familiar from the previous chapter. There were, however, problems of reaching targets for such collaboration and now both the EA and local authorities are made subject to new duties of cooperation in drafting local area agreements and local improvement targets.³⁵ It is already evident that EU law has had a major role to play in the work of the Agency; indeed it is now EU law which is responsible for providing the basic framework of standards in this area, in particular through the system of pollution control introduced in 2000 using regulations to implement the European Directive on integrated pollution prevention and control.³⁶ The law has been seriously criticized as inconsistent and incoherent; the European legislation was drafted in a piecemeal fashion (including different definitions of ‘pollution’ in different instruments) and national transposition of the law was similarly piecemeal. This prompted the Environment Select Committee to support the EA’s proposal for a common EU regulatory code for the environment covering issues such as definitions, permitting, consultation periods, and monitoring arrangements.³⁷ The recommendation was, however, rejected by the government as potentially infringing subsidiarity, although the EA maintained its support for the principle.³⁸ Apart from the central role of EU law, there are special European institutions which are relevant to the work of the Agency. Chief amongst these is the European Environment Agency, established in 1990, which has a central role in establishing the information necessary for the setting of standards. It also coordinates the European environment and information network (Eionet), comprising national regulators and experts. The EA also participates in the EU Network for the Implementation and Enforcement of Environmental Law (IMPEL). Finally, ³⁴ Department for Environment, Food and Rural Affairs, Management Statement Issued to the Environment Agency (2002). ³⁵ Corporate Plan 2008–11, 2; Annual Report 2006/07, HC 834, 2006–7, 5; Local Government and Public Involvement in Health Act 2007, s 106. ³⁶ See n 15 above. ³⁷ ‘The Environment Agency’, 2005–6, paras 68–70. ³⁸ Environment, Food and Rural Affairs Committee, ‘The Environment Agency; Government and Environment Agency Responses’, HC 1519, 2005–6, 10, 27.

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EU law is also extremely important in providing rights of access to environmental information, as will be discussed briefly below.

Setting water prices One striking example of an inter-institutional conflict involving different types of regulation is that of the setting of water price controls by the economic regulator for water, then the Director General of Water Services and Ofwat (see Chapter 9 below) through the periodic review process. This is worth examining in more detail as it illustrates very clearly a major conflict between agencies with predominantly environmental and economic remits.³⁹ The debate concerned the costs of environmental improvements which had to be included in the Director General’s decision on permissible price increases; the environmental standards were specified by ministers after consulting the EA and by EU law requirements, and the conflict was between environmental regulation setting standards and economic regulation protecting consumer interests. In the 1999 periodic review there was a ‘highly charged’ debate on the balance to be struck between price cuts and environmental investment with ‘an open exchange of claims and counter claims by Ofwat, the DETR, the EA, water companies and non-governmental organisations’.⁴⁰ The EA saw its role in the debate as identifying the environmental problems caused by water companies and advising ministers on the relative priority of solving them.⁴¹ Surveys of customers’ needs were undertaken by the various parties, but each of the ‘confusing plethora of customer surveys’ came up with slightly different rankings of customer preferences.⁴² Further problems arose from the process of deciding the scope of the environmental programme, a decision for the government based on EA advice; the ministerial guidance suggested that there was scope for price cuts as a result of the review. The Director General of Water Services made initial statements indicating that he was considering price reductions; the EA then issued an open letter to a wide range of organizations indicating its concern that the outcome had been pre-judged on the assumption that consumer benefits could only be in the form of a price reduction and that consumers gained no benefit at all from a cleaner environment. The Environmental Audit Committee recommended that ministers should not try to influence decisions of the independent water regulator by announcing price expectations, and that Ofwat should seek to ensure ‘that its ³⁹ For general background, see Weale, A., ‘Environmental Regulation’ in Centre for the Study of Regulated Industries, Regulatory Review 1997 (Bath: CRI, 1998), 201–16, and for more detail Byatt, I., ‘The Impact of EC Directives on Water Customers in England and Wales’ (1996) 3 Journal of European Public Policy, 665–74. ⁴⁰ Environmental Audit Committee, ‘Water Prices and the Environment’, HC 597, 1999– 2000, para 3. ⁴¹ Ibid, para 31. ⁴² Ibid, para 52 (emphasis retained).

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own statements do not “ demonise” environmental and quality investment by portraying it as the key upward pressure on prices without equally emphasising the customer and public benefits which it delivers’.⁴³ The position was made worse by criticism of the EA by the Director General of Water Services; he suggested that it had given little attention to establishing that proposed quality improvements offered value for money for the environment or for customers, and that its methodology was inadequate and did not use proper cost-benefit analysis.⁴⁴ Yet a further problem was the lack of involvement of stakeholders in the process.⁴⁵ Finally, the Environmental Audit Committee noted that the water regulator did not have a specific duty to promote sustainability, and the attitude that sustainability was not a direct matter for Ofwat was evident in much of the latter’s work; it recommended that a duty to have regard to sustainable development be added to the Director General’s remit.⁴⁶ Thus in the 1999 periodic review there was conflict between different regulators with environmental and economic remits; this could have been resolved by government but in practice government contributed to the confusion. In the case of the next Periodic Review in 2004 the Environment Committee considered that in its earlier stages the Review had been conducted in a more transparent way than previously, however later the process had become more clouded and differences had continued between the environmental and economic regulators, with the former arguing that too much emphasis had been placed on the cost of environmental improvement, partly because of the way in which Ofwat presented the bases for price increases.⁴⁷ The EA also claimed that Ofwat had assumed the role more properly for the Secretary of State in taking environmental decisions.⁴⁸ The Environmental Audit Committee similarly noted considerable improvements in the process, including in the EA’s cost-benefit analysis. The Water Act 2003 added a duty to take into account sustainable development to those applying to the new water regulatory authority, though this was not yet in effect and would only be a secondary, not a primary, duty. However, there had been informational problems in the process and in the review Ofwat’s proposals did not rest on the principles of sustainable development which the Director General already professed to be upholding.⁴⁹ In conclusion, [t]he Economic Regulator’s Role has come to impinge on the Environmental Regulator’s role. This has been highlighted to us in memoranda received by the Committee and has become obvious to us over the last few months. We are not convinced that the Ofwat has sufficient expertise in determining what should or should not be included in the environmental programme, yet in advice to ministers and evidence to us it would appear that this is part of what the Regulator now sees as his duties. . . . We do not believe it is the ⁴³ Ibid, para 69 (emphasis retained). ⁴⁴ Ibid, para 86. ⁴⁵ Ibid, paras 103–4. ⁴⁶ Ibid, paras 215–20. ⁴⁷ ‘Water Pricing: Follow-up’, HC 1186, 2003–4, paras 8–16. ⁴⁸ Ibid, paras 19–20. ⁴⁹ ‘Water: The Periodic Review and the Environmental Programme’, HC 416, 2003–4, paras 11–16, 21, 33–6.

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role of the Regulator to decide what should or should not be included in the environmental programme.⁵⁰

As regards the outcome, the EA welcomed the approval of a programme of £3.5 billion investment as part of the review, whilst pointing out that it had argued that more investment was called for and that this figure represented the bare minimum required to comply with European law.⁵¹ The sources of the difficulties here are obvious; overlapping responsibilities of different regulators with very different duties and remits. This was always likely to cause problems, and indeed it has been suggested that the separation of environmental regulation and price regulation did have the virtue that disputes were brought into the open, and we have seen some improvements in the transparency of the process which have reinforced this.⁵² A problem has been, however, that the role of government has not been particularly helpful. In the 1999 Periodic Review the Department was criticized for pre-empting the decision of the water regulator by announcing its price expectations in advance, and in 2004 the (delayed) ministerial guidance was ‘the focus of department wrangling, simply because it is the only way the Government can exert any direct influence over water prices’.⁵³ The only way in which the difficulties can be resolved will be through a combination of more uniform statutory remits for the different regulators (already partly achieved with the changes in the Water Act 2003), an emphasis on transparent debate, and a more decisive role for government. This does appear to have succeeded in the 2009 review where, as we shall see in Chapter 9 below, there has been an early and clearer statement of objectives by the government and the drafting of a National Environment Programme by the EA setting out the schemes necessary for meeting European and national requirements. Thus procedural improvements do seem to have provided a better framework for resolving disputes between different approaches to regulation. Indeed, in an examination of the 2009 review by the Environment Committee, criticism of institutional conflict was remarkable by its absence.⁵⁴

The Environment Agency in regulatory space: the duties The most striking feature of the duties applicable to the EA is that there is one primary duty in the form of a principal aim; this is to discharge its functions ‘so to protect or enhance the environment, taken as a whole, as to make the ⁵⁰ Ibid, para 37 (emphasis retained, footnote omitted). ⁵¹ ‘Annual Report and Accounts 2004/05’, HC 201, 2004–5. For discussion of the final outcome of the Review, see Fletcher, P., ‘Water Regulation’, in Centre for the Study of Regulated Industries, Regulatory Review 2004–5 (Bath: CRI, 2005), 119–41. ⁵² Wheale, ‘Environmental Regulation’, 212–13. ⁵³ Environmental Audit Committee, ‘Water: The Periodic Review 2004’, para 23 (emphasis retained). ⁵⁴ Environment, Food and Rural Affairs Committee, ‘Ofwat Price Review 2009’, HC 554, 2008–9, paras 16–22, 26–34.

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contribution towards attaining the objective of achieving sustainable development . . .’.⁵⁵ The second important characteristic is that there is a considerable role for ministerial guidance in defining that objective and determining other objectives; indeed, the sustainable development duty only comes into play when such guidance is issued.⁵⁶ The original Bill had only included provision for the Secretary of State to issue guidance without reference to sustainable development, the latter was introduced at the report stage in the House of Lords. The Secretary of State has issued guidance on the Agency’s objectives and contributions to sustainable development.⁵⁷ The guidance emphasizes that it applies to the formulation of approaches by the EA, decisions about its priorities and the allocation of resources, and is not directly applicable to individual decisions. It notes that the EA is required to take account of costs and benefits in achieving its principal aim and in exercising its powers. The Agency is to support the government’s Sustainable Development Strategy and its key objectives will be social progress which reflects the needs of everyone, effective protection of the environment, prudent use of natural resources, and maintenance of high and stable levels of economic growth and employment.⁵⁸ As well as protecting and enhancing the environment itself, the Agency is to act as an independent adviser on environmental matters affecting policy-making, both within government and more widely. It should develop approaches which do not impose excessive costs. The guidance also sets more specific objectives for the Agency.⁵⁹ These include adopting an integrated approach to environmental protection, discharging its functions in an economical, efficient and effective manner, conducting its affairs in an open and transparent manner, and developing in conjunction with government a ‘risk-based, proportionate, consistent, efficient and cost-effective approach to the regulatory process’ following better regulation principles. Draft guidance has also been issued in relation to the Agency’s exercise of its functions in relation to waste management licensing.⁶⁰ It should thus be apparent that the principal aim is not a simple obligation to promote sustainable development; it is wholly dependent on ministerial guidance, and in that sense ties the EA more closely to government than is the case for most other regulators examined in this book (although the guidance does not directly determine individual decisions by the Agency, for example on enforcement). It is also clear from the guidance that a risk-based approach is to be taken to regulation, and in particular that some form of cost-benefit analysis must ⁵⁵ Environment Act 1995, s 4(1). ⁵⁶ Section 4(2)–(3). ⁵⁷ Department for Environment, Food and Rural Affairs, The Environment Agency’s Objectives and Contributions to Sustainable Development: Statutory Guidance (2002). ⁵⁸ Ibid, para 3.2. ⁵⁹ Ibid, para 4.1. ⁶⁰ Department for Environment, Food and Rural Affairs, Statutory Guidance to the Environment Agency on the Exercise of its Functions with Regard to the Waste Management Licensing (England and Wales) (Amendment and Related Provisions) Regulations 2005 (2005).

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be used in the exercise of the Agency powers. This reflects the important section 39 of the Act, which imposes a controversial duty on the Agency, in deciding whether and how to exercise its powers, to ‘take into account the likely costs and benefits of the exercise or non-exercise of the power or its exercise in the manner in question’.⁶¹ Although ‘benefits’ are not further defined, ‘costs’ include costs to the environment as well as costs to any person.⁶² The requirement is qualified as not applying ‘to the extent that it is unreasonable for it to do so in view of the nature or purpose of the power or in the circumstances of the particular case’.⁶³ It also does not apply to mandatory obligations, such as complying with standards set by the minister or from the EU. Thus the scope of the duty is relatively restricted; it does, however, require some form of environmental and economic appraisal to take place before taking discretionary decisions.⁶⁴ The 1995 Act also imposes a number of other duties on the EA. Thus it is required to exercise its pollution control powers to prevent or minimize the effects of pollution, and to compile information and (on ministerial request) undertake assessments relating to such pollution.⁶⁵ It also has duties in relation to inland and coastal waters to promote their natural beauty and amenity, conservation and the conservation of water resources, and has similar general environmental and recreational duties.⁶⁶ Guidance may be issued by the minister relating to these duties, and this has been done in the form of a code of practice.⁶⁷ Of course, there are other duties applying to the EA under different statutes and under EU law. How are these duties translated into practice by the EA? At the highest level, after criticism by a Parliamentary Committee for lack of a clear vision, the Agency issued an Environmental Vision, setting as its fundamental goals ‘a better quality of life’ and ‘an enhanced environment for wildlife’.⁶⁸ It also set outcomes and changes to be sought. The vision was translated into a Corporate Strategy for the five years 2006–11, which also stressed as the first main objective a better quality of life, with everyone having the opportunity to enjoy a high-quality environment, and with a particular emphasis on improving the environment in disadvantaged areas.⁶⁹ The second objective was an enhanced environment for wildlife in both urban and rural areas. Thus in these main objectives there were strong elements of social solidarity. The goals were further translated into a corporate plan

⁶¹ Environment Act 1995, s 39(1). ⁶² Section 56(1). ⁶³ Section 39(1)(b). ⁶⁴ For a summary of the position, see Bell, S. and McGillivray, D., Environmental Law, (7th edn, Oxford: Oxford University Press, 2008), 119. ⁶⁵ Section 5. ⁶⁶ Sections 6–7. ⁶⁷ Section 9, and see the Water and Sewerage (Conservation, Access and Recreation) (Code of Practice) Order 2000, SI 2000/477 approving the Code of Practice on Conservation, Access and Recreation issued by the minister. ⁶⁸ An Environmental Vision (2000), 5. See also Select Committee on Environment, Transport and Regional Affairs, ‘The Environment Agency’, 1999–2000, paras 13–18. ⁶⁹ Environment Agency, Creating a Better Place: Corporate Strategy 2006–11.

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covering three years setting out detailed actions and key performance targets.⁷⁰ The Annual Reports of the EA also contain detailed analyses of performance against individual targets. In the case of the 2008/9 report, there is detailed analysis of the extent to which 49 targets have been achieved.⁷¹ The EA has now published a new strategy for 2010–15 after consultation; this places a particularly strong emphasis on reducing climate change and its consequences and this now forms the Agency’s first objective. The others are to protect and improve water, land, and air; to work with people and communities to create better places; to work with businesses and other organizations to use resources wisely; and to ‘be the best we can’ as a regulator.⁷² Overall, the various documents are an excellent example of the translation of very high-level objectives into more specific targets and of tracking performance in relation to them. The Hampton Implementation Review concluded that the documents were well written and accessible and that the EA is generally a transparent and accountable regulator.⁷³

The Environment Agency and the regulatory models Regulation for efficiency and consumer choice Clearly the EA has important regulatory roles in relation to industry, and economic considerations must play a role here, although it is not concerned directly with promoting consumer choice as is the Food Standards Agency. This is reinforced by the controversial section 39 of the 1995 Act mentioned above, which requires the Agency to take into account the likely costs and benefits of the exercise or non-exercise of its powers. The duty was opposed by environmentalists on the ground that it would open up the Agency to legal challenge whenever it could not be proved that the costs of its action were outweighed by their benefits. However, in practice the effect seems to be more limited. According to the House of Commons Environmental Audit Committee, examining issues relating to water quality, the requirement does not require cost-benefit analysis for every environmental improvement which the Agency puts forward, and only applies to 10 per cent of its National Environment Programme approved by ministers, the rest being based on EU requirements or government policy decisions.⁷⁴ In these

⁷⁰ Environment Agency, Corporate Plan 2008–11: Creating a Better Place – Translating Strategy into Action. ⁷¹ Environment Agency, ‘Annual Report and Accounts 2008/09’, HC 782, 2008–9, 56–70. ⁷² Environment Agency, Creating a Better Place 2000–2015 – Our Corporate Strategy 2010–2015 (2009). ⁷³ Better Regulation Executive and National Audit Office, Eff ective Inspection and Enforcement, paras 20, 23. ⁷⁴ Select Committee on Environmental Audit, ‘Water Prices and the Environment’, paras 78–9.

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cases, cost-benefit analysis may have been carried out before the EA is required to apply the rules. The EA is also fully committed to the better regulation initiatives, to risk assessment and the use of market-based tools. These were described in detail in its publication Delivering for the Environment – A 21st Century Approach to Regulation, which emphasized its commitment to the principles laid down by the then Better Regulation Taskforce and to a ‘smart regulation’ approach, using systems such as cap and trade of emissions, environmental taxes, trading schemes, and negotiated or voluntary agreements and a more risk-based approach to enforcement.⁷⁵ Similar commitments have been repeated in each of the Agency’s annual reports (eg in 2008–9 it claimed to have exceeded its target for reducing burdens on business with a total reduction of over £17 million), and the Environment Select Committee strongly supported its commitment to a risk-based approach, whilst noting that the full benefits are yet to be realized.⁷⁶ Similarly, the Hampton Implementation Review noted the EA’s commitment to better regulation and a risk-based approach, whilst also noting scope for improvements in risk appraisal.⁷⁷ Provision for trading schemes was made as early as 1990 by the Environmental Protection Act which gives the Secretary of State power to establish total emissions and to allocate quotas.⁷⁸ Some such schemes have been established and are administered by the EA, for example the National Emissions Reduction Plan and the Landfill Allowances and Trading Scheme.⁷⁹ Despite this commitment to a more risk-based and market-friendly approach to regulation, a note of caution should be sounded. In evidence to the House of Commons Regulatory Reform Committee the EA, whilst emphasizing its commitment to better regulation, was highly critical of the current regulatory reform agenda and the role of the Better Regulation Executive (BRE). Thus the latter had failed to strike the right balance between better regulation and reducing the burdens on business: ‘[w]ith an emphasis on cutting red tape there is a risk that the agenda loses sight of the reason for regulation – the very real benefits that regulation delivers to the environment, business and wider society. It is essential that initiatives are seen to be about driving better regulation and that in communicating this agenda the BRE does not undermine the credibility of regulation’. Moreover, the clarity of accountability of the EA ‘is weakened when the role of the BRE begins to encroach on regulatory policy or even oversight of the ⁷⁵ (2003). For a more discursive overview, see also Gray, J., Howes, C., and Clark, R., ‘Promoting Compliance in the 21st Century’, in Centre for the Study of Regulated Industries, Regulatory Review 2004/5 (Bath: CRI, 2005), 171–93. ⁷⁶ Environment, Food and Rural Affairs Committee, ‘The Environment Agency’, 2005–6, paras 27–31. ⁷⁷ Better Regulation Executive and National Audit Office, Eff ective Inspection and Enforcement, para 17. ⁷⁸ Section 3(5). ⁷⁹ See Large Combustion Plants (National Emission Reduction Plan) Regulations 2007, SI 2007/2325; Environment Agency, Report on the Landfill Allowances and Trading Scheme (LATS) 2005/6 (2007).

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regulator’. These concerns were also emphasized strongly in oral evidence by the then Chief Executive of the EA; for example, its Board ‘is very clear that it is not prepared to have the BRE seen as an alternative accountability mechanism’.⁸⁰ This is important as an expression of concerns about the effects of the regulatory reform initiatives on regulatory independence, a matter to be considered in more detail in Chapter 10 below. The EA thus does show a commitment to risk-based regulation and marketbased regulatory tools, such as trading schemes, whilst acknowledging their limitations. However, these are primarily concerned with methods and tools of regulation; when we come to the basic regulatory rationales other approaches are more important.

Regulation and human rights The notion of environmental human rights is a controversial one which cannot be analyzed in detail here.⁸¹ In brief, there are common goals between human rights activists and environmentalists, but also major tensions including problems of definition of appropriate environmental rights, their status in international law, their perceived anthropocentrism, and conflicts with other rights.⁸² Rights may also be difficult to apply in relation to polycentric problems, where an issue involves a complex set of interacting relationships and any one adjustment may affect a large number of other parts of the network.⁸³ In view of these complexities, it is thus not surprising that direct statements of support for environmental rights are rare in major international instruments.⁸⁴ This is not to say, of course, that other human rights which are fully protected in international instruments are not relevant to the work of the EA. An interesting example was found in an important challenge brought against a sewage provider in nuisance and under the Human Rights Act, claiming repeated foul flooding of the claimant’s property breached both Art 8 of the European Convention on Human Rights providing the right to respect for one’s home, and Art 1 of the First Protocol to the Convention, providing for the peaceful enjoyment of possessions.⁸⁵ The claim succeeded in the Court of Appeal but was rejected in the House ⁸⁰ ‘Getting Results: The Better Regulation Executive and the Impact of the Regulatory Reform Agenda’, HC 474, 2007–8, evid 120–1 and qs 224, 231. ⁸¹ For fuller accounts, see Hancock, J., Environmental Human Rights – Power, Ethics, Law (Aldershot: Ashgate, 2003); Boyle, A. and Anderson, M., (eds), Human Rights Approaches to Environmental Protection (Oxford: Clarendon Press, 1996). ⁸² Anderson, M., ‘Human Rights Approaches to Environmental Protection: An Overview’, in Boyle and Anderson, Human Rights Approaches to Environmental Protection, 1–23. ⁸³ See Stallworthy, M., Sustainability, Land Use and Environment – A Legal Analysis (London: Cavendish, 2002), 258. ⁸⁴ For a survey, see Churchill, R., ‘Environmental Rights in Existing Human Rights Treaties’, in Boyle and Anderson, Human Rights Approaches to Environmental Protection, 89–108. ⁸⁵ Marcic v Thames Water Utilities Ltd [2003] UKHL 66; [2004] 2 AC 42. For background, see Stallworthy, M., ‘Whither Environmental Human Rights?’ (2005) 7 Environmental Law Review, 12–33.

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of Lords on the ground that there was a statutory scheme of regulation (in this case in the form of the then Director General of Water Services) which was the appropriate vehicle for prioritizing work taking account of the balance between the rights in question and the acceptable qualifications to them, in particular the interests of the community as a whole. Thus the claim based on breaches of Convention rights ‘does not give sufficient weight to the fact that Parliament has decided that the most appropriate method of achieving a fair balance between the competing interests of the individual and the community is by means of a statutory scheme administered by an independent expert regulator’.⁸⁶ The statutory scheme set an appropriate balance between Convention rights and interests limiting them; moreover the regulator ‘is a public authority within the meaning of the 1998 Act and has a duty to act in accordance with convention rights’.⁸⁷ Although this case did not concern the EA directly, the implication is clearly that an environmental regulator has a central role in deciding on the application of Convention rights and in balancing qualified rights in the environmental field against competing public interests. This should open up considerable scope for rights-based arguments addressed to the regulatory body itself. As in the case of other regulators, procedural rights will also be important in the regulatory context. These include not just the right to a hearing under Art 6 of the European Convention, but extensive rights of access to environmental information under various instruments which will be considered below.⁸⁸ Despite the relative paucity of substantive environmental rights in international instruments, other rights are thus of considerable relevance to the work of an environmental regulator, and moreover may come into conflict with approaches based on economic efficiency and consumer choice.⁸⁹ Some of the distrust of rights and some of their limitations in the environmental field may also be explained by the role of other considerations related to social solidarity.

Regulation and social solidarity Once more, there is no space here to discuss major debates within the environmentalist movement.⁹⁰ Nevertheless, some mention should be made of a concern with ‘solidarity rights’ which are associated with groups rather than individuals, and ‘deep environmentalism’ which ‘requires a conceptual shift from the

⁸⁶ Lord Hope at para 77. ⁸⁷ Lord Hoff man at para 71. ⁸⁸ For the implications of Art 6, see Stallworthy, Sustainability, Land Use and Environment, 268–70. ⁸⁹ For theoretical development of this theme, see Hancock, Environmental Human Rights, 4–5, 17–18, 24. ⁹⁰ For further discussion, see generally Hancock, ibid, and Redgwell, C., ‘Life, The Universe and Everything: A Critique of Anthropocentric Rights’, in Boyle and Anderson, Human Rights Approaches to Environmental Protection, 71–87.

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individualist atomist approach of rights to holistic processes and systems’.⁹¹ This is reflected in less radical form through the language of sustainability, and we have already seen that this is the principle statutory aim of the EA, as specified more precisely through ministerial guidance.⁹² This statutory duty thus places sustainability right at the heart of the EA’s work, and it is clear from the corporate planning documents that issues of sustainability and social solidarity are central in setting the context for its operation. For example in its draft Corporate Strategy for 2010–15, the first theme is to act to reduce climate change and its consequences, and the third ‘to put people and communities at the heart of what we do’.⁹³ Sustainability is central to the EA’s vision document. It has also adopted a focus on working with excluded communities who are likely to suffer from poor environmental standards, for example in water quality, and is developing more sophisticated means of engaging with such groups. Thus the EA is not primarily an economic regulator, it does have a role in protecting individual rights but major objectives concern sustainability and inclusion. As a Parliamentary committee put it, ‘[o]ur quality of life can no longer be measured solely in crude economic terms. It depends crucially on the protection and enhancement of the environment’.⁹⁴

Deliberation It may be recalled from my introduction that one of the traditional characteristics of UK environmental regulation was its closed nature. In Vogel’s classic account, although there were close links between regulatory bodies and producer interests, the number of institutions through which participation in regulatory decisions could take place was limited, apart from through the land use planning system.⁹⁵ Is this still true in the case of the Environment Agency? It is useful to begin by pointing out that at the highest level of policy-making, an important presence is that of the Royal Commission on Environmental Pollution, an unique standing body to advise government, Parliament, and the public on environmental issues.⁹⁶ Indeed, it was largely as a result of the Commission’s reports that the integrated EA was established at all. The Commission is free to choose its own topics for study, and invites written evidence from organizations, individuals, and the general public, with some oral presentations by witnesses. The Commission’s reports are submitted to the Queen; a government response is prepared. There is also a framework document setting out relations with the ⁹¹ Redgwell, ibid, 79 (footnote omitted). ⁹² Environment Act 1995, s 4(1), (3). ⁹³ Creating a Better Place – Environment Agency Corporate Strategy 2010–2015, 6–7, 10–11. ⁹⁴ Select Committee on Environment, Transport and Regional Affairs, ‘The Environment Agency’, 1999–2000, para 1. ⁹⁵ Vogel, National Styles of Regulation, 220–2. ⁹⁶ For details of the Commissions work see (consulted 8 December 2009).

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Department. Recent reports have included Adapting Institutions to Climate Change, The Urban Environment, and Chemicals in Products; it also publishes shorter special reports on issues such as Crop Spraying and the Health of Residents and Bystanders. The presence of the Commission as a permanent body offers a unique opportunity for independently organized debate on the issue of environmental policy. It should also be recalled that policy-making largely takes place at EU and governmental level so ‘Departments, rather than the EA, are responsible for consultation, impact assessment and review at the policy-making stage, with the EA . . . responsible for implementation’.⁹⁷ Turning to the Environment Agency itself, matters got off to an unpromising start when ministers rejected pressure for its meetings to be held in public, despite the fact that some of its responsibilities were taken on from local authorities which of course met publicly. The minister claimed that to require public meetings would inhibit the development of strategic thinking ahead of publication, and that anyway the Agency would be accountable to Parliament through ministers.⁹⁸ In the event, however, the Board has adopted a policy of meeting in public and publishes its agenda, supporting papers and minutes on the internet. Parts of meetings concerned with confidential information are closed. The Agency has also made the strong commitments to openness characteristic of more recently established regulatory bodies. Thus in its Vision it commits itself to increased consultation, and in its Corporate Strategy to improving communications.⁹⁹ Despite this commitment, there have been criticisms of the degree of openness of the Authority by Select Committees. Thus the Environment Committee in 2000 stated that it would like to see the Agency engaging more vigorously in public debate and raising its profile on matters of importance affecting the environment and sustainable development, though in doing so it must conduct itself in accordance with government policy.¹⁰⁰ It also noted problems of communications with local communities concerned with environmental issues (an issue on which the EA is now working to improve engagement).¹⁰¹ The examination of the Agency by the Committee in 2006 was also highly critical about a lack of transparency in relation to regulatory charges and how they were spent.¹⁰² However, the Hampton Implementation Review concluded overall that the EA is generally a transparent and accountable regulator.¹⁰³ The role of advisory committees is central to the work of the EA. Thus the 1995 Act requires the establishment of an advisory committee for Wales, regional environmental protection advisory committees, regional and local fisheries advisory ⁹⁷ Better Regulation Executive and National Audit Office, Eff ective Inspection and Enforcement, para 31. ⁹⁸ Sir Paul Beresford, Parliamentary Under-Secretary of State for the Environment, Standing Committee B, May 2 1995, cols 62–3. ⁹⁹ An Environmental Vision, 14, 17 and 49, 55–6. ¹⁰⁰ ‘The Environment Agency’, 1999–2000, para 22. ¹⁰¹ Ibid, paras 120–3. ¹⁰² ‘The Environment Agency’, 2005–6, paras 47–51. ¹⁰³ Better Regulation Executive and National Audit Office, Eff ective Inspection and Enforcement, para 23.

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committees, and regional and local flood defence committees.¹⁰⁴ The committees are seen as an important link with stakeholders and the general public; all committee meetings are open to the public and the press. Initially there were some problems with the committees, thus the House of Commons Environment Committee in its report in 2000 noted that the Regional Environmental Protection Advisory Committees (REPACs) had had a ‘shaky’ start, had been bombarded with papers, issues, and information and at one stage were close to open revolt. Relations had, however, improved since and they were playing a useful role. The REPACs were now reporting annually on the EA’s performance, and the Agency responds to feedback from the Committees to show how it has taken account of their comments. In addition to the statutory committees, the EA had also established 26 Area Advisory Groups drawn from a wide range of different interests. The resulting structure was criticized by the Select Committee as too complex, and the non-statutory committees were replaced by advisory panels for consultation on a more local basis than the regional committees.¹⁰⁵ The Agency has stressed that its arrangements for consultation and participation are intended to operate well beyond the formal advisory committee structure, and include, for example, organizing public consultations. One further important point needs to be made in relation to deliberation; this is that international law, in particular EU law, has a particularly important role in the environmental context.¹⁰⁶ This can be seen in requirements for participation in decision-making and for access to environmental information. Thus the UN Aarhus Convention on Access to Information, Public Participation in DecisionMaking, and Access to Justice in Environmental Matters of 1998 provides for extensive rights of access to environmental information, and also requires public participation in plans, programmes, and policies relating to the environment.¹⁰⁷ A number of pieces of European legislation also require public participation in the drawing up of certain plans and programmes relating to the environment, notably the 2003 Directive implementing the Aarhus Convention in this regard.¹⁰⁸ Similarly, the EU requirement of environmental impact assessment includes public participation and the provision of information.¹⁰⁹ European law and UK implementing regulations also provide rights of access to environmental information. These were introduced in the form of a Directive in 1990 with domestic ¹⁰⁴ Environment Act 1995, ss 11–18. ¹⁰⁵ ‘The Environment Agency’, 1999–2000, paras 109–16. ¹⁰⁶ For a comprehensive overview of arrangements for public participation in environmental decisions, see Bell and McGillivray, Enviromental Law, ch 10. ¹⁰⁷ See in particular Arts 7–8 of the Convention. ¹⁰⁸ Directive 2003/35/EC providing for public participation in respect of the drawing up of certain plans and programmes relating to the environment [2003] OJ L156/17. ¹⁰⁹ Directive 85/337/EEC on the assessment of the effects of certain public and private projects on the environment [1985] OJ L175/40; Town and Country Planning (Assessment of Environmental Effects) Regulations 1988, SI 1988/1199. See also Berkeley v Secretary of State for the Environment [2000] 3 WLR 420 (HL).

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regulations following in 1992 and later replaced by a further Directive on Public Access to Environmental Information and implementing regulations.¹¹⁰ EU-based regulatory instruments in specific areas may also require access to information and participation. For example, the system of pollution control originally introduced by the Integrated Pollution Prevention and Control Directive of 1996 and implemented by UK regulations, requires public access to certain information before decisions relating to applications for permits are determined, and this is developed further in the implementing regulations.¹¹¹ The regulations provided the basis for a judicial review application against the EA’s failure to publish in-house reports on likely emissions should a permit be granted. The application, though ultimately unsuccessful, did illustrate the importance of European law in requiring access to environmental information, although the majority of the House of Lords held that it did not prevent the EA relying on additional, unpublished, information. Common law requirements of fairness were also relevant and were held to have been breached though no remedy was granted as new information had now become available.¹¹² The regulations also provide a right of appeal to the Secretary of State against decisions relating to environmental permits.¹¹³ Overall, then, the approach to deliberation taken by the EA is one which has much in common with other regulators discussed in this book, involving open meetings and the extensive use of advisory committees. An important difference is, however, a much more developed legal scheme for access to information and, to a lesser degree, public participation in decisions, which is a result of the requirements of European law and which provides major opportunities both for public access and for enforcement of the requirements by the courts.

Conclusions It is possible to draw four tentative conclusions from this analysis of the work of the Environment Agency. The first is that, perhaps surprisingly, the combination of regulatory and operational responsibilities in a single body does not appear to have caused any problems; it is dealt with through the creation of ‘Chinese walls’ within the EA, through external audit, and indeed much of the operational work is contracted out to other organizations. In recent criticisms ¹¹⁰ Directive 2003/4/EC on public access to environmental information [2004] OJ L41/26; Environmental Information Regulations 2004, SI 2004/3391. ¹¹¹ See now Directive 2008/1/EC concerning integrated pollution prevention and control [2008] OJ L24/8, and the Environmental Permitting (England and Wales) Regulations 2007, SI 2007/3538, reg 46 and Sch 19. ¹¹² R (on the application of Edwards) v Environment Agency [2008] UKHL 22; [2008] 1 WLR 1587. ¹¹³ Regulation 31.

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made of the EA by Parliamentary committees and others, this one is remarkable by its absence. There was some criticism of the tensions created by the quite different combination of regulator and environmental champion, but this is a point common to other regulators described in this book and anyway appeared inevitable and did not give rise to serious problems. In this sense the EA’s success would seem to contradict the emphasis in much regulatory work on the importance of a complete separation of regulation from operational or management responsibilities. Secondly, the EA is a further striking example of a collaborative approach to regulation. This is true not only in its relations with stakeholders and its use of advisory committees, but also in its positioning within government structures. The Secretary of State has unusually extensive powers, including the issue of guidance to the Agency, and this goes so far as to define the content of its principal aim. Recent years have seen a huge growth in the importance of the EU, in terms of shaping the design of the regulatory system, determining standards, and not least in setting out participatory requirements and requests for access to information. Environmental law is unusually complex and draws on a wide range of different institutional sources; nothing could be further from the image of an isolated and unaccountable regulator than this rich network of levels of decisionmaking and accountability. Thirdly, the EA is a social regulator. The role of human rights arguments, and their relationship with those of sustainability, may be controversial but it is clear that sustainability provides the key objective for regulation here, as economic efficiency and consumer choice do not. Of course the EA uses economic techniques; in some contexts use of cost-benefit analysis is required by statute, and it has been a pioneer in the use of trading schemes for emissions and landfill, but these are methods for attaining social goals, not objectives in themselves. One approach to analyzing the social functions of the regulator may be to see them as correcting economic externalities, but such an approach does not fully appreciate the richness and complexity of the social goals involved. Finally, it is clear that the conclusions about the UK regulatory style drawn by Vogel in 1986 now need considerable qualification. As a leading environmental law text puts it: ‘[t]he informal and flexible basis remains, but the approach has undoubtedly become more open, more centralized, more legalistic and more contentious, especially in the last ten years or so’.¹¹⁴ This is true of his characterization of the UK system as based on discretion and case-by-case decision-making rather than on rules, and also as permitting only limited public participation. In both cases the change has been largely due to the growing role of EU law, which has increased the role of binding national and international standards, created ¹¹⁴ Bell and McGillivray, Environmental Law, 238.

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an increasingly rule-based system, and greatly increased opportunities for public participation through requirements of access to information, the environmental impact assessment system, and other more specific regulatory requirements. Of course much discretion remains, and there is still some scope for self-regulation, but the underlying design of the system is now radically different from that of 20 years ago. The creation of the EA as a more integrated regulator may have contributed to this, but the major reason is to be found outside the regulatory system itself in the development of EU law and policy.

5 The Health and Safety Executive The Health and Safety Executive (HSE) differs substantially from other regulators discussed in this book. Purely practically, there is a much larger literature on it, including detailed accounts of its rule-making and enforcement practice.¹ It also has major characteristics which differentiate it from many of the other institutions; notably the continuity of its existence as a regulator since 1974.² Most importantly of all, central to the HSE’s work has always been the principle of tripartism with the involvement of employers and the workforce in regulation: ‘it is the tripartism and consensual basis of health and safety regulation that is its most notable feature’.³ Moreover, rather than regulation and self-regulation being conceived as separate spheres, strong elements of self- or co-regulation have been built into the design of the statutory system, with stronger participative and consultative procedures than those of many other regulators.⁴ Thus, both through tripartism and self- or co-regulation, participation is internalized through the involvement directly of affected groups in the regulatory process. This may have been an important contributor to the system’s institutional stability. Given the extensive literature, this chapter will concentrate on the institutional structures and their relationships with the general themes of this book.

The origins of the Health and Safety Executive Before the establishment of the HSE, occupational health and safety was governed by a complex and incoherent body of law; nine separate groups of statutes and 500 statutory instruments were administered by five government departments and

¹ See notably Baldwin, R., Rules and Government (Oxford: Clarendon Press, 1995); Hawkins, K., Law as Last Resort: Prosecution Decision-Making in a Regulatory Agency (Oxford: Oxford University Press, 2002); Hutter, B., Compliance: Regulation and Environment (Oxford: Clarendon Press, 1997). ² See Moran, M., The British Regulatory State: High Modernism and Hyper-Innovation (Oxford: Oxford University Press, 2003), 132, 135–8. ³ Baldwin, Rules and Government, 136. ⁴ For a detailed, critical, account, see Dawson, S., Willman, P., Clinton, A., and Bamford, M., Safety at Work: The Limits of Self-Regulation (Cambridge: Cambridge University Press, 1988).

The Regulatory Enterprise. Tony Prosser. © Oxford University Press 2010. Published 2010 by Oxford University Press.

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seven separate central inspectorates.⁵ In 1970 the Robens Committee was asked to review the existing law, and produced a major report recommending fundamental change.⁶ This was to be achieved through creating a more unified and integrated system based on self-regulation.⁷ Administration should be brought under a single organization, and ‘the “user interests” in this field – that is to say the organisations of employers and workpeople, the professional bodies, the local authorities and so on – must be fully involved and able to play an effective part in the management of the new institution’.⁸ It was to be separate from government and autonomous in its day-to-day operations, directed by a representative managing board; the minister would be responsible for very broad policy directives and control over the budget.⁹ A major role in the system was also to be played by safety representatives in the workforce to emphasize that primary responsibility for improved safety lay with employers and workers themselves. It was decided to split the responsibilities of the new organization into two through establishing a Health and Safety Commission and a Health and Safety Executive. The former was tripartite in structure, with a chair appointed by the Secretary of State, three employers’ representatives appointed after consulting the CBI, three employees’ representatives appointed after consulting the TUC, and two members appointed after consulting local authorities. The role of the Commission was to propose regulations to ministers on the advice of the Executive and after consultation, and to exercise general oversight of the Executive itself, which was the inspection and enforcement arm of the regulatory system; both were Crown bodies so their staff were civil servants. Th is structure was implemented by the Health and Safety at Work etc Act 1974. Of course, major changes have occurred since, not least because of the importance of EU law in this area once more, and through organizational restructuring, for example the reallocation of responsibility for rail safety to the Office of the Rail Regulator from 1 April 2006.¹⁰ The major institutional change did not occur until 1 April 2008 when the Commission was merged by order into the HSE to create a single body.¹¹ The new arrangement was, however, to retain the representative nature of the board of the new unitary HSE, and the requirements for tripartite membership remain in the new Order.¹²

⁵ Baldwin, R., ‘Health and Safety at Work: Consensus and Self-Regulation’, in Baldwin, R. and McCrudden, C. (eds), Regulation and Public Law (London: Weidenfeld and Nicholson, 1987), 132–58, at 132. ⁶ Safety and Health at Work; Report of the Committee 1970–72 (Cmnd 5034, 1972). ⁷ Ibid, para 41. ⁸ Ibid, para 114. ⁹ Ibid, paras 111–12, 117–18, 121. ¹⁰ Railways Act 2005, s 2 and sch 3; for a summary of the other changes see Hawkins, Law as Last Resort, 161–9. ¹¹ Legislative Reform (Health and Safety Executive) Order 2008, SI 2008/960. ¹² Ibid, sch 1, para 2.

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Functions of the Health and Safety Executive The HSE states that its primary function, until 2008 shared with the Health and Safety Commission, is ‘to protect the health, safety and welfare of employees and safeguard others who may be exposed to risks from work activity’. In doing so it seeks to: • influence people and organizations—dutyholders and stakeholders—to embrace high standards of health and safety; • promote the benefits of employers and workers working together to manage health and safety; and • investigate incidents, enquire into complaints about health and safety practices and enforce the law.¹³ The HSE is responsible for inspection and enforcement in nuclear installations and mines, factories, farms, hospitals and schools, offshore gas and oil installations, onshore chemical plants, and other areas, whilst local authorities are responsible for enforcement in offices, shops, and other parts of the services sector. In a way analogous to the work of other regulators, high hazard industries such as oil and gas are subject to permissioning regimes where permission is granted by the HSE after assessing a safety case from the operator. It is also responsible for developing new or revised legislation and codes of practice. Statutory functions of the new unitary HSE include to assist and to encourage persons to further the general purposes of health and safety, to make arrangements for the carrying out of research, and to provide information and advice to government departments, local authorities, employers and employees and their organizations, and others. It also has the function of reporting proposals for regulations and proposals for exercising its functions to the Secretary of State and complying with his or her directions on any matter apart from enforcement in individual cases.¹⁴ The Secretary of State may approve proposals from the HSE for exercising its functions with or without requiring modifications.¹⁵ The HSE also has power to direct the holding of investigations and inquiries into accidents and other matters.¹⁶ It is already apparent, then, that ministerial powers over the HSE are considerable, except of course in relation to enforcement decisions in individual cases.

¹³ ‘Health and Safety Executive Annual Report 2008/09’, HC 580, 2008–9, 4. ¹⁴ Legislative Reform (Health and Safety Executive) Order 2008, SI 2008/960, art 5, inserting a new s 11 into the Health and Safety at Work etc Act 1974. ¹⁵ Ibid, inserting a new s 12. ¹⁶ Health and Safety at Work etc Act 1974, s 14 as amended by the Legislative Reform (Health and Safety Executive) Order 1998, art 6.

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The Health and Safety Executive in regulatory space: the institutions As mentioned above, the 1974 Act established two institutions. The Health and Safety Commission consisting of a chair and members appointed after consulting employers’ and employees’ organizations and local authorities.¹⁷ It had oversight of the HSE, to which it could delegate its functions and to which it could issue directions.¹⁸ The Executive was a three-person statutory board headed by a Director-General with chief responsibility for implementing health and safety law; it was appointed by the Commission with the approval of the Secretary of State.¹⁹ Both were Crown bodies and were subject to audit by the Comptroller and Auditor-General.²⁰ This model lasted until 1 April 2008 when the two institutions were combined by order into a single HSE; the order provides that the new Executive is to consist of a chair and between 7 and 11 other members. The tripartite membership is retained, although only one member is now to be appointed after consulting local authority organizations, whilst up to four are to be appointed after consulting the Scottish Ministers, the Welsh Ministers, or professional bodies.²¹ Ministerial powers in relation to the HSE are extremely extensive. Ministerial responsibility was transferred in 2002 to the Department for Work and Pensions. These ministerial powers have been summarized by Hawkins: [t]he government of the day is always a force to be reckoned with since it can exert considerable control over what the HSE does. First, it controls HSE’s resources. Second, it scrutinizes the Executive’s plan of work. . . . A third source of governmental control arises from HSC’s [now of course the unified HSE’s] responsibility to ministers for all it does. . . . Fourth, Secretaries of State can, in principle, direct the . . . Executive to act in particular ways.²²

Thus the 2008 order preserves substantial powers for the Secretary of State in relation to the new Executive; he or she may approve or not (with or without requiring modifications) the HSE’s particulars of what it proposes to do in the exercise of its functions, and may also give such directions as he or she thinks fit with respect to its functions.²³ These directions may include modifying the Executive’s functions, although new functions may not be conferred in this way. As a non-departmental public body, the HSE negotiates its budget with its sponsoring department.

¹⁷ Section 10(3). ¹⁸ Section 11(4). ¹⁹ Section 10(5). ²⁰ Section 10(7), sch 2, paras 14 and 20. ²¹ Legislative Reform (Health and Safety Executive) Order 2008, SI 2008/960, sch 1 (substituting a new sch 2 in the Health and Safety at Work etc Act 1974), paras 1–2. ²² Law as Last Resort, 159–61. ²³ Articles 11–12.

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Government has also a central role in the rule-making system.²⁴ The Secretary of State is responsible for making regulations which set out the basic regulatory requirements, though this must be done on the proposal of the HSE or after consulting it; they must also be laid before Parliament.²⁵ Reflecting the central role of EU law in this area, other important regulations have been made by the Secretary of State under the European Communities Act 1972.²⁶ Approval of the Secretary of State is also needed before the HSE approves any code of practice; such codes also play a major role in the regulatory system.²⁷ Failure to comply with an approved code of practice may be taken by a court in criminal proceedings as evidence of failure to comply with the Act or regulations unless it can be shown that there was compliance in an equally effective way. Enforcement of regulations and other legislative requirements is for the HSE through inspections and in cases of breach it may issue improvement or prohibition notices, and may prosecute in the criminal courts. Appeal against improvement or prohibition notices lies to an employment tribunal, but an appeal lies to the Secretary of State against licensing decisions.²⁸ Apart from the general legal powers of the Secretary of State and the central ministerial role in rule-making, the HSE is also incorporated into the broader structure of government through a Public Service Agreement and Departmental Strategic Objective as part of the Comprehensive Spending Review process; this sets a general objective and progress is monitored against six more specific targets; the results are published in periodic reports.²⁹ For example, the Work and Pensions Select Committee was critical of a target to reduce days lost through work-related injury and ill-health as many of the factors in meeting it were outside HSE control.³⁰ Of course, the Executive also supplies extensive advice and evidence to government, for example on the safety implications of nuclear power.³¹ A Framework Management Statement has been agreed between the Department for Work and Pensions and the HSE, setting out the broad framework within which they operate based on the statutory responsibilities and including details of procedures for planning, budgeting, and control. Disputes on its interpretation are to be resolved by the Department after consulting the HSE and the Treasury or Cabinet Office.³² There is also a large number of agency agreements, ²⁴ For a detailed account of rule-making in occupational health and safety see Baldwin, Rules and Government. ²⁵ Health and Safety at Work etc Act 1974, ss 15, 50, 82. ²⁶ For example, the Management of Health and Safety at Work Regulations 1999, SI 1999/3242 covering matters such as risk assessment. ²⁷ Section 16. ²⁸ Sections 24, 44. ²⁹ See ‘Moving Forward: Annual Report 2007/08’, HC 579, 2007–8, 8–9. ³⁰ ‘The Role of the Health and Safety Commission and the Health and Safety Executive in Regulating Workplace Health and Safety’, HC 246, 2007–8, para 263. ³¹ ‘Meeting Challenges . . . Health and Safety Commission Annual Report 2006/07’, HC 562, 2006–7, 24. ³² Management Statement Between the Department for Work and Pensions, the Health and Safety Commission and the Health and Safety Executive (2006).

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concordats, and memoranda of understanding setting our relations with other bodies.³³ As will already be evident from the discussion above, the role of the EU is once more of fundamental importance in this area of regulation; as the Better Regulation Executive and National Audit Office put it in its report on implementing the Hampton principles, ‘in practice, most health and safety legislation originates from European directives. As such, much of the HSE’s work in this area is concerned with influencing European policy and with transposing European directives into UK law’.³⁴ Central to the law is the Framework Directive; as we shall see below, the Court of Justice in 2007 decided that domestic law was compatible with it after this had been challenged by the European Commission.³⁵ The HSE also plays a major part in EU negotiations on new occupational health and safety law, through its negotiating role, informal contacts with other Member States, and the EU’s Advisory Committee on Safety, Hygiene and Health at Work.³⁶ As with environmental protection, there is also a European agency in this area, in this case the European Agency for Safety and Health at Work which brings together and shares knowledge and information in order to promote a culture of risk prevention. Like the HSE, it is tripartite in form.³⁷ As was the case with the Environment Agency, then, policy-making is a shared responsibility between government, the EU, and the HSE. Finally, the HSE shares enforcement responsibilities with local authorities, and its policy-making role sets the framework in which they act. In 2004 the HSE signed a high level Statement of Intent with local authorities intended to establish improved partnership between them. This followed concern expressed by the Work and Pensions Select Committee about lack of consistency in enforcement by different authorities, and it recommended additional powers for the HSE to intervene.³⁸ By 2006/07 the objectives in the Statement of Intent were described as substantially achieved, with the focus now shifted to field-based delivery improvement, with many local authorities having signed local Statements of Intent. A Local Government Panel of elected members had been established which held twice-yearly meetings with the then Health and Safety Commission; a Health and Safety/Local Authority Liaison Committee was also working well.³⁹ ³³ See (consulted 9 November 2009). ³⁴ Better Regulation Executive and National Audit Office, Eff ective Inspection and Enforcement: Implementing the Hampton Vision in the Health and Safety Executive (2008). ³⁵ Directive 89/391 on the introduction of measures to encourage improvements in the safety and health of workers at work [1989] OJ L183/1. ³⁶ For a summary, see Hawkins, Law as Last Resort, 150–3, and Better Regulation Executive and National Audit Office, Eff ective Inspection and Enforcement, para 15. ³⁷ For details see (consulted 9 December 2009). ³⁸ ‘The Work of the Health and Safety Commission and Executive’, HC 456, 2003–4, paras 192–8. ³⁹ ‘Meeting Challenges . . . Annual Report 2006/07’, 9; ‘Moving Forward . . . Annual Report 2007/08’, 14.

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The Better Regulation Executive and National Audit Office report found that, whilst there was still some room for improvement, overall partnership with local authorities had been greatly strengthened and that local authorities regarded the HSE as ‘the best of the national regulators that use local authority delivery partners at genuine partnership working’.⁴⁰

The Health and Safety Executive in regulatory space: the duties The major duties under the Act and under the Regulations are imposed on employers, employees and others, of course, rather than on the HSE itself.⁴¹ Given the co-existence of the different forms of legislation the law is complex; the Work and Pensions Select Committee noted in 2008 that ‘[t]he complexity of the legislation, in terms of its application, was one of the few concerns that witnesses raised when endorsing the existing health and safety framework’, an ironic finding in view of the Robens Report’s central theme of simplifying and unifying the law.⁴² Indeed, this latter aim is unusually stated in the 1974 Act, which requires that the provisions of the Act should have effect with a view to enabling the then existing enactments ‘to be progressively replaced by a system of regulations and approved codes of practice operating in combination with the other provisions of this Part and designed to maintain or improve the standards of health, safety and welfare established by or under those enactments’.⁴³ This assumed that the result would be a simpler and more flexible system. Of course, the complexity has in part been due to the need to incorporate EU law requirements. For this reason, rather than examining statutory duties of the HSE, it will be more appropriate to look at its own policy development and setting of objectives and targets. These exist in a number of tiers. At the top was the Public Service Agreement to which reference has already been made. The 2004 version set a single goal to improve health and safety outcomes by 2008 in Great Britain through progressive improvement in the control of risks in the workplace; this goal was fleshed out by more details in a technical note.⁴⁴ The HSE made the targets in it more precise through a 10-point strategy statement and a 44-point action plan. Progress in implementation was documented through regular reports. In addition, particular joint strategies with government set further targets. In 2008, the Public Service Agreement was replaced by a Departmental Strategic Objective of improving health and safety outcomes through progressive improvement in the

⁴⁰ Eff ective Inspection and Enforcement, para 61; see also paras 21, 88. ⁴¹ For a useful summary, see Health and Safety Commission, The Health and Safety System in Great Britain, 3rd edn (2002), 17. ⁴² ‘The Role of the Health and Safety Commission . . .’, para 31. ⁴³ Section 1(2). ⁴⁴ HSE, Spending Review 2004: Health and Safety Public Service Agreement. Measurement of Progress. Technical Note (2004).

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control of work-related risks; it includes five more specific indicators of progress.⁴⁵ Once more, it is clear how closely the HSE is linked to central government. The Health and Safety Commission, and now the HSE itself, also had a major policy-making role. Thus it published a major strategy document in 2004, and in 2009 produced an updated strategy after consultation.⁴⁶ The first strategy set out the HSE’s central vision; ‘[o]ur vision is to gain recognition of health and safety as a cornerstone of a civilised society and, with that, to achieve a record of workplace health and safety that leads the world’.⁴⁷ This was divided into sub-aims, such as developing new ways to maintain an effective health and safety culture and to ‘achieve higher levels of recognition and respect for health and safety as an integral part of a modern, competitive business and public sector and as a contribution to social justice and inclusion’.⁴⁸ It was very clear that the predominant emphasis is a social one, based on rights and social solidarity, and this continues in the updated 2009 strategy. It does not repeat the vision above, but refers to a mission to prevent death, injury, and ill health in Britain’s workplaces. A slowdown in improvement of health and safety means that ‘[c]learly, maintaining the status quo is morally, legally and financially unacceptable’ and ‘[a]ll workers have a fundamental right to work in an environment where risks to health and safety are properly controlled’. The four objectives set out in the updated strategy are to reduce the number of work-related fatalities, injuries, and cases of ill-health; to gain widespread commitment and recognition of what real health and safety is about; to motivate all those in the health and safety system as to how they can contribute to improved health and safety performance; and to ensure that those who fail in their duties are held to account.⁴⁹ The strategy also includes extensive information on how the objectives are to be achieved. Two ‘strategic programmes’ were developed (‘Fit for work, Fit for life, Fit for tomorrow – Fit3’ and ‘Major Hazards’) and four ‘strategic enabling programmes’ (local authorities and HSE working together, worker involvement, business involvement, and enforcement). More detail on the plans and on progress in meeting targets is included in the annual business plans, for example that for 2009/10 sets out strategic goals and proposed actions under headings covering each aspect of its work.⁵⁰ Thus the HSE has developed major objectives and targets of its own within the framework of very general government strategy in the Public Service Agreement and Departmental Strategic Objective. Despite its continuity as an institution, the HSE has in some ways been controversial due to criticisms of over-demanding regulatory requirements and enforcement, though these have often related more to local authority enforcement and to ⁴⁵ ‘Annual Report 2008/09’, 9–10. ⁴⁶ A Strategy for Workplace Health and Safety in Great Britain to 2010 and Beyond (2004); The Health and Safety of Great Britain: Be Part of the Solution (2009). ⁴⁷ A Strategy for Workplace Health and Safety in Great Britain to 2010 and Beyond, 1. ⁴⁸ Ibid, 4. ⁴⁹ The Health and Safety of Great Britain: Be Part of the Solution, 5, 6, 16. ⁵⁰ HSE, Business Plan 2009/10 (2009).

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insurance requirements than to the HSE itself. It is thus useful to examine outside scrutiny of its work. Parliamentary Select Committees have played a major part in scrutinizing performance and so reaching a balanced assessment of the HSE’s performance. Thus a report by the Environment, Transport and Regional Affairs Committee in 2000 noted that witnesses commended the HSE’s high quality of work including its independence from government and its approach to consultation: ‘clearly the HSE has a high degree of credibility in the eyes of employers, employees and other organisations’.⁵¹ However, it needed better arrangements for the reporting of workplace injuries and, whilst its focus should remain prevention, there should be more investigations. It should also review the membership and structure of its advisory committees.⁵² A more detailed inquiry was carried out by the Work and Pensions Committee in 2004.⁵³ The Committee expressed concern about lack of progress in meeting targets, and recommended that the number of inspectors should be doubled and resources should not be shifted to education, information, and advice. Safety representatives should be given new powers and more resources provided for occupational health work. There was a need for a new, all-embracing strategy to address the changing world of work and improved consultation for employees, especially those not in unions.⁵⁴ However, the Committee expressed broad support for the principles in the legislative framework, though it considered that the HSE’s strategy of ‘downplaying . . . further regulatory solutions’ was mistaken and that further legislation was needed on the level of fines and to remove Crown immunity.⁵⁵ In its response, the government rejected those proposals requiring extra resources and claimed that there was no shift away from inspection and enforcement activities.⁵⁶ A further inquiry by the Work and Pensions Committee in 2008 was also supportive of the HSE’s work; it found that the legislative framework was proportionate although, due to a lack of legal clarity, some employers and consultants were over-zealous in their interpretations of its requirements.⁵⁷ Once more the Committee was critical of a decrease in inspections (on average, each workplace would be visited only once over 14.5 years) and lack of resources; thus [w]e were disappointed to hear many of the criticisms that were raised during our predecessor Committee’s inquiry concerning HSE’s resources were reiterated by witnesses. There is widespread concern that HSE is inadequately funded and that this undermines its ability to regulate eff ectively within its core remit’.⁵⁸ The Committee also considered that the HSE was spreading itself too thinly and struggling to cope with its occupational health remit, whilst new responsibilities were placing ⁵¹ ‘The Work of the Health and Safety Executive’, HC 31, 1999–2000, para 7. ⁵² Ibid, paras 29, 111. ⁵³ ‘The Work of the Health and Safety Commission and Executive’. ⁵⁴ Ibid, para 120. ⁵⁵ Ibid, paras 55, 290–1. ⁵⁶ ‘Government Response to the Committee’s Fourth Report into the Work of the Health and Safety Commission and Executive’, HC 1137, 2003–4. ⁵⁷ ‘The Role of the Health and Safety Commission’, paras 28–33. ⁵⁸ Ibid, para 362 (emphasis retained).

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excessive strain on its resources and risked diverting its focus. According to the Committee, the HSE should also do more to promote worker involvement. The government response simply noted the need for the HSE to prioritize and did not accept that there was a compelling case for an increase in inspections.⁵⁹ The vexed question of the level of maximum fines was eventually dealt with through increasing them by the Health and Safety (Offences) Act 2008. The HSE’s work has also been examined by the National Audit Office and the Public Accounts Committee. In 2004 the former produced a report on ‘Improving Health and Safety in the Construction Industry’.⁶⁰ The report noted that there was a need for better measurement of the impact of strategies by the HSE, with better work to translate high-level targets into lower level, more tangible measures, and better follow-up and evaluation. In its subsequent report the Public Accounts Committee made similar recommendations, whilst noting the HSE’s more focused and strategic approach engaging with key stakeholders.⁶¹ The Hampton Implementation Report was broadly favourable, concluding that the HSE was a transparent and accountable regulator and rating it highly on being outcomefocused and generally consistent and proportionate in its approach.⁶² Overall then, Parliamentary scrutiny of the HSE has found a general structure of legislation which is broadly satisfactory, though over-complex, and an institution which is under-resourced but has not faced major criticism of its organization or management; those giving evidence have also been generally supportive. Indeed, the conclusions stand in marked contrast to anecdotal caricatures of an obsessive and over-developed health and safety culture, a caricature which the HSE is determined to combat. Much of the reason for the relative satisfaction by stakeholders must lie in the arrangements adopted by the HSE and the predecessor Commission for participation in its decision-making. However, before looking at these it is necessary to look at the different rationales of the regulation which it carries out.

The Health and Safety Executive and the regulatory models Regulation for efficiency and consumer choice The first issue to consider is whether the approach of the HSE is based around the weighing of economic costs and benefits of safety measures, or on a less utilitarian application of rights to be protected against workplace risks. A major role ⁵⁹ ‘The Role of the Health and Safety Commission and the Health and Safety Executive in Regulating Workplace Health and Safety: Government Reply to the Committee’s Th ird Report’, HC 837, 2007–8, paras 91–2. ⁶⁰ HC 231, 2003–4. ⁶¹ ‘Health and Safety Executive: Improving health and safety in the construction industry’, HC 627, 2003–4. ⁶² Better Regulation Executive and National Audit Office, Effective Inspection and Enforcement, 5.

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of the HSE is to enforce duties imposed on employers, notably the duty under section 2 of the 1974 Act of an employer to ‘to ensure, so far as is reasonably practicable, the health, safety and welfare at work of all his employees’. This has given rise to considerable controversy; does the ‘reasonably practical’ qualification permit what is in effect a general cost-benefit analysis of the costs of safety measures against the costs of injuries? If so, this would suggest that the regulator is to take an approach largely based on economic analysis in determining whether the duty has been broken. Some support for this view might be found in the decision of Edwards v National Coal Board.⁶³ In this case, the court had suggested that the correct approach was a weighing of the quantum of risk against the cost of measures necessary for averting it (in money, time, or trouble). However, the court also emphasized that only where there was a gross disproportion between them would the employer be able to take advantage of the qualification. More recently, the Court of Appeal decided that the likelihood of the risk of an accident happening was part of the equation in determining guilt in a prosecution under section 2. However, again, this was quite distinct from employing cost-benefit analysis and was only concerned with qualifying the scope of the duty in extreme cases. The court also made it clear that ‘so far as is reasonably practicable’ did not provide a defence but merely a qualification to the general duty.⁶⁴ In a case concerned with somewhat differently worded regulations on the control of hazardous substances, the Court of Appeal decided that this duty was an absolute one with only a limited qualification to the duty of total prevention.⁶⁵ The question came before the European Court of Justice in 2007, when the European Commission asked the European Court of Justice to declare that the domestic law did not comply with the absolute duty imposed by the relevant EU Directive.⁶⁶ Although the Advocate-General did not accept that the Directive was designed to introduce a system of strict liability, he considered that the qualification in domestic law to the employer’s duty did involve a balancing exercise between costs and the seriousness and extent of harm for workers’ health, and that this went beyond the question of whether risk prevention was technically possible. Such an approach was not permissible under the Community system ‘which appears to give priority to protecting the individual worker rather than financial enterprise’.⁶⁷ The Court of Justice, however, rejected the Commission’s application, noting that, according to the UK, the disputed qualification involved a purely objective assessment of the circumstances excluding any consideration of the employer’s financial position. It concluded that the Commission had not shown clearly how the disputed qualification infringed the Directive.⁶⁸ ⁶³ [1949] 1 KB 704. ⁶⁴ R v HTM Ltd [2006] EWCA Crim 1156; [2007] 2 All ER 665. See now R v Chargot Ltd [2008] UKHL 73, [2009] 1 WLR 1, esp at [29]–[31], per Lord Hope. ⁶⁵ Dugmore v Swansea NHS Trust [2002] EWCA Civ 1689; [2003] 1 All ER 333. ⁶⁶ Case C-127/05, Commission v UK [2007] ECR I-4619. ⁶⁷ See paras 137–41. ⁶⁸ See paras 32, 55–6.

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The ‘reasonably practicable’ qualification is thus far from introducing full costbenefit analysis in the determination of liability; it is a utility-based criterion which may set the bounds of liability in extreme cases, but that is all, and, as we shall see in a moment, in the work of the HSE it is supplemented by a number of non-utility-based criteria. Of course, risk assessment is crucial to the HSE’s work, but this is distinct from cost-benefit analysis, involving identifying hazards and then assessing the likelihood of harm and its probable consequences. Thus we use a risk assessment essentially as a tool to inform our decisions by assisting in our understanding of the nature and degree of risk and for extrapolating, from available data, our experience of harm, or for representing a large amount of scientific information and judgement as an estimate of the risks. The policy process then couples the scientifically-based judgements about risks with policy considerations about the approach to their control.⁶⁹

As we shall see, the policy considerations may be socially-based and essentially non-quantifiable. Indeed, the HSE has explicitly adopted equity-based considerations into the process of managing serious risks.⁷⁰ Of course, like other regulators, the HSE also uses regulatory impact assessments in relation to its policy proposals, and other forms of cost-benefit analysis to inform its decision-making. However, it has noted the limitations to this ‘because the health and safety of people and their societal concerns are not things that are bought and sold, yet a monetary value has to be attributed to matters such as the prevention of death, personal injury, pain grief and suffering’ and ‘the final decision may take into account wider political and equity considerations as to whether costs are grossly disproportionate to benefits’.⁷¹ The picture is thus of a regulator that uses economic methodology within a context of broader social concerns; it forms a tool without implying a commitment to an overall economic-based approach or to efficiency goals. Consumer choice is also of limited importance here given the fact that ‘consumers’ are workers and members of the general public who will not be in a position either to evaluate their own interests effectively in safety matters nor to exercise autonomous choice given disparities of power in the workplace. Turning now to styles of regulation, the HSE, like the other regulators, has adopted major initiatives as part of the regulatory reform programme. Thus it has published three simplification plans, for example that of 2005 set a target of reduction of administrative burdens on business by 25 per cent by 2010, and that of 2007 noted that over 50 per cent of the HSE’s forms had already been discontinued. It is fully committed to a risk-based approach to regulation and the more general principles of good regulation and, as mentioned above, the ⁶⁹ HSE, Reducing Risks, Protecting People – HSE’s Decision-Making Process (2001), 26. ⁷⁰ Ibid, 43. For a general discussion of relevant issues of the potential role of cost-benefit analysis, see the articles in ‘Policy Forum’ (1997) 2 Environmental and Development Economics 195–221. ⁷¹ Reducing Risks, Protecting People, 65.

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Hampton Implementation Report was broadly supportive of the HSE, finding that it recognizes the need to minimize the burdens of regulation on business and had adopted a risk-based approach through the Fit3 programme, although there could be better use of information on risk.⁷² However, moves towards a greater reliance on self-regulation have produced some tensions: ‘[t]here has . . . been a growing demand by small firms for a reversion to prescriptive regulation, running counter to the self-regulatory approach – a demand resisted by large firms because they do not face the same problems and are comfortable with the self-regulatory approach’.⁷³ In addition, there is a potential tension between the idea of a right to certain levels of protection and a risk-based, selective approach, though this is moderated by the fact that the duty to deliver the right lies with employers, not the Agency itself. Like the Environment Agency, the HSE had some concerns about the work of the Better Regulation Executive encouraging the lifting of burdens: ‘[w]hilst recognising that improving health and safety levels can improve business efficiency, HSC/E’s primary focus must be on protecting people. BRE’s understandable ambition to drive/implement regulatory reform needs to recognise that a “onesize fits all” approach is not always appropriate’.⁷⁴ More positively, relations with the Better Regulation Executive are now good and, despite the widespread myths concerning over-prescriptive health and safety regulation (often referring to local authorities and private consultants rather than the HSE), in 2008 the Work and Pensions Select Committee concluded that the legislation was proportionate, though some SMEs found it difficult to understand, and commended the HSE’s efforts to reduce the administrative burden on business.⁷⁵

Regulation and human rights In contrast to the environmental rights considered in the previous chapter, human rights to health and safety are well established and relatively uncontroversial. Thus the Council of Europe’s European Social Charter provides the right to safe and healthy working conditions, and the parties to it undertake to issue regulations, to provide for enforcement by measures of supervision, and to consult employers’ and workers’ organizations.⁷⁶ The revised version of the Charter of 1996 develops this further, requiring a coherent national policy on occupational safety, occupational health, and the working environment. However, this version has only been signed, not ratified, by the UK. Indeed, the UK has had problems in relation to the earlier version of the Charter. Over the reference period 1997–2000 ⁷² Better Regulation Executive and National Audit Office, Eff ective Inspection and Enforcement, paras 6–8. ⁷³ Reducing Risks, Protecting People, 17. ⁷⁴ House of Commons Regulatory Reform Committee, ‘Getting Results: The Better Regulation Executive and the Impact of the Regulatory Reform Agenda’, HC 474-II, 2007–8, evid 91. ⁷⁵ ‘The Role of the Health and Safety Commission’, para 33. ⁷⁶ European Social Charter (1961), Art 3.

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the European Committee on Social Rights considered that the UK was not in conformity with the Charter requirements because of a manifestly insufficient number of inspectors in Northern Ireland (falling under the Health and Safety Executive for Northern Ireland). In response the UK government pointed to a ‘very significant improvement’ in the number of inspections in Northern Ireland, and the European Committee on Social Rights concluded that the UK was in conformity with the Charter requirement.⁷⁷ An overall reduction in the number of inspectors in Great Britain has continued to be the subject of Parliamentary Committee criticism, and one wonders once more to what extent moves to an increasingly risk-based system with more targeted enforcement will be compatible with Council of Europe requirements.⁷⁸ Further relevant international instruments include the International Labour Organisation Convention C187, ratified by the UK in May 2008.⁷⁹ This requires the promotion of a safe and healthy working environment by formulating a national policy, the establishment and development of a national system and programme for occupational safety and health in consultation with the most representative bodies of employers and workers, and various institutional guarantees, including a national tripartite advisory body to address occupational health and safety issues. The HSE led the negotiations in the ILO on the Convention, and favoured ratification as it considers domestic law already to be in compliance with it. Finally, the EU Charter of Fundamental Rights also sets out relevant rights in this area. Thus Art 31 concerns the right to fair and just working conditions, and states that ‘[e]very worker has the right to working conditions which respect his or her health safety and dignity’; Art 32 provides further protections for young people. Protections are also afforded by Art 19 of the Community Charter of the Fundamental Rights of Workers. As has already been established, EU law is of enormous importance in the area of occupational health and safety, and with the Lisbon Treaty these provisions are likely to assume greater importance. To what extent are rights-based considerations apparent in the HSE’s own approach to decision-making? It has emphasized that one of the criteria it uses in reaching decisions is the ‘equity’ criterion (the others are the utility-based and the technology-based criteria), which ‘starts from the premise that all individuals have unconditional rights to certain levels of protection. This leads to standards, applicable to all, held to be usually acceptable in normal life, or which refer to some other premise held to establish an expectation of protection’.⁸⁰ Similarly, ⁷⁷ Council of Europe European Committee of Social Rights, Conclusions XVI-2 (United Kingdom); United Kingdom’s Twenty Sixth Report (2006); Conclusions XVIII-2 (United Kingdom) (2007). ⁷⁸ Work and Pensions Committee, ‘The Role of the Health and Safety Commission’, paras 97–123. ⁷⁹ C187 Promotional Framework for Occupational Safety and Health Convention, 2006. ⁸⁰ Reducing Risks, Protecting People, 41.

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the HSE’s Collective Declaration on Worker Involvement commences with the statement that ‘[a]ll workers have a right to work in places where all risks to their health and safety are properly controlled’, and this has now been repeated in similar terms in the 2009 revised HSE strategy, the right now being dubbed ‘fundamental’.⁸¹ It may be questioned to what extent this is compatible with the deliberative approach which, as we shall see below, is central to the HSE’s decision-making process.⁸² The answer is that, of course, deliberation is necessary to determine the precise content of a right and of any qualifications to it. In addition, the balance between the three competing principles has to be set through a process of deliberation, and the HSE has published guidance on how this is to be done. Apart from the procedural arrangements to be discussed below, it states for example that ‘the framework can be seen as essentially applying an equity-based criterion for risks falling in the upper region [of seriousness], while a utility-based criterion predominates for risks falling in the middle and lower regions and technologybased criteria complement the other criteria in all three regions’.⁸³ It is also worth noting that the HSE now includes in its Business Plan a section on ‘Enabling Justice’ primarily concerned with enforcement policy; it also includes such a section in its Annual Reports, with the objective ‘ . . . to promote a just, fair society and provide equitable conditions for all businesses to operate under’.⁸⁴ This of course can be seen as a commitment both to substantive and procedural rights.

Regulation and social solidarity It should already be apparent that there are also strong social solidarity-based elements in the underlying values of the HSE’s approach. Thus the equity-based criterion discussed above contains elements of social solidarity in its reference to ‘standards, applicable to all, held to be usually acceptable in normal life’.⁸⁵ The HSE’s strategy includes making ‘a contribution to social justice and inclusion’ through achieving greater levels of recognition and respect for health and safety, and the Work and Pensions Committee of the House of Commons recognized the importance of the social and moral case for health and safety.⁸⁶ Once more the HSE has stressed the qualitative nature of risk assessment and the importance of using it to inform rather than to dictate decisions, so that social considerations ⁸¹ HSC/HSE, Collective Declaration on Worker Involvement (2004), 1; The Health and Safety of Great Britain: Be Part of the Solution, 6. ⁸² For an excellent theoretical account of this issue, see Aalders, M. and Wilthagen, T., ‘Moving Beyond Command-and-Control: Reflexivity in the Regulation of Occupational Safety and Health and the Environment’ (1997) 19 Law and Policy, 415–43, esp 426, 429–30, 433, 436. ⁸³ Reducing Risks, Protecting People, 43. ⁸⁴ Influencing Change: HSE Business Plan 2008/9, 14–15; ‘Annual Report 2008/09’, 22–3. ⁸⁵ Reducing Risks, Protecting People, 41. ⁸⁶ A Strategy for Workplace Health and Safety in Great Britain to 2010 and Beyond, 4; ‘The Work of the Health and Safety Commission and Executive’, para 29.

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can be accommodated in the process, although it considers that broader distributive issues and the wider balancing of overall benefits and detriments are more suitable for decisions by the political system.⁸⁷ The HSE has also accepted that the precautionary principle should be invoked where there is good reason to believe that serious harm might occur, even if the likelihood of harm is remote, and the scientific information is so uncertain that it is impossible to evaluate the conjectured outcomes with sufficient confidence to undertake full risk assessment.⁸⁸ Finally, the HSE of course pays particular attention to the need to protect the most vulnerable type of worker, such as the low skilled and migrant workers.⁸⁹

Deliberation Since the Robens Report, there has been a particularly strong emphasis on the need for a deliberative and reflexive form of regulation for occupational health and safety.⁹⁰ Dealing first with the general approach to openness taken by the HSE, this has shown a commitment to transparency in a number of ways. Thus the Executive has published a detailed document, Reducing Risks, Protecting People which sets out the overall framework for its decision-making and the criteria and values it uses in reaching decisions and managing risks.⁹¹ It was drawn up after publication of a discussion document for consultation and the receipt of responses. The structure of the document is to set out its aims, notably ‘to open to scrutiny HSE’s approach to the regulation and management of risk, and the philosophy underlying it’; to describe key principles and influences on decisions so as to ‘make transparent the factors that inform our decisions on risks and show how these shape the form and content of our regulations and practice’; and then to set out the stages for reaching decisions and the framework for risk assessment.⁹² This document goes further than anything issued by other regulators to make transparent the way in which decisions are reached, though it now needs some updating. The HSE has also made a number of general commitments to openness, including to developing stakeholder engagement. These seem to have met with considerable success. According to the Better Regulation Executive and National Audit Office, ‘[d]rawing on a review of the information the HSE publishes about its activities, the views of stakeholder bodies we spoke to and our observations of the way HSE staff, including inspectors, interact with businesses and the ⁸⁷ Reducing Risks, Protecting People, 14–15, 23–4. ⁸⁸ Ibid, 29. ⁸⁹ For discussion, see the Work and Pensions Committee, ‘The Role of the Health and Safety Commission’, paras 226–51. ⁹⁰ For a theoretical justification of this position, see Aalders and Wilthagen, ‘Moving Beyond Command and Control’. ⁹¹ Reducing Risks, Protecting People. ⁹² Ibid, 1–3, 5. The key information on the system for informing and reaching decisions is set out at 21–40, and on the criteria at 40–52.

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public more widely, we concluded that the HSE is a transparent and accountable regulator’.⁹³ Thus both the Commission and the HSE issued policy statements on open government.⁹⁴ These commit the HSE to publication of, inter alia, facts and analyses behind major decisions; copies of internal instructions where they have an effect on people outside HSE; copies of meeting agendas, papers, and minutes; and information on standards of service, costs targets, and results. The only notable absence is advice to ministers. In the draft Commission policy statement there was a heading to cover this, with a note that ‘criteria to be inserted once agreement reached with Ministers’; the heading has simply been removed from the final version. It will be recalled that this represents a very different approach from that of the Food Standards Agency, which does publish such advice. Of course a major part of the commitment to openness involves handling requests for information under the Freedom of Information Act 2000; indeed, the HSE receives more such requests than any other central government department or body. Detailed information about how such requests are handled and the HSE publication scheme are published on the website.⁹⁵ Another way in which the HSE has gone beyond the transparency shown by other regulators is through commissioning the Constitution Unit to undertake an independent audit of its openness procedures and practices.⁹⁶ This was broadly favourable, though it recommended some changes, notably in relation to developing staff understanding of openness policies and how to apply them. The report noted that ‘[a] majority of stakeholders considered that HSE did a good job and was open and trustworthy. This majority largely comprised employers organisations, sectoral industry bodies and companies’. However, there was greater scepticism amongst campaigning groups, journalists, and specialist consultants, some of whom recognized that HSE was trying to be more open but was subject to pressure from government and employers’ groups.⁹⁷ The major innovation when the current system was created was the Robensinspired emphasis on tripartism; as we have seen, this is retained in the new unitary HSE structure. The system has been criticized, for example, as excluding the interests of sections of the public other than employers and workers.⁹⁸ There have also been some difficulties with the decline of union membership in the general workforce.⁹⁹ Apart from tripartism on the board, the system was based on the ⁹³ Eff ective Inspection and Enforcement, para 10. ⁹⁴ Health and Safety Commission/Health and Safety Executive Policy Statement on Openness (nd) at (consulted 9 December 2009). ⁹⁵ See (consulted 9 December 2009). ⁹⁶ Constitution Unit, Audit of the Health and Safety Executive’s Openness Procedures and Practices (3 vols, 2002), available at (consulted 9 December 2009). ⁹⁷ Ibid, viii–ix. ⁹⁸ See Baldwin, ‘Health and Safety at Work’, 137–41, 157–8, and generally Dawson et al, Safety at Work, esp ch 10. ⁹⁹ For general discussion of the changing nature of the world of work and its implications here, see Work and Pensions Committee, ‘The Work of the Health and Safety Commission

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appointment of safety representatives and safety committees, the former appointed by trade unions and the latter established at the request of union representatives, thus incorporating elements of self-regulation.¹⁰⁰ This clearly became problematic with the decline of unionized employment, and in 1996 further regulations were made to extend consultation rights beyond unionized workforces.¹⁰¹ The regulations also provide rights of access to information in both unionized and nonunionized cases.¹⁰² The functions of the safety representatives include representing employees in consultation with employers, investigating hazards and complaints, and carrying out inspections.¹⁰³ Safety committees are established at the request of union-recognized safety representatives and have the function of keeping under review the measures taken to ensure the health and safety of employees.¹⁰⁴ The Work and Pensions Committee in two recent reports recommended legislative change to increase the powers of safety representatives to include rights to enforce the legislation; in both cases, however, the government rejected the recommendations.¹⁰⁵ The Committee also recommended that regulations be amended to give all employees, unionized or non-unionized, the right to insist on consultation through elected health and safety representatives; this was also rejected by the government.¹⁰⁶ The Commission and HSE agreed in 2004 a Collective Declaration on Worker Involvement, also endorsed by the TUC, the Royal Society for the Prevention of Accidents, the CBI, the Federation for Small Businesses, and the Institute of Directors. This commenced with the statement that ‘[a]ll workers have a right to work in places where all risks to their health and safety are properly controlled’.¹⁰⁷ It notes the effects of changing work patterns in creating a danger of significant reductions in consultation with workers by employers on health and safety matters and suggests examples of new forms of worker involvement, setting out a work programme to increase partnership between workers and employers. It was followed by a consultation on improving communications, consultation, and involvement through strengthening guidance, encouragement, and legislation.¹⁰⁸ and Executive’, paras 23–31, 89–120, and ‘The Role of the Health and Safety Commission’, paras 199–25. ¹⁰⁰ Health and Safety at Work etc Act 1974, s 2(4); Safety Representatives and Safety Committee Regulations 1977, SI 1977/500. ¹⁰¹ Health and Safety (Consultation with Employees) Regulations 1996, SI 1996/1513. ¹⁰² Health and Safety at Work etc Act 1974, s 2(2)(c); Safety Representatives and Safety Committee Regulations, reg 7; Health and Safety (Consultation with Employees) Regulations, reg 5. ¹⁰³ Safety Representatives and Safety Committee Regulations, reg 4; for the more limited functions of non-union representatives, see Health and Safety (Consultation with Employees) Regulations, regs 3, 6. ¹⁰⁴ Health and Safety at Work etc Act 1974, s 2(7). ¹⁰⁵ Work and Pensions Committee, ‘The Work of the Health and Safety Commission and Executive’, paras 176, 229–41, and ‘The Role of the Health and Safety Commission’, paras 201–8. ¹⁰⁶ ‘The Role of the Health and Safety Commission’, para 219. ¹⁰⁷ Health and Safety Commission and HSE, A Collective Declaration on Worker Involvement (2002), 1. ¹⁰⁸ Health and Safety Commission, Improving Worker Involvement – Improving Health and Safety: Consultative Document (2006).

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The HSE has also, for example, produced detailed guidance for its staff and for local authorities on how to promote worker involvement, as well as guidance for workers (including online tools for safety representatives) and employers.¹⁰⁹ As mentioned above, legislative change is unlikely to be forthcoming so future policy development by the HSE itself will be most important. Turning now to meetings of the HSE and its Advisory Committees, business meetings of the Commission and now of the Executive Board of the HSE and of advisory committees have been open to the public since 2005 (though private sessions may also be held); agendas, papers, and minutes are made available on the internet. In addition, it was decided to hold one meeting a year where stakeholders could debate with the regulator.¹¹⁰ The HSE makes extensive use of advisory committees. Thus in 2009 there were no less the 38 different committees in operation, with some of them having additional sub-committees. The committees contain a balance of employer and employee representatives and, where appropriate, technological and professional experts; tripartism is not confined to the main Board. Their role is to recommend standards and guidance, comment on policy issues, or recommend an approach to a particular new problem. The 2004 Work and Pensions Select Committee report noted that ‘[m]any witnesses to the inquiry considered these committees to be an important part of the HSC’s tripartite approach and were concerned that their role was being downgraded’. In response, the Committee recommended a wide ranging and open review of their effectiveness.¹¹¹ This was undertaken and new administrative arrangements made, with a number of committees being reconstituted. The Commission also issued a guide to managing advisory committees, which sets out information on their role and has detailed information on openness of papers and minutes.¹¹² Other participative bodies include a Small Business Forum and National and Regional Stakeholder Councils on particular issues.¹¹³ Finally, like other regulators, the HSE engages in general consultation as well as working through its advisory committees; indeed, the advisory committees form a central part of the consultative process. Once more, the Better Regulation Executive and the National Audit Office were impressed: [t]he HSE demonstrates high levels of consultation with external stakeholders, including business. In particular, the HSE has a strong and effective network of advisory committees made up of representatives from business, trades unions and other relevant stakeholders. By and large, the advisory committees are organised around sectors or health

¹⁰⁹ Topic Pack: Worker Consultation and Involvement (2007), at (consulted 9 December 2009). ¹¹⁰ ‘Health and Safety Commission Annual Report 2004/05’, HC 98, 2004–5, v, viii, xv. ¹¹¹ Work and Pensions Committee, ‘The Work of the Health and Safety Commission and Executive’, paras 68–72. ¹¹² A Guide to Managing HSC Advisory Committees (2006), esp paras 2.5, 2.28–2.34. ¹¹³ See ‘Health and Safety Commission Annual Report 2005/06’, HC 1115, 2005–6, 12.

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and safety issues, and are one of the primary methods by which the HSE engages with stakeholders on policy and implementation issues.

The report thus considered that the HSE was very good at engaging with external stakeholders, although there was no routine or systematic process for involving them in reviewing and amending policies and regulations.¹¹⁴ Consultations involve use of a two-stage process, with a discussion document followed by a more focused consultation document setting out options; a regulatory impact assessment is also used, and interactive workshops may be held.¹¹⁵ A very important example is that of the development of the revised Construction (Design and Management) Regulations 2007, identified by the Better Regulation Executive and National Audit Office as an example of good practice which had produced a good deal of industry ‘ownership’ of the regulations.¹¹⁶ In this case a discussion paper was published identifying major problems in the area and seeking suggestions for change. On the basis of the responses, the Commission decided that the existing regulations needed to be changed. A working group of the Health and Safety Commission’s Construction Advisory Committee was established to develop detailed proposals and a consultation document. The full consultation document was then published, including draft regulations and guidance. The HSE undertook work with the group, met to consider the emerging findings from the consultation, and engaged industry secondees for further discussions on concerns raised. A further working group was established by the Advisory Committee to coordinate the production of industry-produced guidance on the new requirements. The Advisory Committee then met to consider the draft regulatory package (including a draft Approved Code of Practice supporting the regulations) and agreed to forward it to the Commission, which in turn formally approved it for submission to ministers. There was also a Parliamentary debate on the new regulations.¹¹⁷ The timescale was fairly protracted, around two years from publication of the consultation document to the regulations coming into effect, but this was justified by the importance of the subject-matter. Overall then, the most important aspects of deliberation and openness in the case of the HSE are those associated with its unique tripartite structure, in particular the role of advisory committees and the arrangements for workforce involvement. In addition, the HSE has used similar techniques to the other regulators discussed in this book, including open meetings and consultation, for example in developing its strategy.

¹¹⁴ Eff ective Inspection and Enforcement, paras 19, 22. ¹¹⁵ For examples, see ‘Health and Safety Commission Annual Report 2004/05’, HC 98, 2004–5, 29. ¹¹⁶ Eff ective Inspection and Enforcement, 14. The regulations are SI 2007/320. ¹¹⁷ For details of the process, see the New Construction (Design and Management) Regulations – Timeline, which has links to all the documents, at (consulted 9 December 2009).

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Conclusions The first thing to be apparent about the HSE is that it is not primarily an economic regulator. It certainly uses economic techniques such as cost-benefit analysis as part of regulatory impact assessments, but it has been at pains to stress that decision-making involves reference to social and rights-based factors. Health and safety is thus ‘a cornerstone of a civilized society’ or a ‘fundamental right’; equity considerations may play a major part in decision-making, in some circumstances requiring an unconditional right to protection. A risk-based approach to enforcement may be in tension with this, but does not qualify the absolute duty on the employer. Nor do the ‘reasonably practicable’ qualifications to the statutory duties on employers require a general balancing of costs and benefits; rather they provide qualifications to the duty in extreme cases. The second striking conclusion about the HSE is the relative stability of the system. Compared to regulators referred to in this book in areas such as food safety and the environment, the system is unusual in being recognizable as that established over 35 years ago. This is particularly striking given the changes in the structure and composition of the workforce and in industrial organization since 1974. As Moran has put it, occupational health and safety ‘is the one domain where institutional upheaval and moves to more hierarchical surveillance and control have been successfully resisted’.¹¹⁸ He suggests two possible explanations for this: that the system had already been reformed before the crises of the 1980s and 1990s, or that it is a case of regulatory capture by those regulated.¹¹⁹ However, he also notes that ‘the key variable in health and safety in resisting business colonisation is union strength’ and that ‘while new actors like environmental pressure groups have been able to invade the world of high policy and to influence the larger architecture of the regulatory system, their influence weakens when work place implementation is attempted’.¹²⁰ This suggests that major influences in the stability of the system have been its tripartite nature, and its use of forms of self- or co-regulation. Thus, in addition to adopting the structured arrangements for the consultation of interest groups and for transparency characteristic of other regulators discussed in this book, the HSE incorporates the major stakeholders into the heart of the system through tripartism, both in its own board and in the advisory committees, and combines public regulation with self- and co-regulation in which regulatory tasks are delegated within a statutory framework and are subject to monitoring by the regulator. Thus those affected by regulation are in a sense ‘internalized’ within the regulatory system; rather than the regulator receiving evidence from outside which it considers in reaching its decisions, the key interests are themselves put at the heart of decision-making, more so than for any other regulator. Thus ¹¹⁸ The British Regulatory State, 132.

¹¹⁹ Ibid, 135–8.

¹²⁰ Ibid, 137, 138.

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regulatory responsiveness is more important than fear of capture, especially as several different interests are represented through the tripartite structures and the role of the HSE is to act as an ‘honest broker’ between them. It is these factors that best explain regulatory stability and the general satisfaction with the HSE expressed by major stakeholders, in marked contrast to media myths about overintrusive and petty health and safety requirements. Regulation as a collaborative enterprise is at the heart of the HSE.

6 The Care Quality Commission and its Predecessors In the previous chapter, the Health and Safety Executive provided a remarkable example of regulatory continuity. In healthcare and the regulation of social care we see the reverse; an almost obsessively frequent redesign of regulatory institutions. This has been particularly striking in the health sector, where there have been nine Acts of Parliament for England alone since 1999, but the process has also occurred in social care, where major regulatory reform was announced almost as soon as a new regulator had commenced work. It has culminated in the creation of a new joint body, the Care Quality Commission (CQC), replacing from January 2009 two sectoral bodies, the Healthcare Commission (HC) and the Commission for Social Care Inspection (CSCI). The CQC will introduce its new registration system, covering all health and adult social care providers including NHS trusts, from January 2010. As the new body has only recently been established, this chapter will also cover, at the price of some untidiness in its structure, the work of the CQC’s predecessors. Much of their work provides lessons in itself, and will be continued by the new single regulator.

Background and history The Healthcare Commission Healthcare was subject to only very limited public regulation until recently, both as regards clinical standards and generic standards. Thus ‘[u]ntil well into the 1990s, the notion that there should be explicit standards of care which all healthcare professionals should seek to meet and which would apply to patients across the NHS, simply did not exist’ and ‘[t]here were no agreed standards as to what care the patient with a given illness or condition might expect of healthcare professionals as a team or of the NHS as a whole. There being no such standards, there were also no benchmarks against which to assess and evaluate the quality of clinical care given’.¹ By the mid-1990s, however, audit of care quality and quality ¹ Learning from Bristol: The Report of the Public Inquiry into Children’s Heart Surgery at the Bristol Royal Infirmary 1984–1995 (Cm 5207(1), 2001), 17, 74.

The Regulatory Enterprise. Tony Prosser. © Oxford University Press 2010. Published 2010 by Oxford University Press.

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assurance was developing, and the Department of Health assumed a greater role in improving performance; the internal market introduced in 1990 created the need to specify standards more clearly. The first major development in relation to the institutions examined here was the 1998 White Paper The New NHS – Modern, Dependable, which proposed setting up two regulatory bodies working within National Service Frameworks set by the government, a National Institute for Clinical Excellence (NICE) and a Commission for Health Improvement.² The former would produce clinical guidelines based on evidence of clinical and cost-effectiveness, notably of drugs, and the latter would monitor local arrangements for assuring clinical quality, with powers to intervene if they were unsatisfactory. These proposals were implemented by the Health Act 1999, which was characterized by a leading commentator as creating an interventionist regime and ‘a new era of managerialist intervention by government’ to replace earlier self-regulation.³ In 2001 major changes to the regulatory system were recommended by the final report of the public inquiry into very serious defects in the management of children’s heart surgery at Bristol Royal Infirmary, chaired by Professor Ian Kennedy, later to become Chair of the Healthcare Commission. Central to the recommendations was an emphasis that the management of the NHS was quite distinct from its regulation, and the latter should not be under the day-to-day control of the Department of Health; it should be carried out by independent bodies within a statutory framework. Crucially, the regulatory approach should be patient-centred; its purpose was to ensure that the NHS works in patients’ interests.⁴ This may seem similar to the economic regulators protecting consumers; however, the report distinguished its proposals from them: [b]y regulation we do not refer to the various economic approaches, such as through the market. Instead we mean the totality of the processes and systems for assuring and improving the safety and quality of healthcare, including the regulation of healthcare professionals and the regulation of the institutions in which they work.⁵

The new arrangements proposed by the inquiry report adopted a broad concept of regulation: ‘those systems which set monitor and enforce standards and disseminate information on performance’.⁶ The recently established regulatory bodies should be given greater independence from central government, and there should be an over-arching body to integrate and coordinate the activities of the others so avoiding the fragmentation of responsibility identified at Bristol. This ² (Cm 3807, 1998), ch 7. See also the consultation paper, A First Class Service – Quality in the NHS (1998), ch 4. ³ Davies, A., ‘Don’t Trust Me, I’m a Doctor: Medical Regulation and the 1999 NHS Reforms’ (2000) 20 Oxford Journal of Legal Studies, 437–56, 437–8, 444. See also Bevan, G. and Cornwell, J., ‘Structure and Logic of Regulation and Governance of Quality of Health Care: was OFSTED a Model for the Commission for Health Improvement?’ (2006) 1 Health Economics, Policy and Law, 343–70. ⁴ Learning from Bristol, 260–1. ⁵ Ibid, 261. ⁶ Ibid, 315.

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would be a new Council for the Quality of Healthcare. Government should perform a strategic role and the new Council should be independent of the NHS; the model recommended was that of the Food Standards Agency.⁷ The Council should validate all healthcare organizations, public or private.⁸ Some of the proposals were implemented by the National Health Service Reform and Health Care Professions Act 2002, which extended the Commission for Health Improvement’s inspection powers to cover private sector provision to NHS patients and made appointments more independent of the Secretary of State.⁹ However, even during the passage of the Bill through Parliament, more fundamental reform was announced through the establishment of a new Commission for Healthcare Audit and Inspection, replacing the Commission for Health Improvement, the National Care Standards Commission (regulating private sector healthcare), and the health value for money work of the Audit Commission.¹⁰ This reflected the increasing mixed economy of NHS provision; implementation occurred through the Health and Social Care (Community Health and Standards) Act 2003. The Secretary of State was responsible for setting overall standards for the provision of healthcare, and the new Commission was responsible, inter alia, for monitoring performance against them. The Commission adopted the simpler name ‘The Healthcare Commission’ and its first chair was Sir Ian Kennedy. This is the basic model which existed until 2009, in an environment in which health policy increasingly emphasized market provision and patient choice.¹¹

The Commission for Social Care Inspection The regulation of residential homes, nursing homes and children’s homes was incoherent, with responsibilities shared between local authorities, health authorities, and the Department of Health. Given the role of local and health authority commissioning of care in these areas, a central problem was the lack of independence of regulation. In 1998 the government issued proposals to create eight regional Commissions for Care Standards as independent statutory bodies, accompanied by an extension of regulation to local authority care homes and uniform standards for the public and private sectors. New standards to develop greater consistency would be developed by the Secretary of State, and there would be greater use of risk assessment procedures and appeals to an independent tribunal.¹² The proposals were, however, overtaken by the Sutherland Report of the ⁷ Ibid, 314–19. ⁸ Ibid, 391–2. ⁹ Sections 12–14. ¹⁰ Delivering the NHS Plan – Next Steps on Investment, Next Steps on Reform (Cm 5503, 2002), ch 6. ¹¹ See, eg The NHS Improvement Plan: Putting People at the Heart of Public Services, (Cm 6286, 2004) and Creating a Patient-Led NHS: Delivering the NHS Improvement Plan (2005). ¹² Modernising Social Services – Promoting Independence, Improving Protection, Raising Standards (Cm 4169, 1998), ch 4.

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Royal Commission on Long Term Care.¹³ It recommended the establishment of a National Care Commission to look at the whole care system in a strategic way, with the functions of monitoring its operation, representing the consumer, publishing national benchmarks and monitoring performance against them, and encouraging the development of better services. It would not engage in day-today regulation, which would be left to the regional bodies already proposed.¹⁴ The government in fact announced that, rather than the proposed regional structure, a new National Care Commission would be established with a direct regulatory role.¹⁵ This was implemented through the Care Standards Act 2000 establishing the National Care Standards Commission (covering England but not Scotland or Wales). Its remit covered children’s homes, a range of private healthcare services, care homes (including those of local authorities), and local authority adoption and fostering. The Commission started work in April 2002. However, further reform was announced within the first few weeks of its operation and was implemented through the Health and Social Care (Community Health and Standards) Act 2003 discussed above. Private health responsibilities passed to the Healthcare Commission; a new Commission for Social Care Inspection was established with a remit covering all social care services in England, including local authority care services previously inspected by the Social Services Inspectorate and its joint review team with the Audit Commission. This new Commission commenced work on 1 April 2004, operating through nine regional and 80 local offices. However, in the budget speech in 2005 it was announced that it was to merge with the Healthcare Commission by 2008. It also lost its responsibilities for regulating childcare (including the important role of its Children’s Rights Director) to the Office for Standards in Education, Children’s Services and Skills (Ofsted) under the Education and Inspections Act 2006.

The Care Quality Commission The announcement of the merger of the two Commissions was based on recommendations for the rationalization of regulatory bodies made in the Hampton Report (see Chapter 10 below) and the review of Department of Health armslength bodies. The new Care Quality Commission was also to take over the responsibilities of the Mental Health Act Commission.¹⁶ The merger was preceded by a consultation paper which, as we shall see later, adopted a highly economistic approach to the future (limited) role of regulation. Commissioning of ¹³ With Respect to Old Age: Long Term Care – Rights and Responsibilities, A Report by the Royal Commission on Long Term Care (Cm 4182, 1999). ¹⁴ Ibid, ch 7. ¹⁵ The NHS Plan –The Government’s Response to the Royal Commission on Long Term Care (Cm 4181-II, 2000), esp Appendix. ¹⁶ These responsibilities will not be examined in this chapter; they do however provide an important example of rights-based regulation which could well influence other aspects of the work of the new Commission.

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services was to be the main means of securing standards, and one role of the new body was to be that of determining appeals made by providers on the basis of unfair competition.¹⁷ The latter proposal was rejected by the Department after the consultation (instead a non-statutory Cooperation and Competition Panel was set up); the Department emphasized the role of the new Commission as being ‘to provide independent information and assurance that systems for safety and quality are working well’ and to offer assurance that ‘services provide safe, quality care and are delivered in a way that respects individual needs and rights’. It was to provide reliable information on which people could make choices. Thus both safety and quality assurance and promoting choice and competition were amongst the regulatory functions proposed.¹⁸ The proposals were implemented by the Health and Social Care Act 2008, with the Care Quality Commission taking over the responsibilities of its predecessors on 1 April 2009.

Functions The predecessor regulators In its annual report, the Healthcare Commission summarized its functions as: • carrying out reviews and investigations of the provision of healthcare, including studies aimed at improving economy, efficiency, and effectiveness; • promoting the coordination of reviews and assessments carried out by other bodies; • publishing information about the state of healthcare across the NHS and the independent sector, including the results of national clinical audits; • reviewing the quality of data relating to health and healthcare. Further functions in England only included: • reviewing the performance of each NHS organization and awarding an annual performance rating; • regulating the independent healthcare sector through registration, assessment, and inspection; • considering complaints about NHS bodies not internally resolved; • publishing results of surveys of views of NHS staff and patients.¹⁹ A further, important, concern was dealing with safety, infection control, and hygiene issues under the Hygiene Code issued under the Health Act 2006. ¹⁷ Department of Health, The Future Regulation of Health and Adult Social Care in England (2006), paras 3.9, 3.40, 3.42. ¹⁸ Department of Health, The Future Regulation of Health and Adult Social Care in England: Response to Consultation (2007), paras 1.1–1.2, 1.14. ¹⁹ ‘Making Healthcare Safer for Patients: Annual Report 2007/08’, HC 784, 2007–8, 47.

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The responsibilities of the CSCI were based to a considerable degree on standards issued by the Department of Health, which acted as a code of practice for regulated services and the basis for much inspection activity. The Commission covered 27,000 services in the private voluntary and public sectors, including residential and nursing homes. Its functions were: • registering new services and the persons running them, ensuring that they were fit to operate; • carrying out inspections of registered services (about 48,000 per year); • responding to complaints about registered services; and • enforcing regulations, including ultimately cancelling the registration if necessary.²⁰

The Care Quality Commission The CQC has the following functions: • safety and quality assurance of health and adult social services (including registration of public and private health and adult social care providers, monitoring compliance with registration requirements and taking action if they are breached and conducting further inspections, investigations, and reviews of services). Unlike the HC, it has no direct role in resolving complaints, a matter which proved controversial during the passing of the 2008 Act; • monitoring and keeping under review the operation of the Mental Health Act 1983 and related functions; • conducting periodic reviews of providers and commissioners, to ensure that good quality information is available to support choice by service users and to publish comparative information about health and adult social care commissioners; • to minimize the burden of regulation and inspection, for example through coordinating and reducing duplication of inspection-related activity. Its over-arching focus is stated by the Department of Health to be ‘to help protect and promote the health, safety and welfare of people who use health and social care services’.²¹ The powers are wider than those of its predecessors, including to suspend registration and to issue penalty notices for non-compliance with regulatory requirements.²² Very importantly, the registration responsibilities of the CQC will extend to the provision of care by NHS institutions, including primary care trusts and NHS foundation trusts hospitals. This creates potential

²⁰ Commission for Social Care Inspection Corporate Plan 2005–8 (2005), 4–5. ²¹ Health Committee, ‘Appointment of the Chair of the Care Quality Commission’, HC 545, 2007–8, para 8. ²² See the Health and Social Care Act 2008, ss 18, 86–87.

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issues of duplication with Monitor, the regulator for foundation trusts, and these will be discussed in the following chapter.

The Care Quality Commission and its predecessors in regulatory space: the institutions Compared to the regulatory bodies discussed in the preceding chapters of this book, the role of the EU and of EU law is much more limited. This is not of course to deny that EU law has a growing importance, especially in relation to healthcare.²³ Moreover, the European Commission has now identified a concept of ‘social services of general interest’ to which minimum requirements of EU law apply, such as non-discrimination.²⁴ However, given limits of EU competence in health and social care, the standards applied by the regulators have emanated from domestic government rather than any supra-national legislation. The role of central government is central to the work of the CQC, as government sets the basic standards which it is responsible for monitoring.

The predecessor regulators Turning first to the HC, the regulator itself was established by the Health and Social Care (Community Health and Standards) Act 2003 as a body corporate.²⁵ It was not a servant or agent of the Crown, and was to have a chairman and chief executive. Appointments procedures were reformed by the Health Act 2006 setting up the Appointments Commission reporting to the Secretary of State rather than leaving appointment wholly to him or her.²⁶ Accounts were audited by the Comptroller and Auditor-General.²⁷ The role of the Secretary of State was pervasive in the regulatory system. Thus the minister was responsible for setting standards after consultation, including criteria for the ‘annual health check’ of healthcare bodies by the HC; this was supplemented by further in-depth checks by the HC.²⁸ Where a review or investigation revealed failings, the HC reported to the Secretary of State, ²³ See Hervey, T. and McHale, J., Health Law and the European Union (Cambridge: Cambridge University Press, 2004); Boeger, N. and Prosser, T., ‘The Changing Framework of Public Services in Europe: UK Report’, in Krajewski, M., Neergaard, U., and van de Gronden, J. (eds), The Changing Legal Framework for Services of General Interest in Europe (The Hague: TMC Asser Press, 2009), 357–82. ²⁴ See Implementing the Community Lisbon Programme: Social Services of General Interest in the European Union, COM (2006) 177 final. ²⁵ Section 41. ²⁶ Health and Social Care (Community Health and Standards) Act 2003, sch 6; Health Act 2006, Pt 5. ²⁷ 2003 Act, sch 6, para 10. ²⁸ See ibid, ss 46 and 50 on annual reviews; Healthcare Commission, ‘Improving Healthcare for Patients Through the Annual Health Check: Annual Report 2006/2007’, HC 913, 2006–7, 11.

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who might take special measures; in some circumstances it also had to report to Monitor.²⁹ The HC was also under a duty to keep the Secretary of State informed about the provision of healthcare by or for any NHS body and to offer advice.³⁰ The Secretary of State could also make regulations requiring the HC to publish criteria to be used in the exercise of its functions, and the regulations might require consultation and the Secretary of State’s consent before publication.³¹ A duty of cooperation was imposed with Monitor.³² The HC was also given duties under the Care Standards Act in relation to private services.³³ The Commission had a duty in exercising any of its functions to have regard to such aspects of government policy as the Secretary of State might direct.³⁴ The Secretary of State could exercise default powers where the HC failed to discharge its functions, and order an inquiry into any matter connected with the discharge of its functions.³⁵ To structure relationships, the HC had a formal agreement with the Department of Health known as the Management Statement, which set out the financial framework within which it operated; it also met the minister for an annual performance review and the chair and chief executive had regular meetings with ministers and officials.³⁶ One early activity of the HC was to agree a concordat with other institutions responsible for inspecting, reviewing, and auditing healthcare in England. This was also agreed by the Department of Health and the (then) Cabinet Office Regulatory Impact Unit.³⁷ The aim was to enable inspection bodies to plan and coordinate activity and prevent unintended clashes of visit. The scope of the concordat was later expanded to include 21 signatories; progress on coordination was monitored in each of the HC’s annual reports in a section entitled ‘Taking the Lead in Coordinating and Improving Regulation’. The existence of the Concordat did not, however, prevent criticism from the House of Commons Health Committee of the lack of coordination between the different bodies.³⁸ The CSCI was also established by the Health and Social Care (Community Health and Standards) Act 2003, and its status and structure were similar to those of the HC.³⁹ As with its companion regulator, it worked very much within a framework set by the Secretary of State; thus under the Care Standards Act 2000 he or she was empowered to make regulations imposing any requirements he might think fit on care establishments, and to set minimum standards.⁴⁰ The extensive ministerial role relating to the CSCI included the latter’s duty to have regard to such aspects of government policy as were ²⁹ Ibid, s 53. ³⁰ Ibid, s 54. ³¹ Ibid, s 59. ³² Ibid, s 61. ³³ Ibid, ss 102–119. ³⁴ Ibid, s 130. ³⁵ Ibid, ss 132, 134. ³⁶ See, eg Healthcare Commission, ‘Putting Patients First: A Better Experience of Health and Healthcare: Annual Report 2005/2006’, HC 1381, 2005–6, 57. ³⁷ Healthcare Commission, ‘Our Progress: One Year On: Annual Report 2004/2005’, (2005), 33–4. ³⁸ ‘Patient Safety’, HC 151, 2008–9, paras 225, 242, 262. ³⁹ See s 42 and sch 7, and the Health Act 2006, Pt 5. ⁴⁰ Sections 22–23.

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notified by the Secretary of State, who also had default powers and the power to order an inquiry into the Commission’s work.⁴¹ It was also under a duty of cooperation with the HC.⁴²

The Care Quality Commission The legislative provisions relating to the CQC largely repeat those of its predecessors. It is a body corporate appointed by the Secretary of State in conjunction with the Appointments Commission, and is not a Crown body. It must also appoint an advisory committee, and its accounts are audited by the Comptroller and Auditor-General. Members may only be removed if the Secretary of State is satisfied that they are unable or unfit to carry out their duties, are failing to do so, or are disqualified from holding office.⁴³ The powers of the Secretary of State are once more extensive, including, for example, regulation-making which may impose any requirements in relation to regulated activities, standard setting, and setting indicators for annual reviews; this includes setting the basic requirements which the CQC will enforce.⁴⁴ Even before the Commission formally took over its functions, a conflict emerged on its periodic review of primary healthcare trusts where the quality indicators used need ministerial approval. The CQC intended to include venous thromboembolism as one of the indicators, but this was vetoed by the minister to avoid imposing a new requirement on trusts.⁴⁵ The Commission is also under a duty to have regard to government policy as notified by the Secretary of State.⁴⁶ In Parliamentary debate, the minister denied that the powers would enable the government to dictate policy to the Commission, but rather ‘to ensure that the independent commission operates within the context of Government policy’.⁴⁷ The central role of the CQC will be to monitor and to enforce the registration requirements set in regulations after consultation; these will replace the standards used by its predecessors. The CQC will set compliance criteria linked to them.⁴⁸ The Secretary of State may also publish guidance to the CQC on avoiding the imposition of unreasonable regulatory burdens.⁴⁹

⁴¹ Health and Social Care (Community Health and Standards) Act 2003, ss 131, 133, 135. ⁴² Ibid, s 120. ⁴³ Health and Social Care Act 2008, s 1 and sch 1. For more information on the role of the Board see the Health Committee, ‘Appointment of the Chair of the Care Quality Commission’, HC 545, 2007–8, paras 10–12. ⁴⁴ Sections 20, 45, 46, 160–162. ⁴⁵ Health and Social Care Act 2008, s 46(4); Health Committee, ‘Patient Safety’, evid, q. 736. ⁴⁶ Section 4(2). ⁴⁷ The Minister of State, Department of Health (Mr Ben Bradshaw), House of Commons Public Bill Committee, 15 January 2008, cols 171–2. ⁴⁸ See The Future Regulation of Health and Adult Social Care in England: Response to Consultation, paras 3.22–3.28. ⁴⁹ Health and Social Care Act 2008, s 68.

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The Care Quality Commission and its predecessors in regulatory space: the duties The predecessor regulators The 2003 Act gave the HC the general function of encouraging improvement in the provision of healthcare by and for NHS bodies, setting out criteria to which it should pay particular concern, including availability of healthcare, its quality and effectiveness, the economy and efficiency of provision, and the need to safeguard and promote the rights and welfare of children.⁵⁰ Further functions included the publication of national performance data, undertaking an annual review of all English healthcare bodies and conducting overall reviews of healthcare provision.⁵¹ The HC was given more duties under the Care Standards Act 2000, in particular keeping the Secretary of State informed about the provision of independent health services and encouraging improvement in their quality.⁵² Turning now to the normative principles adopted in the implementation of its duties and functions, the HC based these around seven standards published by the government in 2004. In its Strategic Plan, the Commission set six goals: to promote a better experience of health and healthcare for patients and the public; to safeguard the public; to provide authoritative, independent, relevant, and accessible information; to promote action to reduce inequality in people’s health and to improve their experiences of healthcare and access to services through greater respect for human rights and diversity; to take a lead in coordinating and improving the impact and value for money of assessment and regulation; and to create an organization delivering world class assessment and regulation.⁵³ By 2008/09, these broad focuses had been retained in the form of six strategic goals and seven key activities, each of the latter being broken down into measurable changes. The CSCI was given similar functions and duties under the 2003 Act to those of the HC. Thus it had the general function of encouraging improvement in the provision of English local authority social services, with matters for its particular concern including their availability and access and quality.⁵⁴ It was also given functions under the Care Standards Act 2000 with a general duty to encourage improvement in the quality of registered social care services.⁵⁵ As regards the development of policies and priorities by the CSCI itself, this must be seen very much within the context of general government policy. Thus in its 2005 Green Paper on the future of adult social care, the Department of Health set out the need for regulation as arising because some users were ⁵⁰ Health and Social Care (Community Health and Standards) Act 2003, s 48. ⁵¹ Ibid, ss 49–52. ⁵² Ibid, s 103. ⁵³ Strategic Plan 2005/2008, (2005), 11–20. ⁵⁴ Section 76. ⁵⁵ Section 104.

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vulnerable to abuse and unable to speak for themselves. It was difficult for existing and prospective users to assess quality before choosing services and difficult to change services if quality proved poor, and people were increasingly using their own resources to pay for social care and so did not have any support from their local authority or the NHS.⁵⁶ In the succeeding White Paper, the Department set out four main goals: providing better prevention services with earlier intervention; giving people more choice and a louder voice; doing more on tackling inequalities and improving access to community services; and providing more support for people with long-term needs.⁵⁷ In its Corporate Plan, the Commission identified six priorities: putting people first by giving more weight to the views of users; driving service improvement by modernizing regulation; promoting better outcomes through inspections, reviews, and performance assessment; being an expert voice in social care paying particular attention to coordination between services and disseminating information on new models of care that promote choice and independence; building capacity; and becoming demonstrably more effective and efficient. These overall aims were then translated into a number of subsidiary objectives.⁵⁸

The Care Quality Commission The Health and Social Care Act 2008 goes further than earlier legislation in setting out the CQC’s objectives and matters to which it must have regard, some of which have been referred to above. This is partly the result of House of Lords’ amendments to the Bill. The CQC’s main objective is to protect and promote the health, safety, and welfare of people who use health and social care services. It must perform its functions for the general purpose of encouraging the improvement of such services, their provision in a way that focuses on the needs and experiences of users, and the efficient and effective use of resources in their provision.⁵⁹ Matters to which it must have regard include the views of members of the public, experiences of users and their families and friends, views expressed by local involvement networks (see below), the need to protect the rights of users, the need for action to be proportionate to risks and targeted only where needed, ‘any developments in approaches to regulatory action’, and best practice among persons performing comparable functions (including the principles under which regulatory action should be transparent, accountable, and consistent). As mentioned above, it must also have regard to such aspects of government policy as the Secretary of State may direct.⁶⁰ The Commission is also required to publish a ⁵⁶ Independence, Well-being and Choice: Our Vision for the Future of Social Care for Adults in England (Cm 6499, 2005). ⁵⁷ Our Health, Our Care, Our Say: A New Direction for Community Services (Cm 6737, 2006). ⁵⁸ Making Social Care Better for People – CSCI’s Corporate Plan 2005–2008 (2005), 17, 19–30. ⁵⁹ Section 3. ⁶⁰ Section 4.

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statement of user involvement (see below).⁶¹ Importantly, given criticisms of lack of regulatory coordination, it must promote the coordination of reviews or assessments carried out by public or other bodies.⁶² In its draft strategy for 2010–15, the CQC identifies five priority outcomes for its work: ensuring that care is centred on people’s needs and protects their rights; championing joined-up care; acting swiftly to help eliminate poor quality care; promoting high quality care; and regulating effectively in partnership. It also sets out its proposed actions to achieve these outcomes, and measures to be used to assess success.⁶³

The commissions and the regulatory models Regulation for efficiency and consumer choice Of course, the context of the working of the HC was one of greatly increased marketization of healthcare, through the increased use of private provision, through the creation of semi-autonomous foundation trusts which contract for the provision of services, and through the promotion of patient choice as a central value within the NHS. As the consultation paper on future regulation in this area put it, the government’s view was that ‘[t]he simplest and most direct way to increase people’s control is to give them more choice’.⁶⁴ To a great extent this has been carried out through the establishment of bodies other than the quality regulators considered in this chapter, notably Monitor to act as the economic regulator for foundation trusts and the non-statutory Cooperation and Competition Panel to handle competition disputes. The regulatory style of the HC did follow the usual pattern for regulators of emphasizing the minimizing of burdens and adopting a risk-based approach.⁶⁵ However, a risk-based approach has not been without its difficulties and in 2006 the HC had to downgrade the self-assessments (designed to reduce the need for routine inspection) of half the organizations inspected on the ground that they were over-optimistic; in the case of 15 trusts this reduced the final score.⁶⁶ The House of Commons Health Committee was also critical of the use of ‘light-touch’ self-assessment in the HC’s Annual Health Check, which had missed ‘appalling cases of lethally unsafe care’.⁶⁷ As we shall see, self-assessments were also to cause problems for the CQC. The chair of the HC was unusually critical in public of the drive for ‘better regulation’. In an assessment of progress since the Bristol report, he criticized ⁶¹ Section 5. ⁶² Section 67. ⁶³ Our Strategy for 2010–2015 – Consultation (2009); see also A Manifesto for the Care Quality Commission (2008). ⁶⁴ Department of Health, The Future Regulation of Health and Adult Social Care in England, para 1.14. ⁶⁵ See, eg the Healthcare Commission’s Strategic Plan 2005/2008, 21, 29. ⁶⁶ Healthcare Commission, Healthcare Watchdog Shines Spotlight on Trusts’ Declarations on Core Standards, Press Release, 12 October 2006. ⁶⁷ ‘Patient Safety’, paras 227–37.

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the characterization of regulation as inherently burdensome: ‘once the rhetoric is stripped away, not much is left . . . if the purpose of regulation is to bear down hard on a activity or enterprise than it may be seen as burdensome by those affected, but it will be efficient and good’. In relation to the HC’s work, ‘a better case for its being burdensome needs to be made than complaining about the process of respecting patients’ basic rights, which, after all, is required by law quite apart from any regulation’. He claimed that the benefits of regulation, being harder to quantify, are usually neglected in the debate. Ironically, ‘if there were a genuinely patient-centred system of healthcare, I suspect that one of the first messages which would be picked up is that the public and patients actually want more regulation rather than less!’ Finally, he argued that the claim that regulation should be ‘proportionate’ failed to define ‘proportionality’ ‘because it is not an objective term but a rhetorical ploy. Clearly, we are not in the realm of reasoned analysis any more. We are in the realm of dogma, of ideology, or theology’.⁶⁸ Turning to the CSCI, the provision of social care operates in a highly marketbased system, with a very extensive role of private providers and privately funded provision subject to the ordinary competition authorities. It was the subject of a market study by the Office of Fair Trading in 2005, after receiving a supercomplaint by Which?. The study stressed the importance of a minimum standard of care, of availability of information, of price transparency, of fair contractual terms and proper complaints procedures, thus showing that it is a sector in which a narrow, market-based, vision of regulation might be appropriate. As we shall see below, this possibility emerged in the consultation on the merger of the two commissions.⁶⁹ It is also possible that the commissioning of care falls within ordinary EU and domestic competition law.⁷⁰ On regulatory styles, CSCI also adopted the major principles of ‘better regulation’. These included the government’s principles of good regulation and its principles for public service inspection, including regulation being proportionate to risk and encouraging self-assessment by managers.⁷¹ Particularly important was the move to self-reporting and more targeted inspection; indeed, new regulations were made to permit this.⁷² ⁶⁸ Kennedy, I., ‘Learning from Bristol: Are We?’ (2006), 63–6, at: (consulted 9 December 2009); see also ‘Health Watchdog Warns of Future Crunch’, Financial Times, 11 October 2006. For further criticism of a risk-based approach to health regulation, see Bevan and Cornwell, ‘Structure and Logic of Regulation’, 359–60, 365. ⁶⁹ Office of Fair Trading, Care Homes for Older People in the UK – A Market Study, OFT 780 (2005). ⁷⁰ Bettercare v Director General of Fair Trading [2002] CAT 7, but cf C-205/03 Federacion Espanola de Empresas de Tecnologia Sanitaria (FENIN) v Commission of the European Communities [2006] ECR I-6295. For the position of the Office of Fair Trading, see its The Competition Act and Public Bodies, Policy Note 1/2004 (2004). ⁷¹ Making Social Care Better for People – CSCI’s Corporate Plan 2005–2008 (2005), 10–11. ⁷² The Commission for Social Care Inspection (Fees and Frequency of Inspections) (Amendment) Regulations 2006, SI 2006/517. For more information see CSCI, Inspecting for Better Lives – Delivering Change (2005).

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The merger of the Commissions and the creation of the new Care Quality Commission was preceded by a consultation paper on the future regulation of health and adult social care.⁷³ Th is set out a limited role for regulation based very much on a market approach. Thus ‘[t]he simplest and most direct way to increase people’s control is to give them more choice. The Government aim for reform of public services is that, whenever practical, individual service users should be offered a choice over what is provided and how it is provided and have better information on which to make these choices’.⁷⁴ The paper examined economic regulation in other areas to assess how far it was applicable to health and social care. It identified seven broad regulatory functions: independent safety and quality assurance; promoting choice and competition; assurance of the effectiveness of commissioning; information provision and performance assessment of providers; price setting and equitable allocation of resources; stewardship of publicly owned assets; and distress and failure interventions.⁷⁵ Notably absentees from the list were enforcing human rights and supporting social solidarity and inclusion. In the context of standards, ‘the main drive for continuous safety and quality improvement will come from service providers themselves and their staff as they respond to patients’ needs, patient choice and commissioner requirements’.⁷⁶ The functions of the new regulatory body would include acting as an appellate body for providers on the ground of breach of the competition rules, and also assessing whether commissioners of services were securing good value for their communities. The consultation paper concluded by asserting that the seven functions did not need to be carried out by an independent regulator ‘especially in public services with robust and effective commissioning or in competitive environments where quality is driven by consumer choice’.⁷⁷ In fact, the more radical proposals were not accepted in the Department’s response to consultation.⁷⁸ Thus it noted that ‘[r]egulation offers assurance that both publicly and privately funded services provide safe, quality care and are delivered in a way that respects individual needs and rights’.⁷⁹ Whilst accepting the seven regulatory functions, the response noted the distinction between the role of the new regulator and the economic regulation provided by Monitor; it abandoned the proposal to give the new Commission a role in determining competition appeals.⁸⁰ Considerable stress was also placed on the role of the new Commission in ensuring the participation of patients and users of services in regulation.⁸¹

⁷³ Department of Health, The Future Regulation of Health and Adult Social Care in England. ⁷⁴ Ibid, para 1.4. ⁷⁵ Ibid, para 2.5. ⁷⁶ Ibid, para 3.9. ⁷⁷ Ibid, para 5.1; see also para 5.2 on the allocation of functions to the regulator. ⁷⁸ Department of Health, The Future Regulation of Health and Adult Social Care in England: Response to Consultation (2007). ⁷⁹ Ibid, para 1.2 ⁸⁰ Ibid, paras 3.33, 3.43. ⁸¹ Ibid, paras 2.6, 4.3.

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In the event, as we saw above, the CQC has a mix of different objectives and matters to which it must have regard, including that its action is proportionate to risk but also the need to protect and promote the rights of people who use health and social care services.⁸² Its chair committed it to being ‘a modern regulator’ taking an approach that is risk-based, proportionate, and with a strong focus on looking at regulatory burdens.⁸³ However, at the end of 2009 serious concerns were raised when Monitor (see Chapter 7) intervened after major failures by a foundation trust which it considered to have poor standards of leadership and patient care. The CQC also found serious failings after unannounced inspections of the trust hospitals; however, the trust had previously been rated as ‘good’ partly on the basis of its self-assessments. Shortly after this was made public and after extensive criticism of the assessment system, the CQC Chair announced her resignation. Clearly there were serious problems with the assessment system, and the implementation of the new registration requirements was brought forward from April to January 2010.

Regulation and human rights Once more healthcare is an area where there are important international obligations applying to the UK. Thus the European Social Charter includes in its recitals that ‘[e]veryone has the right to benefit from any measures enabling him to enjoy the highest possible standard of health attainable’ and Art 11 refers to the right to protection of health.⁸⁴ Similarly, the Charter of Fundamental Rights of the EU provides that ‘[e]veryone has the right of access to preventative health care and the right to benefit from medical treatment under the conditions established by national laws and practices’.⁸⁵ Similar provision is made in the UN International Covenant on Economic, Social and Cultural Rights.⁸⁶ There is also strong support from the Council of Europe for rights to participate in healthcare: ‘[t]he right of citizens and patients to participate in the decision-making process affecting healthcare . . . must be viewed as a fundamental and integral part of any democratic society’.⁸⁷ The HC adopted, as one of its Strategic Plan commitments, using its assessments and other activities to promote action to reduce inequalities in people’s health and to improve their experiences of healthcare and access to services through greater respect for human rights and diversity.⁸⁸ Each of its annual ⁸² Health and Social Care Act 2008, ss 2–3. ⁸³ Health Committee, ‘Patient Safety’, para 239. ⁸⁴ Recital 11, Art 11. ⁸⁵ Ibid, Art 35. ⁸⁶ Ibid, Art 12. ⁸⁷ Recommendation No R (2000) 5, The Development of Structures for Citizen and Patient Participation in the Decision-making Process Aff ecting Healthcare (2000), App. Guideline 1. See generally on this theme, Vincent-Jones, P., Hughes, D., and Mullen, C., ‘New Labour’s PPI Reforms: Patient and Public Involvement in Healthcare Governance?’ [2009] 72 Modern Law Review 247–71. ⁸⁸ Strategic Plan 2005/2008, 12, 20.

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reports incorporated a section on ‘Focusing on Inequalities, Human Rights and Diversity’ outlining measures taken to implement its human rights commitment. This included a three-year action plan aimed at promoting human rights and reducing inequalities in health and healthcare, publishing race, disability and gender equality schemes, undertaking equality impact assessments through the ‘planning for inclusion’ process, and assessing impact against six strands of diversity.⁸⁹ This was in the context of a more general commitment to human rights in healthcare made by the Department of Health in conjunction with the British Institute of Human Rights.⁹⁰ The work of the HC on human rights was examined by the Parliamentary Joint Committee on Human Rights in 2007.⁹¹ It noted that respect for human rights was built into the Department of Health’s core standards for healthcare organizations, but that guidance on practical implications had not been issued and urged the HC not to view the Human Rights Act as merely one of a large number of regulations to which it was subject, but ‘it should regard the framework created by the Act as over-arching and fundamental to all its work’. The Commission should ensure that the Act was explicitly used in its regulatory work, and the new merged commission should adopt a human rights framework for all its work.⁹² The government reply stated that it would ‘expect compliance with the Human Rights Act to form an important element of [the CQC’s] work, as it has for the regulatory bodies it supersedes’.⁹³ International commitments to human rights were also extremely important for the CSCI’s work. Thus there are a number of rights particularly relevant to older people.⁹⁴ Apart from those in the international instruments referred to above, relevant rights include those under the European Convention on Human Rights and so enforceable in domestic courts under the Human Rights Act 2008. These are the right to life (Art 2); the prohibition on inhuman or degrading treatment (Art 3); the right to respect for private and family life, home and correspondence (Art 8); and the prohibition of discrimination in the enjoyment of rights (Art 14). The Convention may create positive obligations upon public authorities to take measures to protect people’s rights, for example to ‘take effective operational

⁸⁹ See, eg ‘Making Healthcare Safer for Patients: Annual Report 2007/08’, HC 784, 2007–8, 31–4. ⁹⁰ British Institute of Human Rights and Department of Health, Human Rights in Healthcare – A Framework for Local Action (2007). ⁹¹ ‘The Human Rights of Older People in Healthcare’, HL 156, HC 378, 2006–7, esp ch 6. ⁹² Ibid, para 184 (emphasis retained). ⁹³ Joint Committee on Human Rights, ‘Government Response to the Committee’s Eighteenth Report of Session 2006–07: The Human Rights of Older People in Healthcare’, HL 5, HC 72, 2007–8, 14. ⁹⁴ For a detailed catalogue and analysis, see ‘The Human Rights of Older People in Healthcare’, Annex at 80–91, and for more context, Age Concern, Rights for Real: Older People, Human Rights and the CEHR (2006).

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steps to guard against . . . ill-treatment’.⁹⁵ In addition, a number of children’s rights were of great relevance to the Commission, and the position of Children’s Rights Director was established as a statutory post to act as a ‘children’s auditor’ to ensure that the rights and welfare of children in care were safeguarded and promoted.⁹⁶ However, these responsibilities for children’s rights have now passed from the Commission to Ofsted. A particular problem in English law was that a private home providing care on behalf of a local authority was not treated as a ‘public authority’ to which the Human Rights Act was applicable.⁹⁷ In the leading decision on this question, the majority of the House of Lords implied that, in the absence of direct judicial enforcement of rights, this task should be one for the regulator.⁹⁸ The effects of the decision have now been limited by statute, which provides that care homes providing services for local authorities under statutory provisions are public authorities and so open to challenge under the Human Rights Act.⁹⁹ The scope of this statutory change is, however, narrow and does not apply to other services, and anyway does not negate the position that the regulatory body itself has responsibility for ensuring that the requirements of the Convention are complied with. In the area of social care, there has been particular attention paid to the protection of rights of older people by Parliamentary committees. Thus the House of Commons Health Committee reported in 2004 on Elder Abuse.¹⁰⁰ This included a chapter on ‘The Contribution of Regulation’ which concerned registration of workers and the role of the then National Care Standards Commission in ensuring standards and notifying unacceptable circumstances, including abuse; the Commission was ‘the major guardian of the vulnerable person against abuse in social and certain health care environments’.¹⁰¹ The Committee also emphasized the need for cooperation between the new CSCI and the HC.¹⁰² The report of the Joint Committee on Human Rights discussed above on the human rights of older people in healthcare also examined the regulation of care homes. Though it was impressed by a clear ministerial commitment to human rights as absolutely central to the government’s approach to social care, the Committee pointed out that human rights were not part of the current core standards, though dignity and respect were included. The Committee recommended that the human rights of residents be spelled out more clearly in the care home standards and made ⁹⁵ R (on the application of Limbuela) v Secretary of State for the Home Department [2005] UKHL 66; [2006] 1 AC 396 at para 92, and see the Joint Committee on Human Rights, ibid, 82–3. ⁹⁶ The Commission for Social Care Inspection (Children’s Rights Director) Regulations 2004, SI 2004/615. ⁹⁷ See the decision of the majority of the House of Lords in YL v Birmingham City Council [2007] UKHL 27; [2008] 1 AC 95. ⁹⁸ See Lord Scott at para 32, Lord Mance at paras 79, 116, and Lord Neuberger at para 134. See also the Joint Committee on Human Rights, ‘The Human Rights of Older People in Healthcare’, paras 161, 179. ⁹⁹ Health and Social Care Act 2008, s 145. ¹⁰⁰ ‘Elder Abuse’, HC 111, 2003–4. ¹⁰¹ Ibid, paras 154, 156. ¹⁰² Ibid, para 170.

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uniform for health and social care.¹⁰³ The CSCI and the HC, according to the Committee, played an important role in the implementation of the Human Rights Act. Although the CSCI claimed that the Act underpinned a great deal of its values and claimed to have adopted ‘a human rights approach’ in its work, there were lessons to be learned from the more systematic approach adopted by the Mental Health Act Commission. Thus ‘we recommend that the forthcoming merged inspectorate for health, social care and mental health adopts a human rights framework with the intention that the framework informs all of the inspectorate’s work and so makes it more eff ective in fulfilling its statutory duty’.¹⁰⁴ As was made clear by the Committee, the Mental Health Commission, which is also merged into the new CQC, adopted a strong and systematic approach to human rights. Thus in 2006 it published a Strategy on Equality and Human Rights aiming to embed a human-rights based approach throughout the organization, taking human rights as the framework for a two to three-year programme of work; it stated that ‘[p]romotion of the human rights of individuals detained under the Mental Health Act is the core and central function of the Commission’.¹⁰⁵ The Joint Committee on Human Rights returned to the role of human rights in the work of the new CQC in its pre-legislative report on the Health and Social Care Bill.¹⁰⁶ It recommended amendments to the Bill to strengthen the powers of the new regulator to inspect care providers against human rights standards and to include a requirement that the regulations governing providers made reference to the rights of users. Th is would work alongside amending the scope of the Human Rights Act to include private providers as ‘[a]chieving eff ective human rights protection requires a combination of diff erent measures operating in diff erent ways to make human rights considerations more central to the decision-making process where appropriate’.¹⁰⁷ The Committee was also critical of the bland response of the Department of Health to its proposals in the previous report, and proposed a new clause for the Bill which would provide that ‘[t]he protection and promotion of human rights shall be central to the performance of the functions of the Commission’.¹⁰⁸ The government rejected these recommendations; however the Bill was amended in the Lords and in the Health and Social Care Act one of the matters to which the CQC must have regard is ‘the need to protect and promote the rights of people who use health and social care services’; this is specified to include in particular the rights of mental health patients and other vulnerable adults.¹⁰⁹

¹⁰³ ¹⁰⁴ ¹⁰⁵ ¹⁰⁶ ¹⁰⁷ ¹⁰⁹

‘The Human Rights of Older People in Healthcare’, paras 98, 174–80 Ibid, para 189 (emphasis retained). Mental Health Act Commission, Strategy on Equality and Human Rights (2006), paras 2, 4. ‘Legislative Scrutiny: Health and Social Care Bill’, HL 46, HC 303, 2007–8. Ibid, para 1.21 (emphasis retained). ¹⁰⁸ Ibid, paras 1.27–1.28 (emphasis retained). Section 4(1)(d).

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One of the principles of regulation announced by the CQC before it commenced its work was to take a rights-based approach, and in its draft strategy for 2010–15 the first priority is stated as ‘[e]nsuring care is centred on people’s needs and protects their rights’. It also states that its work in all its priority areas will be underpinned by the principles of equalities and human rights, and has commenced a consultation on its Equality and Human Rights Scheme which will, amongst other things, require providers to consider equality, diversity, and human rights in every aspect of their work.¹¹⁰

Regulation and social solidarity It will be evident from the discussion above that the HC adopted a very different approach to regulation from that of economic regulators, and a social solidarity-based approach was very apparent in its submission to the government’s wider review of regulation of health and social care in 2005. This emphasized that a central purpose for regulating healthcare is to provide assurance on the safety and quality of services; such assurance must not be secondary to, or isolated from, financial issues or the management of public assets. The regulatory system should focus on the needs of patients and users of services; there was a risk that this was being forgotten in the current debates. ‘One example of this is the discussion of “market failure” as an abstract economic occurrence without apparent recognition that healthcare is about patients and, in a publicly funded system, Government has a duty to prevent citizens’ health being put at risk’. Thus the regulatory system should continue to have the overall remit of promoting improvement in the safety and quality of care provided and in the use of public money; even in the privately funded independent sector, risks of exploitation and information asymmetries mean that core standards and their monitoring remain essential. This required strengthening the regulatory framework and powers of enforcement.¹¹¹ Moreover, ‘the regulatory system cannot be designed around responding to failure. It must concentrate on preventing failure, in a way that deals with quality and money in an integrated way’.¹¹² Unsurprisingly, this was a radically different approach from that set out by the economic regulator, Monitor, in its submission to the same review, as we shall see in the following chapter. A similar approach is also apparent in the assessment of progress since the Bristol report by the chair of the HC, referred to above. He criticizes a narrow view of regulation as accreditation through licensing organizations to provide services if they meet minimum standards. This is ‘completely wrong-headed’ as it sees regulation as an insensitive burden imposed from outside, and fails to distinguish ¹¹⁰ A Manifesto for the Care Quality Commission, 2; Our Strategy for 2010–2015, 10–13; Equality and Human Rights Scheme – A Consultation Document (2009). ¹¹¹ Healthcare Commission, Wider Review of Regulation of Health and Social Care – Submission by the Healthcare Commission (2005), 4. See also 13–14, 16–17. ¹¹² Ibid, 20–1.

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promoting and encouraging improvement (a task for the regulator) and actually doing the improving (for managers and professionals).¹¹³ Given these policy statements, it is not surprising that social solidarity played a major role in the work of the HC. There is considerable overlap with the matters considered above in relation to human rights, but it should also be noted that in its Strategic Plan the HC highlighted inequality in the state of health of various groups of the population and varying levels of access to and provision of healthcare.¹¹⁴ Its strategic goals included ‘promoting action to reduce inequalities in people’s health and increase respect for human dignity’.¹¹⁵ The Annual Report included a section on ‘Planning for Inclusion’, which assessed programmes for their effect on different strands of diversity.¹¹⁶ There was also considerable overlap between the CSCI’s human rights-based activities and those related to social solidarity and social inclusion. Apart from a general emphasis in documentation on the importance of equal access to care, the Commission’s Corporate Plan for 2005–08 emphasized that it would do much more to promote the social inclusion in social care of certain user groups, including those with mental health problems and ethnic minorities.¹¹⁷ It had published an equalities and diversity strategy, stating that ‘[p]romoting equality, embracing diversity and ensuring full inclusion for people who use social care is central to our vision and values’. This was incorporated into mainstream corporate planning; the Strategy covered six aspects of equalities and diversity, and was supplemented by separate Race Equality and Disability Equality schemes.¹¹⁸ As we shall see later in this chapter, the CSCI’s arrangements for participation also placed a strong emphasis on social inclusion. Given the strong emphasis on social solidarity by its predecessors, it is inevitable that the CQC will continue to make this a major element in its approach. The statute has as the Commission’s main objective ‘to protect and promote the health, safety and welfare of people who use health and social care services’, and it is to encourage the improvement of services and their provision ‘in a way that focuses on the needs and experiences of people who use those services’.¹¹⁹ It must have regard, inter alia, to the views and experiences of the public, users, and their family and friends.¹²⁰ In its Manifesto, issued before the assumption of its responsibilities, the CQC states that its vision is of high quality social care which: • supports people to live healthy and independent lives; • helps individuals, families, and carers make informed decisions about their care; • responds to individual needs. ¹¹³ ‘Learning from Bristol: Are We?’, 68–9. ¹¹⁴ Strategic Plan 2005/2008, 1, 7, 12, 20. ¹¹⁵ See, eg Corporate Plan 2008/2009, 7. ¹¹⁶ ‘Making Healthcare Safer for Patients: Annual Report 2007/08’, 31. ¹¹⁷ Making Social Care Better for People, 13–14. ¹¹⁸ Commission for Social Care Inspection, Equalities and Diversity Strategy (2006), 5, 11–13, 15, 17, 19–21. ¹¹⁹ Health and Social Care Act 2008, s 3 (1)–(2). ¹²⁰ Section 4(1)(a)–(b).

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This does correspond to the approaches of both its predecessors; more will be said below on the involvement of users in the Commission’s work. The draft strategy for 2010–15 places a strong emphasis on fair access to care services, reducing health inequalities and supporting people in vulnerable circumstances. The draft Equality and Human Rights Scheme also emphasizes that it covers equality as well as human rights.¹²¹

Deliberation A major theme in the Bristol inquiry report was the need for a more patientcentred approach within healthcare. Thus ‘[p]atients and the public are entitled to be involved wherever decisions are taken about care in the NHS’.¹²² This involved two things: participation in the processes of the regulatory bodies themselves (‘the first and most obvious means of ensuring that the public’s interests are served is to involve the public adequately and appropriately in those bodies concerned with establishing and monitoring standards’), and the regulatory bodies ensuring that patients were properly involved in decision-making by the NHS itself.¹²³ Not surprisingly, these themes were also central to Sir Ian Kennedy’s vision of the HC when he was its chairman. As he put it, ‘[t]he approach adopted by the Healthcare Commission is simple, yet radical. It begins from the premise that improvement can only be actually achieved by those providing the services and those receiving them’. He concluded that ‘[r]egulation . . . can be at the forefront of ushering in a patient-centred system of healthcare, which is safe and of good quality’.¹²⁴ Actively engaging patients and the public in all its work was thus, as we have seen, the first priority in the HC’s Strategic Plan. It published a strategy covering both how the Commission would find ways of engaging patients and the public, and how it would help healthcare organizations themselves to engage successfully.¹²⁵ Apart from the use of consultation, workshops, and surveys, means of engagement included developing networks of community-based groups at a local level representing people who were seldom heard. The HC also insisted that patients and the public were involved in the annual health check of NHS organizations. This activity has to be seen in the broader context of changes to public participation in health provision as a result of the Local Government and Public Involvement in Health Act 2007.¹²⁶ This statute replaced the previous system of patients’ and public involvement forums for each primary care and NHS trust and a Commission for Patient and Public Involvement in Health ¹²¹ Our Strategy for 2010–2015, 7–8; Equality and Human Rights Scheme – Consultation Document, 6. ¹²² Learning from Bristol, 19; see also 399–411. ¹²³ Ibid, 406. ¹²⁴ ‘Learning from Bristol: Are We?’, 71. ¹²⁵ Engaging Patients and the Public – Have Your Say (2005). ¹²⁶ See Vincent-Jones, Hughes, and Mullen, ‘New Labour’s PPI Reforms’.

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with a requirement that local authorities enter into contractual arrangements to establish local involvement networks (LINKs) for public involvement.¹²⁷ The HC took an active role in working with communities to establish the LINKs and developed means for communicating effectively with them.¹²⁸ In the case of more conventional consultation, the HC organized, for example, 13 public consultations across the country in its Corporate Plan. As part of the process of designing its new system for assessing and promoting improvement in the performance of healthcare organizations, it ‘successfully carried out one of the largest consultation exercises ever undertaken in England’. This included distributing 64,000 documents outlining the proposed approach and organizing almost 400 events; over 1,100 responses were received from a wide range of organizations.¹²⁹ Meetings of the Commission were held in public and included question time for the public and press; there were also private sessions for confidential material. The HC was, of course, subject to the Freedom of Information and Data Protection Acts, and in 2007/08 received 456 requests for specific information.¹³⁰ The CSCI also committed itself strongly to engaging with service users and ensuring that they were involved in the work of the regulated organizations. In its Corporate Plan, the Commission undertook to draw on the views and experiences of people who use services and to use these to inform all its plans. It regarded the challenge as finding new ways of ascertaining people’s wishes and views and also ensuring that these were given more weight.¹³¹ It appointed a Head of User Involvement, and rapidly developed a user involvement project in each of its regions. This involved partnership with a user-led organization and aimed to test different ways of involving service users in inspections, and led to the use of ‘experts by experience’ with first-hand experience of using social care services in the inspections. Thus in 2006–07 such experts were involved in 134 inspections, and the number of experts expanded from 55 to 211 in the following year. This is an unusual and direct means for participation in its decisions which does not appear to have been used by any other regulator. The CSCI also developed an ‘Engage Network’ and Service Improvement Boards so that people who had experience of using services could influence its policies and practices.¹³² As with the HC, the CSCI consulted widely on its draft corporate plan and on proposals for improving inspection. This included using a consultation questionnaire which generated 3,447 responses, a series of forum workshops for 320 people, national seminars for 85 representatives from provider and user

¹²⁷ Part 14. ¹²⁸ ‘Making Healthcare Safer for Patients: Annual Report 2007/08’, 26. ¹²⁹ ‘Our Progress: One Year On: Annual Report 2004/2005’, 5, 14. ¹³⁰ ‘Making Healthcare Safer for Patients: Annual Report 2007/08’, 29. ¹³¹ Making Social Care Better for People – CSCI’s Corporate Plan 2005–2008, 20. ¹³² For information on the engagement policies, see, eg ‘Annual Report and Accounts 2006–07’, HC 794, 2006–7, 11–17.

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organizations, and 18 workshops for service providers.¹³³ It should be noted also that this was in the context of wider consultation by government, which included the use of deliberative events. The consultation involved nearly 100,000 people and culminated in a 1,000 person Citizens’ Summit.¹³⁴ The CSCI held most of its meetings in public in different locations in England. Of course, there was also extensive consultation on the plans to merge the regulators. It is unsurprising, given the background of the work of by both the regulators, that a major theme arising from the merger consultation and workshops was ‘the importance of involving patients and users of services in regulation . . . participation needed to be based around genuine involvement, using a variety of methods in order to promote equality and proper representation of the interests of patients and users . . .’.¹³⁵ This was indeed reflected in the new statutory provisions, which included much stronger requirements of user involvement than previously. As noted above, the CQC is required to have regard to ‘the views expressed by or on behalf of members of the public about health and social care services’, ‘experiences of people who use health and social care services and their families and friends’ and the views of local involvement networks.¹³⁶ Even more importantly, the CQC is required to publish, after consultation, a Statement on User Involvement. This must describe how the Commission proposes to promote awareness among service users and carers of its functions, to promote and engage in discussion with service users and carers about the provision of services and the way in which the CQC carries out its functions, to ensure that proper regard is had to the views of service users and carers, and to arrange for any of its functions to be exercised by, or with the assistance of, service users and carers.¹³⁷ This goes much further than the statutory participation requirements of any other regulator. Even before taking over its responsibilities, the CQC consulted on a draft Statement of Involvement. It was published as Voices into Action, and sets out principles for governance, continuing use of ‘experts by experience’, specialist working groups, formal and informal consultation, and sharing functions with user and carer groups; it will be followed by a detailed work plan for involvement and reports on involvement work each year.¹³⁸ The statement explicitly builds on the experience of the CQC’s predecessors, but it is particularly important that the Commission was required to reflect publicly on involvement in the round at the commencement of its work. The CQC is also to monitor the extent to which providers and commissioners of services involve users and others, and this should form part of the annual performance rating of each ¹³³ ‘Annual Report and Accounts 2004–05’, HC 105, 2004–5. ¹³⁴ Our Health, Our Care, Our Say: A New Direction for Community Services (Cm 6737, 2006), 3–4. ¹³⁵ The Future Regulation of Health and Adult Social Care in England: Response to Consultation, 2.6. ¹³⁶ Health and Social Care Act 2008, s 4(1)(a)–(c); see also s 1(2)(b). ¹³⁷ Section 5. ¹³⁸ Care Quality Commission, Voices into Action – How the Care Quality Commission is Going to Involve People (2009).

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organization. If well organized, this could provide an extra element of reflexivity through the regulation of involvement in services themselves on a regular basis by an external body, something which goes further than is the case for other regulators examined in this book.¹³⁹

Conclusions As mentioned at the beginning of this chapter, health and social care is the fastest-changing area of regulation of any discussed in this book. However, a number of continuing themes can be identified amongst the constant reforms. The first is that, despite the rapid marketization of health service provision and the increased stress on patient choice, regulation of this area remains essentially social regulation, with a particular emphasis on human rights in the regulator’s work. Indeed, human rights provide a stronger rationale in this area for regulation than in any other examined in the book. This was especially evident in the work of the HC under Sir Ian Kennedy who developed a vision of the regulator’s role quite distinct from that of an economic regulator. A rights-based approach and an emphasis on social solidarity was also characteristic of the CSCI, and is now required by the statutory duties of the CQC. The very different and limited approach of setting minimum standards and leaving competition to maintain quality set out in the government’s consultation document was not implemented in the final legislation. This approach is reinforced by the Health Act 2009, which requires health bodies, including the CQC, to have regard to the NHS Constitution. The first principle set out in the Constitution is that: The NHS provides a comprehensive service, available to all irrespective of gender, race, disability, age, sexual orientation or belief. It has a duty to each and every individual that is serves and must respect their human rights. At the same time, it has a wider social duty to promote equality through the services it provides and to pay particular attention to groups or sections of society where improvements in health and life expectancy are not keeping pace with the rest of the population.¹⁴⁰

It is difficult to think of a more explicit statement of a human rights- and social solidarity-based approach. Secondly, as with other regulators examined in earlier chapters, the CQC does not act in isolation but forms part of a network of different bodies forming part of a joint enterprise of regulation. Most important, of course, is the role of the Secretary of State; the minister’s standards formed the basis for the work of both the HC and the CSCI and this will continue with the registration requirements set by the minister in regulations as the basis for much of the CQC’s work. The ¹³⁹ See Vincent-Jones, Hughes, and Mullen, ‘New Labour’s PPI Reforms’, 269–70. ¹⁴⁰ Health Act 2009, s 2; NHS, The NHS Constitution: The NHS belongs to us all (2009), 3 (emphasis retained).

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Commission is also linked to government by a number of other statutory provisions, for example the requirement to have regard to government policy. The extensive involvement of government is of course wholly legitimate in this area, for reasons both of democratic accountability and of attempting to ensure the coherent regulation of complex systems. What is important is that the involvement is open, through published means and after consultation when standards and other rules are made. We shall see in the following chapter that there have been problems in relations with other regulatory bodies, and the events at the end of 2009 culminating in the resignation of the Chair suggest problems in the system for assessing hospital quality. It remains to be seen whether this will be improved after the full registration requirements come into effect. Finally, the CQC and its predecessors have taken an imaginative approach to organizing user involvement both in their own decisions and in those of regulated organizations. This was central to Sir Ian Kennedy’s vision of the role of the HC; innovative techniques have been used, such as the ‘experts by experience’ taking part in the CSCI’s inspections. Particularly important is the statutory requirement on the CQC to publish a Statement on User Involvement at the outset of its work. Indeed, it is interesting to note the strong ministerial involvement in a regulatory system does not prevent the development alongside it of mechanisms for direct user involvement; the CQC requirement and the resulting statements could be a model for other regulators. In this case, Parliamentary democracy through the involvement of the minister and participatory democracy through the regulator’s own procedures, are not alternatives but are complementary.

7 Monitor, the Independent Regulator of NHS Foundation Trusts The regulator covered in this chapter is very different from those in the earlier chapters of this book. It is much smaller and appears at first sight to have a far more limited role covering the financial authorization and monitoring of NHS Foundation trusts. However, Monitor in fact has a wider remit than this; as the chairman commenced his Forward to an Annual Report: ‘Monitor exists to improve all aspects of services. That may not be the perception of our role, but it is the reality. Moreover, we believe it was the intention of Parliament when they legislated in 2003 to create NHS foundation trusts and an independent regulator’.¹ This raises important questions of the relationship between Monitor, the Care Quality Commission, and commissioning bodies within the NHS.

Background The creation of Monitor accompanied the establishment of NHS foundation trusts under the Health and Social Care (Community Health and Standards) Act 2003.² According to the Department of Health, the process was based on four principles for public service reform: the establishment of explicit national standards and clear accountability for the NHS; greater devolution of power from the Department of Health to clinicians and managers who were responsible for care at the front line; more flexibility for NHS staff; and greater plurality and choice for patients. The trusts are not subject to direction by the Secretary of State and their establishment is authorized by Monitor which, as its name suggests, also monitors their performance. They have greater financial and management freedoms than other NHS bodies, including the freedom to retain surpluses and to invest in the delivery of new services; they also, in principle, have ¹ ‘Annual Report and Accounts 2006–2007’, HC 780, 2006–7, 6. ² Part 1 (now consolidated in the National Health Service Act 2006); see also Department of Health, A Guide to NHS Foundation Trusts (2002). For an excellent discussion, see Davies, A., ‘Foundation Hospitals: A New Approach to Accountability and Autonomy in the Delivery of Public Services?’ [2004] Public Law 808–28.

The Regulatory Enterprise. Tony Prosser. © Oxford University Press 2010. Published 2010 by Oxford University Press.

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access to private capital. Services are purchased by commissioning bodies from the foundation trusts through legally binding contracts. The trusts are responsible locally through the requirement that they establish a Management Board which is answerable to a Board of Governors. The latter has powers to appoint the chair and non-executive directors, and to dismiss the Chief Executive by a 75 per cent majority. It is intended to represent stakeholders, and includes members appointed by primary care trusts and local authorities, as well as members elected by the ‘membership community’ of local people, patients, and staff. Doubts have been expressed about the effectiveness of the local accountability mechanisms.³ The trusts thus appear to have considerable autonomy, but this will be restricted in important ways in practice.⁴ For example, private borrowing has been limited, and a cap on private patients prevents the proportion of income from them being increased above that which existed before foundation trust status. The latter forms part of the mechanisms designed to safeguard NHS principles within the foundation trust system; these also require that values and principles of the NHS are upheld, high national standards are protected, and that assets are not sold off, mortgaged, or used for purposes against the public interest.⁵ The original intention of the government was that all NHS trusts should achieve foundation status in four to five years; this was modified so that the aim was that all would have the opportunity to apply by 2008. In view of a significant proportion of applications rejected by Monitor, it was recognized that this would not be achieved, and in 2008 the policy was that over the next three years all acute and mental health services would be delivered by foundation trusts, with successful applicants merging with, or buying out, non-foundation hospitals. By August 2009, 122 out of 225 acute and mental health NHS trusts had achieved foundation status.

Functions of Monitor The functions of the new regulatory body were summarized in the Guide to NHS Foundation Trusts as granting licences termed authorizations to applicants for foundation trust status, monitoring compliance with the authorization, undertaking periodic reviews of the authorization, taking steps to mitigate any breach of the authorization, and publishing an annual report on the activities of the licensed body.⁶ ³ Davies, ‘Foundation Hospitals’, 818–20; Health Committee, ‘Foundation Trusts’, HC 395, 2002–3, 48–55; Health Committee, ‘Foundation Trusts and Monitor’, HC 833-I, 2007–8, 45–61. ⁴ Davies, ‘Foundation Hospitals’, 827–8. ⁵ A Guide to NHS Foundation Trusts, 8–9. For the statutory requirements, see below. ⁶ Ibid, 29.

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In the authorization process the key questions which Monitor asks are whether the trust is legally constituted, whether it is financially viable and sustainable, and whether it is well governed. Assessment takes place using a template first provided by the Department of Health, around which Monitor then developed a model core constitution. At an early stage the applicant is required to engage in local consultation, and the Secretary of State’s consent must be given for the application. The core constitution includes important requirements on governance.⁷ The regulator also applies other extensive requirements including those relating to financial sustainability and the provision of core NHS services. By no means all applications are successful; in 2008–9 43 applications were assessed and 26 granted. The monitoring of the work of the foundation trusts is undertaken against a Compliance Framework designed by Monitor; all foundation trusts are required to prepare an annual plan and to make quarterly submissions.⁸ These are used by the regulator to prepare risk ratings, annually and quarterly, covering finance, governance, and the provision of mandatory services required in the authorization. For example, governance risk is rated using a traffic light system of risk ratings, where green indicates compliance with the terms of the authorization, amber indicates concern about one or more aspects of governance, and red indicates concern that there is a significant breach of the authorization.⁹ The assessment of governance includes issues of clinical quality; a notable example has been progress in reducing the rates of MRSA.¹⁰ Monitor also has to be notified of major investments (above 10 per cent of gross assets, income, or gross capital) and acquisitions by foundation trusts, and will assess the effect of these on risk ratings; it must formally approve any proposed merger involving a foundation trust. It will also apply competition rules after advice from the NHS Co-operation and Competition Panel. Finally, Monitor has extensive powers of intervention for breach of the requirements of an authorization. This could be triggered by the Board of Governors of the trust itself, which has a duty to report action by the Management Board which appears to breach the authorization, through inspection by the Care Quality Commission or concerns arising from information provided to Monitor. The range of corrective measures which the regulator can apply includes the imposition of additional reporting requirements, issuing formal or informal warning letters, removing some or all of the Management Board or ordering new elections to the Board of Governors, and finally recommending that the assets of the trust are transferred to another NHS body. In the case of failure to meet financial duties, the Board of Governors can be dissolved and the Board of Management dismissed, leading to the winding up of the trust.¹¹ The Health Act 2009 adds ⁷ ⁸ ⁹ ¹⁰ ¹¹

Monitor, NHS Foundation Trust Model Core Constitution (revised edn, 2008). Compliance Framework 2009/10 (2009). Health Committee, ‘Foundation Trusts and Monitor’, 30. Monitor, ‘Annual Report and Accounts 2008–09’, HC 621, 2008–9, 19–21. A Guide to NHS Foundation Trusts, 30.

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powers for Monitor to de-authorize in other cases, and empowers the Secretary of State formally to request action including de-authorization; if it refuses to implement the request, Monitor has to provide a public statement of reasons within seven days.¹² Of course, the first step will be to ensure that breaches do not occur or are remedied. For example, in February 2008 Monitor identified eight foundation trusts where there were serious concerns about their ongoing performance against annual MRSA targets. Five were found to be in significant breach of their terms of authorization which required them to ensure that infection control issues were receiving attention at the highest level. A recovery trajectory was agreed with them and they were later de-escalated to a lower risk rating.¹³ In other cases, evidence of high risk on governance or financial matters led to meetings with Monitor and action to improve performance; in only two cases during 2008–9 was the use of formal powers of intervention necessary.¹⁴ At the end of 2009 Monitor took formal action to improve performance in one trust through sending in an external task force to work with the board, and in another required the removal of the trust’s chair.

Monitor in regulatory space: the institutions Monitor was established by the Health and Social Care (Community Health and Standards) Act 2003, although the provisions have now been consolidated into the National Health Service Act 2006. The Act set up Monitor as a body corporate with not more than five members appointed by the Secretary of State after recommendations from the NHS Appointments Commission; there is no separate chief executive.¹⁵ Members hold office in accordance with the terms of their appointment; the Secretary of State has the power to remove any member for incapacity or misbehaviour, although this is not stated to be the only ground for removal, unlike in the case of the Care Quality Commission. Audit is by the Comptroller and Auditor-General, and the regulator does not have Crown status.¹⁶ Monitor has emphasized in its annual report that ‘[a]lthough Monitor’s independence is vital in order to discharge our statutory functions effectively, we seek to work in partnership with others . . .’.¹⁷ In many ways it is the most independent of the regulators examined in this book with, for example, no powers of ministerial direction over its work. However, the executive chairman stated in the 2007–8 Annual Report that ‘[i]t was disappointing that the Government did not use the passage of legislation in 2007 to reconstitute Monitor as a fully-independent body ¹² ¹³ ¹⁵ ¹⁶

Consultation on De-Authorisation of NHS Foundation Trusts (2009): Health Act 2009, s 15. ‘Annual Report and Accounts 2008–2009’, 20–1. ¹⁴ Ibid, 23–6. National Health Service Act 2006, s 31 and sch 8, para 1. Ibid, sch 8, paras 12, 16. ¹⁷ ‘Annual Report 2008–09’, 7.

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in line with other regulators. This is something for which we will continue to press’.¹⁸ This would have involved changing its status to a non-ministerial government department so that budget negotiations would be conducted directly with the Treasury rather than the Department of Health. The Secretary of State does clearly have an important role in aspects of the process (though much less so than in other regulators discussed earlier). Thus the minister’s consent is necessary for an NHS organization to apply for foundation trust status, and the template for the Model Core Constitution was initially made available by the Department. On one particular issue, early tensions arose between the Department and Monitor. The regulator’s executive chairman wrote to the NHS Chief Executive expressing his discomfort over the ‘directive’ and ‘intrusive’ tone of letters sent to foundation trusts by the Department of Health relating to infection control, deep cleaning, and matrons. He considered that the letters were in contravention of legislation and could only be interpreted as issuing instructions and implying that the foundation trusts were ‘in a line management accountability relationship with the DH’. Although the Monitor executive chairman characterized this as a debate in the context of a changing NHS, the Health Committee noted that the boundaries were still being negotiated between the Department and Monitor about what level of government intervention in foundation trusts’ affairs is legitimate; it recommended that the government take steps to clarify this.¹⁹ This is in a context where commentators have suggested that the actual autonomy of foundation trusts would be much less than originally suggested; the role of Monitor could be an important corrective in providing a buffer between them and the Secretary of State.²⁰ Relations between Monitor and the Care Quality Commission are also of very great importance. As will be evident already, Monitor is not merely a regulator of the financial arrangements of foundation trusts, but also has major responsibilities for regulating the quality of governance. Under the 2008 legislation, as we saw in the previous chapter, the Care Quality Commission is also responsible for quality registration and inspection, which now extends to NHS bodies, including foundation trusts. This creates problems of overlap and of potentially conflicting approaches; we have seen that the approach of the Healthcare Commission was radically different from that of Monitor. Monitor agreed a Memorandum of Understanding with the Healthcare Commission as a base for cooperation and coordination to provide clear and consistent messages to foundation trusts. However, the position with the Care Quality Commission is potentially far more difficult since it will have powers to intervene directly where there are problems with foundation trusts, which will have to be registered with it. Monitor has itself noted the potential problem; in its 2007–8 Annual Report it stated in relation to the Bill which became ¹⁸ ‘Annual Report and Accounts 2007–08’, HC 694, 2006–7, 6. ¹⁹ ‘Foundation Trusts and Monitor’, paras 101–3. ²⁰ See, eg Davies, ‘Foundation Hospitals’, 827–8.

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the Health and Social Care Act 2008, ‘[w]hen the Bill was published in 2007 we communicated our concerns to parliamentarians about the need for clarity in the planned legislation, in particular in relation to the powers that will be held by both Monitor and the Care Quality Commission to intervene with NHS foundation trusts where there are problems’. It remained concerned about a lack of clarity round the roles of the two regulators, but was positive that a strong working relationship could be established with the new Commission.²¹ This was re-emphasized in evidence to the Health Committee; according to the executive chair of Monitor, there was already a good relationship with the Healthcare Commission and they were both clear about their respective roles. However, the Care Quality Commission was ‘a very different animal with a much wider remit’. Talks were already taking place well before the Commission started work with its chair to ensure that ‘the fact that they have a degree of intervention power in relation to registration does not produce two regulators trying to do either different or the same things to the same trust’.²² The Health Committee itself was less sanguine, noting that ‘questions remain about whether it is necessary for [foundation trusts] to be subject to quality monitoring by two separate regulators’, and pointing out that added complexity would be created by the establishment of a further regulator, the Competition and Collaboration Panel.²³ In addition to the duplication, the Committee also identified a gap in coverage; neither Monitor nor the Healthcare Commission and its successor had a clear remit to identify innovation and spread best practice.²⁴ Serious problems were revealed in early 2009 when the Healthcare Commission issued a damning report on the Mid Staffordshire NHS Foundation Trust, which had been granted foundation trust status by Monitor a year earlier. The Health Committee of the House of Commons found that ‘[i]ncredibly, it transpires that the two organisations were not in communication about the Trust, and the [Healthcare Commission] only found out by accident that Monitor had decided to give it Foundation Trust status’.²⁵ Ministerial evidence also revealed confusion about the extent to which Monitor has a performance management role in relation to the trusts.²⁶ The Committee concluded that the case ‘exposed serious shortcomings in Monitor’s assessment process when granting authorisation’, and that ‘[t]here appears to be considerable potential for confusion, and possibly conflict, regarding the respective roles of Monitor and the CQC’.²⁷ Monitor stated that it now considers a broader range of information on clinical quality and formally seeks the views of the Care Quality Commission in relation to each application. It had also taken further steps to develop a coherent regulatory framework for monitoring compliance with standards in partnership with the Care Quality Commission. ²¹ ²² ²³ ²⁵ ²⁷

‘Annual Report 2007–2008’, 37, 44. ‘Foundation Trusts and Monitor’, evid, HC 833-II, 2007–8, q 120. ‘Foundation Trusts and Monitor’, paras 108, 109. ²⁴ Ibid, paras 42–4. ‘Patient Safety’, HC 151, 2008–9, para 244. ²⁶ Ibid, para 247. Ibid, paras 264–6 (emphasis retained).

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They will use common standards for governance indicators and the annual health check in 2009–10, and new measures and a coordinated approach will then be developed as the Commission takes over its registration functions. This will make it clear that the Commission is the lead regulator on quality matters with Monitor leading on governance. A Memorandum of Understanding has been agreed between the two regulators as the basis for this approach. This sets out general principles for collaborative working, including for communication between the two regulators, with special provisions relating to registration and authorization of foundation trusts and failure to meet regulatory requirements.²⁸ At the end of 2009 when, as mentioned in the previous chapter, serious deficiencies were found in quality of service in an authorized foundation trust, formal action was taken by Monitor based on information provided by the Care Quality Commission on care quality as well as its own concerns about board effectiveness. Finally, Monitor also has relationships with commissioning bodies within the NHS, such as primary care trusts, which are themselves responsible for ensuring quality. We saw in the previous chapter that their role was considered to be a key driver for change when the new regulatory structure was being established; the Healthcare Commission also stressed the importance of regulatory scrutiny of commissioning bodies. In its Business Plan for 2008–9, Monitor stated that it would pay particular attention to developing its relationships with commissioners so that together they could create levers for improvement in foundation trusts and to encourage innovation, and it would reinforce the role of commissioners in ensuring that the trusts remain compliant with the terms of their authorizations.²⁹ It envisaged that increasingly targets for the compliance would be set locally by commissioners and that delivery should be monitored through contract management processes.³⁰ Overall, then, Monitor is part of a complicated regulatory space with multiple relations with other bodies in the network. After initial problems, action is being taken to provide a clearer administrative division of responsibilities between the different bodies. It has yet to be seen how effective this will be.

Monitor in regulatory space: the duties The statute does not contain a clear statement of Monitor’s purpose. However, it has a general duty to exercise its functions in a manner consistent with the performance of specified duties of the Secretary of State; these include the promotion of a comprehensive health service providing services free of charge except as ²⁸ Monitor, Corporate Plan 2009–12 (2009), 4, 13, 17, 23; Memorandum of Understanding (‘Memorandum’) Between the Care Quality Commission (‘CQC’) and the Independent Regulator of NHS Foundation Trusts (‘Monitor’) (2009). ²⁹ Business Plan 2008–9 (2008), 15. ³⁰ ‘Annual Report 2007–2008’, 5.

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otherwise provided in any enactment, providing specified types of services which it considers necessary to meet all reasonable requirements throughout England, and ensuring the provision of facilities to universities for clinical teaching and research.³¹ Provision is made in the Act for considering applications for foundation trust status made with the Secretary of State’s consent and for granting authorizations; a schedule to the Act also sets out the basic requirements to be included in the constitutions of all trusts, including for example eligibility for membership by the public, staff, and patients, and the basic governance structure.³² Consultation by the applicant trust is required on whether the public and patients’ constituencies will be representative of those eligible, and consultation is also required in more general terms about the application.³³ Provision is made for the variation of a foundation trust’s constitution with Monitor’s approval and for Monitor to vary the authorization after having had regard to reports from the health service consultative bodies.³⁴ The legislation includes substantial restrictions which must be imposed on foundation trusts by Monitor. Thus it must make, and may revise after consultation, the prudential borrowing code which limits the total borrowing permitted for each foundation trust.³⁵ Importantly, the Act requires that authorization must secure that the principal purpose of any trust must be the provision of goods and services for the purposes of the health service in England.³⁶ The authorization may include a cap on private patient income, and the foundation trust may not dispose of protected property without regulatory consent (this is property designated in the authorization as needed for the provision of core services).³⁷ Powers are also given to Monitor to deal with failing trusts through issuing directions, removing the directors or board of governors, and ultimately dissolving the trust and transferring assets to another NHS body.³⁸ Mergers between foundation trusts or with other NHS trusts require Monitor’s consent.³⁹ Turning now to Monitor’s own policies, what is striking when reading its corporate plans is the frequency of references to devolution and incentivization rather than direct regulatory intervention. Thus its vision is described as [a]n affordable, devolved healthcare system with patients choosing and commissioners purchasing high-quality healthcare from a range of providers who operate within a regulatory framework that incentivises professional management and financial discipline.

Its strategy is to operate a proportionate risk-based regulatory regime and a rigorous assessment process. ⁴⁰ The five objectives in the Corporate Plan are: to operate ³¹ Now see the National Health Service Act 2006, ss 1, 3, 32, 258. ³² National Health Service Act 2006, ss 35(2)(a) and sch 7. ³³ Ibid, ss 35(2)(b), 35(5). ³⁴ Sections 37–8. ³⁵ Health and Social Care (Community Health and Standards) Act 2003, s 12(1); National Health Service Act 2006, ss 41, 46. ³⁶ National Health Service Act 2006, s 43(2). ³⁷ Sections 44–45. ³⁸ Sections 52–55. ³⁹ Section 56. ⁴⁰ Corporate Plan 2006–09, 2 (emphasis retained). A similar emphasis with slightly different wording is retained in the Corporate Plan 2009–12, 1–2.

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a proportionate, risk-based regulatory regime; to operate a rigorous assessment process to ensure that foundation trusts are legally constituted, well governed, and financially strong; to promote the development of well-led NHS foundation trusts; to contribute to and influence the development of an affordable, developed healthcare system ‘that incentivises professionally managed, financially strong providers to be innovative and responsive’; and to continue to evolve as a high-performing organization.⁴¹ Monitor’s vision, mission, and strategy are set out at the beginning of each annual report and provide a framework for assessing progress in detail against more specific business objectives. More detailed plans are also set out in annual Business Plans establishing actions to be taken forward during the year. Monitor is of course only at a fairly early stage of operation, but has been examined by the House of Commons Health Committee. The Committee’s first report on foundation trusts in 2003 did not deal with Monitor in any detail as it was not yet established, but did note a number of relevant concerns. These included how real the promised management freedoms for foundation trusts would be, and the greater bureaucracy caused by accountability to both the Healthcare Commission and to Monitor.⁴² It considered that greater steps should also be taken to involve disadvantaged groups in foundation trust membership.⁴³ In a short report in 2008, the Committee reported generally favourably on the regulatory regime, which ‘seems to be well regarded ’, whilst, as already mentioned, expressing concern about potential duplication of regulation with the Healthcare Commission and the new Cooperation and Competition Panel, and the lack of clear regulatory responsibility for identifying innovation and spreading best practice.⁴⁴ These concerns were to lead to more serious criticisms in the context of patient safety, considered above.

Monitor and the regulatory models Regulation for efficiency and consumer choice As we shall see later, the regulatory role of Monitor is by no means limited to financial regulation, it also has to examine governance and the provision of services. However, in a different sense, Monitor can be characterized as taking an economic approach to regulation in the sense of emphasizing incentivization as a major regulatory tool, a risk-based approach, and a stress on proportional regulation. In some of its work, of course, Monitor has to take a more directly economic approach, in some ways similar to the work of the Financial Services Authority, ⁴¹ Corporate Plan 2006–09, 8; Corporate Plan 2009–12, 11. ⁴² ‘Foundation Trusts’, paras 19, 23. ⁴³ Ibid, para 42. ⁴⁴ ‘Foundation Trusts and Monitor’, paras 42–4, 104–11 (emphasis retained).

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through ensuring that foundation trusts are financially sustainable when they are established and that this is not put at risk by excess borrowing or other financial activities. Thus each trust has a ‘prudential borrowing limit’ in a code required from the Secretary of State to ensure that it does not over-borrow and put services at risk; Monitor can reduce this should risk factors increase.⁴⁵ More broadly, the stress is on a framework which provides incentivization for the foundation trusts. Thus, according to Monitor’s Corporate Plan, it aims ‘[t]o operate a transparent and effective regulatory framework that incentivises NHS foundation trusts to be professionally managed, financially strong and capable of delivering innovative services that respond to patients and commissioners’.⁴⁶ This may create some tensions in relations with the rest of the NHS, thus academic evidence to the Health Committee suggested that [c]learly foundation trusts have been given a set of incentives in which they are much more responsible for their own activities and affairs and . . . surpluses as well. So clearly there is a much greater focus on their internal processes and decision pathways if you like and that clearly sets up a self interest type model that they are responsible for the boundaries of their trust and outside that is an externality: it is beyond their responsibility.⁴⁷

In considering relationships within local health communities, the House of Commons Health Committee concluded that, whilst in communities where collaborative working had historically been good this continued to be the case, there was evidence that in some other areas the presence of foundation trusts might contribute to tensions and resentment.⁴⁸ Turning now to the style of regulation, Monitor is strongly committed to a proportionate and risk-based approach to regulation, and this is emphasized in all its literature.⁴⁹ In its first Annual Report the regulator described its risk-based approach, corresponding closely to that in the Hampton Report (see Chapter 10 below).⁵⁰ It is based on the Compliance Framework, published after consultation, and the premise that the principal responsibility for compliance with the terms of authorization rests with the trust itself. The three main components of the Compliance Framework are annual assessment used to set risk ratings providing the basis for the frequency and depth of regulatory scrutiny; in-year monitoring, initially quarterly but moving to six-monthly for trusts with the lowest financial risk; and intervention where necessary. Risk ratings are set in the three areas of finance, governance, and mandatory services. Borrowing limits are also set on a basis which varies according to the assessment of financial risk. Further ⁴⁵ Health and Social Care (Community Health and Standards) Act 2003, s 12; National Health Service Act 2006, s 41. ⁴⁶ Corporate Plan 2006–09, 6 (emphasis retained); see also Corporate Plan 2009–12, 8, 22–3. ⁴⁷ Mark Exworthy, quoted in Health Committee, ‘Foundation Trusts and Monitor’, para 67. ⁴⁸ Ibid, para 69. ⁴⁹ See, eg Corporate Plan 2006–09, 6, 8, 9–10, 22; Corporate Plan 2009–12, 13–14. Annual reports contain a special section entitled ‘Proportionate Regulation’. ⁵⁰ ‘Annual Report 2005’, HC 195, 2005–6, 8–10.

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requirements include that trust boards self-certify that they have in place systems to monitor and improve quality.⁵¹ Annual and quarterly reports are published by Monitor covering the performance and risk ratings of the trusts. The Compliance Framework characterizes the approach as one of ‘responsive regulation’; ‘Monitor seeks to build a trust-based regulatory framework based on a philosophy of “no surprises” and open communication’.⁵² Thus Monitor has strongly adopted the approach suggested by the ‘better regulation’ initiatives of the government. Indeed, it appears to have done so to a greater degree than other regulators discussed so far, in part reflecting its relative youth. In a different sense, it has shown an approach very much based on that of economic rather than social regulation, most explicitly in its submission to the government’s Wider Review of Regulation of Health and Social Care in 2005, a submission which is in dramatic contrast to that of the Health Commission discussed in the previous chapter.⁵³ Thus it envisaged a system with a fully implemented purchaser/ provider split and a plurality of independent providers. Both providers and the payments system would be subject to an independent regulator and a consumer inspection inspectorate measuring performance against national quality standards, but payments and provision would take place in an ‘operational’ space without direct political intervention.⁵⁴ Some space for a public service ethos and social norms based on trust would, however, remain due to severe market failures centred around information problems and the role of monopoly purchasers.⁵⁵ The key justification for regulation and inspection was market failure, and from specific failures of markets it was possible to identify the objectives to be met by regulation and inspection. These fell within the two broad headings of protecting consumers and securing an effective system, although where possible market failure should be addressed by directly improving the structure or functioning of market components. The seven objectives which could be so identified as a result of market failure were protecting patients from substandard care, equipping patients to exercise meaningful choice, ensuring sustainable capacity, safeguarding access to essential services in cases of financial failure, upholding competition to drive up quality and deliver choice, and certifying the accuracy and integrity of tariffs.⁵⁶ According to Monitor, it was important to have separate regulators for quality and economic matters because of the inherent conflict of interest where the same body was responsible for both, creating a risk that provider stability is traded off against patient care or is seen to be traded off. Moreover, the skills involved in economic and quality regulation are distinct; not only are real synergies between these rather limited, but it would be challenging for a “super-regulator” ⁵¹ ‘Annual Report 2006–2007’, 23. ⁵² Compliance Framework 2009/10, 6. ⁵³ Monitor, Securing an Eff ective Healthcare System for England: Submission to the Department of Health’s Wider Review of Regulation of Health and Social Care (2005); see also Monitor, English Healthcare 2008–9: An Interpretation of the Government’s Reform Vision (2005). ⁵⁴ Securing an Eff ective Healthcare System, 9. ⁵⁵ Ibid, 12–13. ⁵⁶ Ibid, 18, 20–1.

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in healthcare to build the broad skill-base required to be effective in performing the very different activities involved in quality inspection and securing an effective system. It is largely for these reasons that system regulation and quality regulation are kept separate in many regulated industries.⁵⁷

This is in contrast with the view of the Healthcare Commission that a separation between ‘quality regulation’ and ‘economic regulation’ is usually unhelpful and that regulatory functions involve consideration of both quality and economic and financial issues. Trade-offs will be necessary, but that can best be done ‘by a regulatory body that can survey the whole landscape, rather than being responsible for just one aspect of it’.⁵⁸ The view of Monitor was that the economic regulator should also be responsible for competition issues in the NHS.⁵⁹ As we saw in the discussion of the establishment of the Care Quality Commission in the previous chapter, the Monitor view largely prevailed; the government accepted a similar set of regulatory functions and established separate quality and economic regulators, though with competition issues being dealt with by a new, non-statutory Cooperation and Competition Panel within the NHS. Monitor will enforce the Principles and Rules of Cooperation and Competition drawn up by the NHS in the foundation trust sector on the basis of advice from the Panel. However, as we shall see below, there is no firm dividing line between the responsibilities of the quality and economic regulators.

Regulation and human rights One result of the separation of quality and economic regulation is that Monitor has only a very limited role in relation to the protection of human rights; as we saw in the previous chapter, this is a matter for the Care Quality Commission. Some of the matters with which Monitor has to deal such as quality of governance and access to services are related to rights, but are more appropriately considered under the next heading.

Regulation and social solidarity As noted at the beginning of this chapter, there are several references in Monitor reports stressing that its role is not just one of regulation of the finances of foundation trusts, it is also responsible for regulating quality of governance, and this is lesser-known, even by stakeholders.⁶⁰ Such regulation does include elements of social solidarity given the fact that foundation trusts remain part of the NHS; the executive chairman of Monitor has stated that trusts are expected ‘to play their ⁵⁷ Ibid, 31. ⁵⁸ Healthcare Commission, Wider Review of Regulation of Health and Social Care – Submission by the Healthcare Commission (2005), 14–15. ⁵⁹ Securing an Eff ective Healthcare System, 28. ⁶⁰ See, eg ‘Annual Report 2007–2008’, 44.

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part in meeting wider social objectives such as sustainability and diversity’.⁶¹ In the Act itself, Monitor is given the general duty of exercising its functions in a manner consistent with the performance of specified duties of Secretary of State; these include the promotion of a comprehensive health service providing services free of charge except as otherwise provided in any enactment.⁶² Extensive safeguards were put in place for this when the arrangements were made for the first establishment of foundation trusts. They include: to require that the trusts uphold the values and principles of the NHS; to protect high national standards for NHS services; to ensure that the prime purpose is met of providing NHS services to NHS patients free at the point of use and with treatment according to need, not ability to pay; and to prevent NHS assets from being sold, mortgaged, or used for purposes against the public interest.⁶³ More detailed protections include the requirement that so-called ‘regulated services’ defined in the authorization are offered for NHS patients, and that the ‘regulated assets’ needed to provide such services are not disposed of without regulatory consent.⁶⁴ The foundation trusts are also prohibited from demutualization and assuming the status of ordinary commercial companies. A further important protection is that provided by the private patient cap. This prevents the foundation trusts from exceeding a percentage of income from private patients which exceeds that which existed in 2002–3; in the case of mental health trusts, this cap has been set at zero.⁶⁵ Extensive as these protections are, they have not ended fears about the effects of foundation trusts on the rest of the NHS. Thus in its 2003 review, the House of Commons Health Committee issued a number of warnings on the dangers of shifting resources to organizations which do not have a responsibility for the strategic overview of the health needs of a whole community, and of dragging resources away from poorer-performing hospitals and the effect of privileged access to capital (including surpluses) draining away resources from other parts of the service that need it most.⁶⁶ In its 2008 report the Committee found mixed progress; some fears about the impact of the foundation trusts on local health economies had not been made out, and where there were good pre-existing relationships these had continued. However, there were tensions in other areas, and foundation trusts had made little contribution, except in mental health, to delivering more NHS care outside hospitals (although this was also attributable to the system of payment by results).⁶⁷

⁶¹ ‘Annual Report 2008–09’, 2. ⁶² National Health Service Act 2006, ss 1, 32. ⁶³ A Guide to NHS Foundation Trusts, 8. See also now the new NHS Constitution and the Health Act 2009 referred to at the end of the previous chapter. ⁶⁴ Ibid, 25–7, and the National Health Service Act 2006, ss 43, 45. ⁶⁵ National Health Service Act 2006, s 44. The Administrative Court held that Monitor had adopted an incorrect interpretation of the statute in relation to the cap in a challenge brought by Unison, the health union; R (on the application of Unison) v Monitor [2009] EWHC 3221 (Admin). ⁶⁶ Health Committee, ‘Foundation Trusts’, 112, 127, 133–7, 148–62. ⁶⁷ Health Committee, ‘Foundation Trusts and Monitor’, 66–9, 80–6.

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Turning now to the role of Monitor in ensuring quality standards are met, the Compliance Framework was amended in 2006 to give greater prominence to the obligation to deliver high-quality care and meet national standards. This includes delivering risk ratings for the delivery of mandatory services, self-certification that systems are in place for monitoring and improving quality, and that there is an explicit approach to monitoring service performance against national core standards and targets including criteria for regulatory intervention in the case of poor performance.⁶⁸ Examples of intervention in relation to low quality of service include those concerning reducing the rates of MRSA mentioned above, as well as those based on a high standardized mortality ratio and the length of time old people stayed in hospital, and for breach of national waiting list targets for orthopaedic treatment and potential failure in the management of waiting lists.⁶⁹ Finally, other governance aspects of Monitor’s works may also raise issues of social solidarity. It was mentioned earlier that a key theme in the establishment of the foundation trusts should be their accountability to local people through a membership community. Some emphasis has been placed on the involvement of previously disadvantaged groups. The 2003 Health Committee report had noted considerable confusion on arrangements for local accountability. In its 2008 report it noted some examples of good practice, but concluded that the new governance arrangements had been slow to deliver benefits and that there was a lack of robust evidence as to their effectiveness. The Committee was also ‘surprised and concerned’ that Monitor did not issue guidance to governors until 2008.⁷⁰ Despite these problems, there are requirements relating to governance and local involvement in the Model Core Constitution which must be adopted as the basis for an application for foundation trust statement, and the Compliance Framework makes provision for Monitor to intervene in the case of governance failure. It should be noted also that the statute provides that an authorization may require a foundation trust to take steps to secure that membership is representative, reporting requirements which must be followed to show a representative membership are set out in the Compliance Framework.⁷¹

Deliberation Deliberation here raises three separate issues: participation by stakeholders and the public in decisions of Monitor itself; Monitor’s responsibility for supervising local accountability by foundation trusts; and the broader arrangements for public and patient participation in the NHS. ⁶⁸ ⁶⁹ ⁷⁰ ⁷¹

‘Annual Report 2006–2007’, 23, and see the Compliance Framework, 11–37 and App B. ‘Annual Report 2007–2008’, 18–19, 32–3. Health Committee, ‘Foundation Trusts and Monitor’, 60–1. National Health Service Act 2006, s 61; Compliance Framework, App D2.

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As part of the regulatory approach described above, Monitor has stated its commitment to developing a ‘responsive approach to regulation’ through ‘a trust-based regulatory framework based on a philosophy of “no surprises” and open communication’.⁷² This provides the basis for its annual risk assessment, in-year monitoring and intervention, and is designed to produce ratings for the limited target audience of trust boards and staff, governors, and primary care trusts, whilst the ratings may also be of interest to other stakeholders. The first Corporate Plan committed Monitor to greater emphasis on reporting foundation trust performance, and its Business Plan emphasized the development of relations to a wide group of stakeholders.⁷³ Work has been undertaken to develop relationships and communications with commissioning bodies, health advisers, and MPs.⁷⁴ Monitor has undertaken a number of consultation exercises; for example, on its Compliance Framework, for which 2,000 copies of a consultation paper were distributed to stakeholders and more than 100 responses received.⁷⁵ Consultation has also taken place when the Framework has been amended. Monitor operates in a manner closer to that of the other economic regulators in that its meetings are not held in public, not surprisingly given the major role played by confidential financial information. Minutes are available, however, on the internet. Monitor thus takes an ‘externalist’ approach to participation through consultation and the receipt of evidence from outside rather than building participation directly into its own decision-making structures through open meetings as in the case of the Food Standards Agency and other regulators discussed above or tripartite membership as in the case of the Health and Safety Executive. The range of participatory mechanisms may seem modest in comparison with those discussed in, for example, the previous chapter. In part this is due to Monitor’s role as a predominantly (though by no means solely) economic regulator, but it is also due to the fact that accountability to patients and the public is for the foundation trusts themselves through their membership systems and governance techniques. Monitor is also responsible for policing these, as mentioned above. Thus the Act itself sets out the major requirements for establishing the membership system and the board of governors.⁷⁶ Much more detailed provision is made in the Model Core Constitution prepared by Monitor on the basis of a template from the Department of Health; all applicants for foundation trust status are required to adopt this as the basis for the constitution included in the application, and any deviations from it must be clearly explained. It covers, inter alia, the establishment of the public, staff, and patients’ constituencies and provides governance rules relating to the Board of Governors and the Board of Directors. For example, the Model Core Constitution provides that meetings of ⁷² Compliance Framework, 6. ⁷³ Business Plan 2005/06, 10–11. ⁷⁴ ‘Annual Report 2008/09’, 28, 39, 44. ⁷⁵ ‘Annual Report 2005’, 8–9. ⁷⁶ National Health Service Act 2006, sch 8.

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the Board of Governors must be held in public, though the constitution may provide that members of the public can be excluded for special reasons.⁷⁷ The Health Committee was concerned to discover, however, that a significant number of trusts conducted all, or a substantial part, of their business behind closed doors, a practice later defended by Monitor.⁷⁸ Monitor is responsible for ensuring that these requirements are complied with by foundation trusts, and this is included in the Compliance Framework.⁷⁹ Finally, a little should be said on the recently reformed systems for patient and public representation within the NHS.⁸⁰ The 2003 Health Committee report was highly critical of the proposal that foundation trusts were not to have the patient and public involvement forums which were required for other trusts.⁸¹ The forums were introduced, although the government announced in 2005 that they would no longer be required for acute services. However, major change to the NHS systems was made after the consultation paper A Stronger Local Voice which proposed the abolition of the patient forums and Commission for Patient and Public Involvement in Health which had previously supported and managed them, and their replacement by local involvement networks established for every local authority area.⁸² This was implemented by the Local Government and Public Involvement in Health Act 2007, setting up the framework for establishing the new system of local involvement networks covering both health services and local authority social services.⁸³ They will be linked to the provision of services in their areas rather than to specific providers, although foundation trusts will fall within the categories of service provider covered. It is still too early to assess the effects of this change, but it will be interesting to see how the role of the new local involvement networks interacts with the more direct forms of local involvement required by statute for foundation trusts.

Conclusions In many ways Monitor seems radically different from the regulators discussed earlier in this book and much closer to the economic regulators of the public utilities to be discussed in later chapters. Thus it is a small organization, and stresses the role of incentivization rather than direct regulatory interventions; it ⁷⁷ NHS Foundation Trust Model Core Constitution, para 15(2). ⁷⁸ ‘Patient Safety’, paras 279–80; Health Committee, ‘Patient Safety: Care Quality Commission, Monitor, and Professor Sir Ian Kennedy’s Responses’, HC 1019, 2008–9, 20–1. ⁷⁹ Compliance Framework 2009/10, 17. ⁸⁰ For background, see Baggott, R., ‘A Funny Thing Happened on the Way to the Forum? Reforming Patient and Public Involvement in the NHS in England’ (2005) 83 Public Administration 533–51 and Vincent-Jones, P., Hughes, D., and Mullen, C., ‘New Labour’s PPI Reforms: Patient and Public Involvement in Healthcare Governance?’ (2009) 72 Modern Law Review 247–71. ⁸¹ ‘NHS Foundation Trusts’, paras 58–69. ⁸² Department of Health, A Stronger Local Voice: A Framework for Creating a Stronger Local Voice in the Development of Health and Social Care Services (2006). ⁸³ Part 14.

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also emphasizes strongly its risk-based and proportionate approach. There is relatively little stress on the importance of innovative means of participation, partly because these are for the foundation trusts to develop for themselves but also because Monitor considers that it has only a limited target audience for its own risk ratings; foundation trust Boards and senior staff, Governors and, to a lesser extent, primary care trusts.⁸⁴ It should be noted, however, that under the Health Act 2009 Monitor must have regard to the NHS Constitution discussed at the end of the previous chapter and this brings in a wide range of non-economic considerations. The means of regulation used and regulatory procedures are thus closer to those of the economic regulators than the social regulators considered above. But the substance of regulation is not simply concerned with economic or financial matters; as Monitor has itself emphasized, it also has an important role in assessing governance arrangements and therefore quality of service provision. In the latter role there is potential overlap with the work of the Care Quality Commission (which, unlike its predecessor, has registration and enforcement responsibilities that include the foundation trusts), and this raises the question of whether it was necessary to establish (or to retain after the new Commission takes on its registration functions) a second regulatory body in the form of Monitor. As we saw earlier, Monitor was in favour of this on the grounds that economic regulation requires different skills from quality regulation, and that it would be difficult for a single regulator to develop a broad skills base for both. Some other regulators have combined both, and indeed, in the next chapter we shall consider a striking example of such a combination; Ofcom is both an economic regulator and a regulator with major social responsibilities in relation to public service broadcasting. Such broader mixes of different responsibilities potentially permit trade-offs between different regulatory values to be made effectively and transparently within the regulator’s decision-making. However, given the emphasis on independence characteristic of Monitor, and the dominance of financial regulation in its work, it believes that a strong case can be made out for its existence as a separate, small, regulator on grounds both of the importance of financial expertise and of transparency. An analogy would be with the different roles of the Environment Agency and Ofwat. We saw in Chapter 4 above that the problems experienced there had been largely resolved by administrative means; after initial difficulties, relations between the regulators are now also being clarified by Monitor and the Care Quality Commission. It has yet to be seen what this will mean in practice.

⁸⁴ Compliance Framework 2009/10, 6.

8 The Office of Communications In this chapter I shall examine a large regulator, the Office of Communications (Ofcom), with an unusually wide range of different functions. These include the economic regulation of telecommunications (now referred to as electronic communications to reflect EU terminology), protecting human rights in the area of broadcasting standards and privacy, implementing universal service, and protecting the values of public service broadcasting.

Background The origins of Ofcom can be found in the merger of different regulators in telecommunications, broadcasting, and related fields to reflect the growing convergence in the delivery of communications services. Thus by the late 1990s there was a clear consensus that the regulatory system for communications in the UK was over-complicated. It was possible to identify no fewer than 14 statutory or self-regulatory bodies in this area; the major actors were the Office of Telecommunications (Oftel), established at the time of the privatization of British Telecom in 1984, and the Independent Television Commission responsible for regulating commercial television. The latter sector was also subject to the Broadcasting Standards Commission, responsible for handling complaints about unfair treatment and infringements of taste and decency, whilst the BBC was regulated by its own Board of Governors. Radio had a separate Radio Authority, whilst spectrum management was in the hands of the Radiocommunications Agency. In addition, the general competition authorities could be involved in aspects of economic regulation, and other areas were subject to forms of selfregulation, including advertising standards and regulation of the internet. In the context of convergence of different forms of media delivery, it was argued that it no longer made sense to regulate them separately when the choice of delivery method was becoming increasingly divorced from the nature of the content delivered.¹ At the end of 2000, the government published a major White Paper ¹ See, eg Culture, Media and Sport Committee, ‘The Multi-Media Revolution’, HC 520, 1997–8, paras 141–59.

The Regulatory Enterprise. Tony Prosser. © Oxford University Press 2010. Published 2010 by Oxford University Press.

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dealing with these issues, A New Future for Communications.² The paper forecast that convergence would be rapid; the government’s objectives were to achieve UK competitiveness, to ensure universal access to a choice of diverse services of the highest quality, and to ensure that citizens and consumers were safeguarded.³ It proposed a new unified regulator responsible for the communications sector replacing five existing bodies; it should have powers to enforce competition legislation and special powers to promote effective competition in the sector; it should protect universal access to services; it should promote plurality and diversity, and protect broadcasting quality.⁴ The latter should be achieved through three tiers of regulation, with the basic requirements set out for all broadcasters in the first and the third, applying only to public service broadcasters, delivered through self-regulation. The interests of citizens would be protected through content standards, including accuracy and impartiality, and those of consumers through a principal requirement on the regulator to protect consumer interests.⁵ Responsibility for BBC regulation would be divided between the new regulator and a reformed Board of Governors. A further changing context was EU liberalization of electronic communications.⁶ A new regulatory package was to take effect in 2003, aiming to respond to convergence through setting clearer regulatory principles which would be technologically neutral. These principles include both liberalization of competition and licensing requirements and protection for universal service; the implementation of the package was to be primarily by national regulatory authorities. This was a further spur for UK reform, and was important in shaping the tasks of the new regulator. The government undertook extensive consultation on these proposals, including the publication of a draft Bill. A paving Act was passed in the form of the Office of Communications Act 2002; this did not set out new regulatory functions but merely established Ofcom as the new regulator. The Communications Bill which would implement the major regulatory changes was highly controversial, not so much on the principle of a new regulator but in relation to the liberalization of public service content and ownership requirements for public service broadcasting. This in turn affected the proposed duties of Ofcom. A particular influence at a late stage in the process was scrutiny by a joint committee of both Houses of Parliament, chaired by Lord Puttnam, the former film producer.⁷ It noted that, although the White Paper had referred to the interests of citizens as well as those of consumers, the former did not feature in the draft Bill, and that ‘[e]vidence we received reflected genuine concern that the democratic, social ² (Cm 5010, 2000). ³ Ibid, paras 1.2.1–1.2.12. ⁴ Ibid, paras 2.1, 3.1, 4.1, 5.1, 8.5. ⁵ Ibid, paras 6.1, 7.1. ⁶ For a brief summary of the process and its regulatory implications, see Prosser, T., The Limits of Competition Law: Markets and Public Services (Oxford: Oxford University Press, 2005), 177–88. ⁷ House of Lords and House of Commons Joint Committee on the Draft Communications Bill, HL 169, HC 176, 2001–2.

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and cultural interests of citizens, most notably in relation to broadcast content, were not given due weight in the formulation of OFCOM’s general duties’.⁸ The Committee recommended that the new regulator should be given a dual principal duty of protecting the interests of citizens and those of consumers.⁹ Such a dual duty was introduced at a late stage in the passage of the Bill through an amendment moved by Lord Puttman; its implications will be discussed below.¹⁰ The Bill was also examined by the Joint Committee on Human Rights, which expressed major concerns about some of the content; indeed, the Bill was unusual in that it had not been given a full statement of compatibility with the European Convention on Human Rights under section 19 of the Human Rights Act 1998 because of potential incompatibility with European Court of Human Rights case law on political advertising (see below).¹¹ The main concerns of the Committee related to the right to a fair hearing under Art 6 of the Convention, the right to private life under Art 8, the right to freedom of expression under Art 10, and the right to the peaceful enjoyment of possessions under Art 1 of the First Protocol to the Convention. None of these criticisms, however, went to the heart of the new regulatory structure, and, after the passing of the Communications Act, Ofcom took over the work of the existing regulators at the end of 2003.¹²

Functions of Ofcom Ofcom sets out its major functions as implementing duties under the Communications Act in six areas: • ensuring the optimal use of the electro-magnetic spectrum; • ensuring that a wide range of electronic communication services—including high-speed data services—are available throughout the UK; • ensuring a wide range of television and radio services of high quality and wide appeal; • maintaining plurality in the provision of broadcasting; • applying adequate protection for audiences against offensive or harmful material; and • applying adequate protection for audiences against unfairness or the infringement of privacy.¹³

⁸ Ibid, para 24 (footnote omitted). ⁹ Ibid, para 26. ¹⁰ Communications Act 2003, s 3(1). ¹¹ House of Lords and House of Commons Joint Committee on Human Rights, ‘Draft Communications Bill’, HL 149, HC 1102, 2001–2. ¹² For details of Ofcom’s establishment, see National Audit Office, ‘The Creation of Ofcom: Wider Lessons for Public Sector Mergers of Regulatory Agencies’, HC 1175, 2005–6. ¹³ Ofcom, ‘Annual Report 2008/9’, HC 638, 2008–9, 54.

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It should also be noted that the Postal Services Bill was to give Ofcom new responsibilities for regulating postal services and protecting universal service there; it was withdrawn for other reasons in summer 2009, but could well be re-introduced. Moreover, the Digital Britain final report (to be discussed below) proposed that Ofcom should acquire new responsibilities in combating online copyright infringement.

Ofcom in regulatory space: the institutions Ofcom was thus established by the Office of Communications Act 2002, with functions later conferred on it by the Communications Act 2003. It is a body corporate, and does not have Crown status.¹⁴ It differs in important ways both from the earlier regulatory model of the utilities in which powers were vested in an individual Director General, and from the model of a commission used for other regulators such as the US Federal Communications Commission. Instead, it follows a model closer to private sector practice and similar to that of the Financial Services Authority; as it is not a non-ministerial government department its staff are not civil servants and it is more easily able to attract staff from industry. Ofcom is thus to have a board including a chief executive and other executive members as well as non-executive members; it currently has a total of nine members, six of whom are non-executive. Members hold office in accordance with the terms of their appointments, and may be removed by the Secretary of State for bankruptcy, misbehaviour, or being otherwise incapable or unfit to carry out their functions.¹⁵ This model avoids both the personalization of power associated with the Director General model and the horse-trading of interests possible with a commission. The danger is, however, that there is less room for the representation of outside interests and that the non-executive directors bear a heavy burden of ensuring that Ofcom is responsive to its environment.¹⁶ Ofcom is also required to have regard to general guidance concerning the management of the affairs of public bodies and to ‘generally accepted principles of good corporate governance’; this refers in particular to the Combined Code on Corporate Governance published by the Committee on Corporate Governance in 1998, and since updated, again emphasizing the private sector model.¹⁷ Ofcom’s accounts are audited by the Comptroller and Auditor-General, and the National Audit Office undertook a valuable study of its establishment.¹⁸ The legislation also obliges Ofcom ¹⁴ Office of Communications Act 2002, s 1(1), (9). ¹⁵ Office of Communications Act 2002, sch, para 2. ¹⁶ For discussion, see Rufus C. Taylor III, ‘Embedding Evidence Based Policy Making in a Regulatory Organisation: A Case Study of the UK Office of Communications – OFCOM’, thesis submitted for the degree of D. Phil, University of Oxford, 2009, 102–10. ¹⁷ Office of Communications Act 2002, s 3. ¹⁸ National Audit Office, ‘The Creation of Ofcom’.

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to establish a Content Board (with a majority of members drawn from outside Ofcom itself) for matters of broadcasting content, and a Consumer Panel, also with separate membership.¹⁹ As regards Ofcom’s relationship with government, there is no general power of ministerial direction over Ofcom, nor does it have any general duty to have regard to government policy. There are, however, many specific powers of governmental intervention. For example, in relation to electronic communications and spectrum, the Secretary of State may issue general or specific directions binding on Ofcom in the interests of national security, relationships with other governments, to secure compliance with international obligations or in the interests of public safety or health.²⁰ The minister also has a general power to issue general or specific directions on spectrum management.²¹ It is the Secretary of State who issues the order setting out the universal service requirements necessary to meet EU obligations.²² The Secretary of State may also give directions on advertising content and methods, which, as we shall see, was important in shaping decisions on advertising food and drink products to children.²³ As Ofcom itself has noted, the relationship with government is especially strong on citizenship matters.²⁴ Thus both its public service broadcasting review and its work on universal access to broadband have ended up as ultimately informing decisions by government rather than resulting in direct regulatory interventions by Ofcom itself (though there have been such interventions, for example reducing the regulatory requirements on ITV as a result of the public service broadcasting review). The transparency of the process is strong; all significant advice to ministers is published.²⁵ In other areas, work must be carried out in partnership with a wide range of stakeholders, for example in driving forward digital participation through a Consortium of Stakeholders led by Ofcom.²⁶ Ofcom’s work is of course also heavily dependent on rules laid down by the EU, and on broader European cooperation. As mentioned already, the basic framework for electronic communications is laid down by the directives comprising the 2002 regulatory package; these set out the requirements applying, amongst other things, to licensing, to interventions for anti-competitive practices, and to universal service. Implementation is for national regulatory authorities, but clearly EU law provides major constraints on their autonomy.²⁷ The European Commission also issues annual reports on the implementation of the package, ¹⁹ Communications Act 2003, ss 12–13, 16–17. ²⁰ Section 5(3). ²¹ Section 156. ²² Section 65. ²³ Section 321(6). ²⁴ Ofcom, Annual Plan 2008/09, para 2.8. ²⁵ For Ofcom’s relaxed attitude to important matters being ultimately for governmental decision, see ‘Ofcom Chief Upbeat Despite Raft of Tough Challenges’, Financial Times, 13 February 2009. ²⁶ Department for Business, Innovation and Skills and Department for Culture, Media and Sport, Digital Britain: Final Report (Cm 7650, 2009) 39–45. ²⁷ For an excellent review of this complex area, see Nihoul P. and Rodford, P., EU Electronic Communications Law: Competition and Regulation in the European Telecommunications Market (Oxford: Oxford University Press, 2004).

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which examine the work of the national regulators and assess their independence.²⁸ Ofcom also plays a major role in the European Regulators Group which represents the different European regulatory bodies for electronic communications (Ofcom chaired the Group in 2006), and works with the government in EU policy development in this field. Though the EU influence is particularly strong in the field of electronic communications, there is also some EU presence in relation to broadcasting. For example, Ofcom lobbied hard during the drafting of the Audiovisual Media Services Directive against the extension of regulation beyond television broadcasting to include on-demand media, and generally succeeded in limiting the scope of the new Directive.²⁹

Ofcom in regulatory space: the duties Ofcom has a large number of different statutory duties applying to the various areas of its work; it has been estimated that the total number of such duties is no less than 263. The most important general duties are to further the interests of citizens and consumers, in the latter case where appropriate by promoting competition.³⁰ The statute also requires Ofcom to secure various things in carrying out its functions, including the availability throughout the UK of a wide range of electronic communications servicers and high quality broadcasting calculated to appeal to a variety of tastes and interests.³¹ It must have regard to the principles under which regulatory activities should be transparent, accountable, proportionate, consistent, and targeted, and to ‘any other principles appearing to OFCOM to represent the best regulatory practice’.³² Ofcom must have regard to a number of other matters also, including the desirability of promoting the fulfilment of the purposes of public service broadcasting, the desirability of promoting effective forms of self-regulation, and of encouraging investment and innovation.³³ It was proposed in the ‘Digital Britain’ report that a further principal duty be introduced to promote investment in communications infrastructure.³⁴ The Digital Economy Bill announced in the 2009 Queen’s Speech would require that in exercising its citizenship duty, Ofcom has regard to the need to promote appropriate investment in both electronic communications networks and public service media content. ²⁸ See, eg Progress Report on the Single European Electronic Communications Market 2008 (14th Report) COM (2009) 140 final. ²⁹ See now Directive 2007/65/EC on the coordination of certain provisions laid down by law, regulation, or administrative action in Member States concerning the pursuit of television broadcasting activities [2007] OJ L332/27. ³⁰ Communications Act 2003, s 3(1); for Ofcom’s interpretation of the duties see Ofcom’s Consumer Policy: Statement (2006), and Ofcom, Citizens, Communications and Convergence (2008). ³¹ Section 3(2). ³² Section 3(3). ³³ Section 3(4). ³⁴ Digital Britain – Final Report, 65–6.

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Even from this selection amongst the statutory duties, it is evident that they may come into conflict. In such a case, Ofcom is required to give priority to duties derived from EU law, and where there is a conflict between the two principal duties to publish a statement giving reasons for the manner in which the conflict has been resolved.³⁵ Ofcom has recognized that there will often need to be tradeoffs between the two duties, and here it will need to work with government.³⁶ Other statutory requirements include a duty to review regulatory burdens, a duty to use impact assessments in relation to significant changes in Ofcom’s activities, to publish and meet promptness standards, and to promote media literacy.³⁷ The Communications Act contains numerous further duties applying to each area of Ofcom’s activities; thus for example in the area of electronic communications statutory duties implement EU law, mainly in relation to licensing but also with an important place for universal service.³⁸ In relation to spectrum management there is a particular stress on efficiency, economic benefits, innovation, and competition in the applicable duties.³⁹ In the broadcasting sector there are important duties relating to public service broadcasting as a whole as well as the remits of individual broadcasters. Ofcom is responsible for enforcing basic broadcasting standards and its duties include issuing a standards code to secure objectives which include protection of those under 18, ensuring that news is presented with due impartiality and accuracy, and protecting the public from offensive and harmful material.⁴⁰ In some cases, this responsibility covers the BBC as well as commercial broadcasters.⁴¹ This section has merely given a taste of the large number of statutory duties applying to Ofcom. In the case of some regulators discussed earlier, we have seen that there is a normative vacuum surrounding their operation due to an absence of general statutory duties. For Ofcom, the position is the opposite, with a bewildering number of different duties. In some respects this reflects the different functions of Ofcom, replacing as it did five different regulators, but even so it is clear that the general duties may conflict and resolving such conflicts will be central to policy-making and other decisions.⁴² Ofcom has adopted a number of regulatory principles: • to operate with a bias against intervention but with a willingness to intervene promptly and effectively where required; • to intervene where there is a specific statutory duty to work towards a public policy goal that markets alone cannot achieve; • to seek the least intrusive regulatory methods; ³⁵ Section 3(6)–(9). ³⁶ Ofcom, Annual Plan 2009/10 (2009), para 2.13. ³⁷ Sections 6–8, 11. ³⁸ Part 2, Ch 1. ³⁹ Section 154(2). ⁴⁰ Section 319. ⁴¹ Broadcasting: An Agreement Between Her Majesty’s Secretary of State for Culture, Media and Sport and the British Broadcasting Corporation (Cm 6872, 2006), clauses 91–5. ⁴² For discussion of such conflict resolution, see Ofcom, Citizens, Communications and Convergence, paras 4.4–4.11.

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• to strive to ensure that interventions are evidence-based, proportionate, consistent, accountable, and transparent in both deliberation and outcome; • to regulate with a clearly articulated and publicly reviewed annual plan with stated policy objectives; • to research markets constantly; • to consult widely with all relevant stakeholders and to assess the impact of regulatory action before imposing regulation on a market.⁴³ The initial mission adopted by Ofcom was ‘to further the interests of citizenconsumers through a regulatory regime which, where appropriate, encourages competition’.⁴⁴ This was implemented through three major reviews, in relation to telecommunications, spectrum, and public service broadcasting. Ofcom set out a three-year strategic framework with work to be undertaken in five key areas; more details are provided in the Annual Plan which sets out the key elements on which work will focus, further broken down into more detailed work areas and priorities.

Ofcom and the regulatory models Regulation for efficiency and consumer choice It was mentioned earlier that Ofcom has principal duties to further the interests of both citizens and of consumers; the latter reads that ‘[i]t shall be the principal duty of OFCOM, in carrying out their functions . . . to further the interests of consumers in relevant markets, where appropriate by promoting competition’.⁴⁵ In 2006 Ofcom published a statement of its consumer policy, emphasizing that the policy’s purpose was to facilitate the operation of markets, to remove barriers, and correct market failures which might otherwise prevent them delivering what consumers want.⁴⁶ Ofcom also has concurrent powers with the general competition authorities to implement competition law.⁴⁷ It could be suggested that the consumer duty is more relevant for electronic communications and spectrum functions, whilst the duty to citizens applies to broadcasting content.⁴⁸ However, as we shall see, the division is much more complex that this, with the competition duty applying right across Ofcom’s responsibilities, and the same being also true of the duty to further citizens’ interests. A particularly important element in ⁴³ Annual Plan 2009–10, 8. ⁴⁴ Annual Plan 2004–2005 (2004), para 2.1.1. The phrase ‘citizen-consumer’ is no longer used as it was perceived by some stakeholders as downplaying the importance of citizens; see Citizens, Communications and Convergence, para 2.15. ⁴⁵ Communications Act 2003, s 3(1)(b). ⁴⁶ Ofcom’s Consumer Policy, para 1.5 and also section 3 on Ofcom’s approach. ⁴⁷ Communications Act 2003, ss 369–372. ⁴⁸ See Groebel, A., ‘Ofcom: a Converged Regulator?’ in Robinson, C., (ed), Governments, Competition and Utility Regulation (Cheltenham: Edward Elgar, 2005), 106–17, at 109.

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the implementation of the duty to consumers is the correction of market failure, which of course also has strong social dimensions.⁴⁹ Perhaps the most striking area in which there has been a stress on efficiency maximization is that of spectrum, where Ofcom’s goal has been explicitly to enable market forces to play a greater role, notably through the use of spectrum auctions and spectrum trading. Thus in 2004 the regulator published a Spectrum Framework Review setting out how market forces could be used to maximize the use of this resource and to ensure a greater degree of flexibility in its spectrum use, and an Implementation Plan with a programme for spectrum release, trading, and liberalization. It announced a number of spectrum auctions, and shortly afterwards spectrum trading commenced.⁵⁰ Further auctions have followed, although the largest, announced in 2008, has been delayed by litigation by some mobile operators. Ofcom also intends to auction spectrum made available by digital television switchover. Turning to telecommunications, the major example of an approach based on efficiency and consumer choice was that of the Strategic Review of Telecommunications which had huge implications for the operation of British Telecom.⁵¹ The aim of the review was to create effective equality of access for BT’s competitors to those parts of the telecommunications network which they cannot viably replicate, and to promote competition between networks. Ofcom adopted six objectives underlying its approach: to drive down the price of calls and other services; to support more innovation, such as faster broadband; to provide regulatory certainty for providers and investors; to refocus regulation where it was needed with swifter remedies and a structured time table to deliver equivalence between operators through incentives and penalties; to remove regulation where competition was effective; and to ensure consumer protection. The result was BT agreeing legally enforceable undertakings with Ofcom as an alternative to reference to the competition authorities. They committed the company to establish a new and operationally separate business unit responsible for access, ‘Openreach’, to support all communication providers’ activities on an exactly equivalent basis, including those of BT. It would also offer universally available products and services, including the use of BT’s access network. The Telecoms Review, which has been one of Ofcom’s most successful initiatives, was very clearly and explicitly based on the achievement of allocative, ⁴⁹ For some of the relevant market failure issues, see ‘A New Future for Communications’, 50 and see Ofcom’s Consumer Policy. ⁵⁰ See Ofcom, ‘Annual Report 2005/06’, HC 1280, 2005–6, 30–4. ⁵¹ See Ofcom, Final Statements on the Strategic Review of Telecommunications, and Undertakings in Lieu of a Reference Under the Enterprise Act 2002 (2005). This major review can only be dealt with in summary here; for the background and context see Cave, M. and Corkery, M., ‘Communications Regulation’ in Centre for the Study of Regulated Industries, Regulatory Review 2006/2007 (Bath: CRI, 2007), 17–48.

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productive, and dynamic efficiency.⁵² Moreover, the outcome was expressed in terms of a new regulatory contract with BT; as we saw in Chapter 1, this conception of regulation is characteristic of economic rather than social regulation.⁵³ It also emphasized the scope for reduction in regulation.⁵⁴ This bore further fruit in 2006, when the last retail price controls on BT line rental and calls were abolished. Although this major review was in the area of telecommunications, Ofcom has also undertaken economic regulation of broadcasting, and has important powers of ex ante regulation here.⁵⁵ Thus it has been extensively involved in competition issues; for example, reviewing competition in wholesale digital television broadcasting platforms, developing a code to require fair, reasonable, and non-discriminatory treatment of broadcasters on electronic programme guides, and undertaking a major review of the pay-TV market announced in 2007 and still continuing. Ofcom is also responsible for undertaking market impact assessments for new BBC services and modifications to existing services as a preliminary to a decision from the BBC Trust whether or not to approve them; the first such assessment was commenced in 2006 of new on-demand services. Perhaps most interesting in this area is the approach taken by Ofcom to its successive reviews of public service broadcasting (PSB), as required by the Communications Act.⁵⁶ The statutory provisions relating to public service broadcasting have a strong emphasis on a social solidarity-based approach (see below). However, in its first PSB review, Ofcom took an approach based on limiting the scope of PSB to those areas where there was market failure. This had to be based on ‘a rigorous understanding of what the market, left on its own, would deliver – and of the nature and scale of the market failures that policy may need to address’.⁵⁷ Market failures were then classified into two categories distinguished by the different types of interventions which they justified; those which help the market work to deliver the sort of programmes consumers want, and those which provide the programmes which as citizens we want to be available to as many people as possible. As a result of the increased choice made possible by digitalization, the first reason for intervention would be weakened, so that ‘[t]he rationale for a continued investment in PSB is that only with such an intervention would TV serve UK citizens adequately’.⁵⁸ Thus, as Ofcom stated in the final report of the first review, whilst public intervention to deliver social purposes would still be

⁵² See, eg Ofcom, Strategic Review of Telecommunications: Phase 1 Consultation Document (2004), paras 4.2–4.16. ⁵³ Ofcom, Strategic Review of Telecommunications: Phase 2 Consultation Document (2004), para 1.43 and section 7. ⁵⁴ Final Statements on the Strategic Review of Telecommunications, section 5. ⁵⁵ Communications Act 2003, s 316. ⁵⁶ Section 264. ⁵⁷ Ofcom, Ofcom Review of Public Service Broadcasting: Phase 1 – Is Television Special? (2004), para 143. ⁵⁸ Ibid, paras 145, 146.

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needed, ‘we do not believe that continued consumer market failures are likely to be a major rationale for public intervention in a mature, fully digital, world’.⁵⁹ This approach does leave considerable scope for public intervention to support PSB on citizenship grounds. However, it is less open to non-economic values than might first sight appear. It assumes that regulation is always a second-best solution, and the idea that there is an independent, cultural, or social justification for regulation as an alternative to markets has no place. Thus as markets are liberalized social reasons for intervention are likely to be seen as increasingly anachronistic. One result of the emphasis on consumer choice and markets was that the Review developed the idea of a ‘public service publisher’ selected by competitive tender to compete with the BBC as increased competition made it more difficult for commercial broadcasters to deliver public service content. This met with political objections to implementation in its original form, however the second Review, published in 2009, continued to emphasize the importance of competition with the BBC to deliver public service content through the merger of other broadcasting organizations.⁶⁰ In this report, however, the emphasis on market failure was less apparent, the approach being based strongly on the views of audiences (not simply characterized as consumers) about what the future of PSB should be. Thus there were few references to market failure; an annex to the consultation document concerned market failure in broadcasting, but emphasized that ‘[t]he rationale for intervention in public service broadcasting does not rest exclusively on quantifiable, preference-led, market failures. For this reason, the broader decisions around the level and nature of public service broadcasting are political and taken within a broader context than expressed preferences alone’.⁶¹ Thus, though market failure might in some circumstances be a prerequisite for public intervention, it did not offer any clear recipe for the form that intervention should take. Finally, turning now to regulatory style, Ofcom is required by the Communications Act to have regard, in all cases, to ‘the principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed’ and to ‘any other principles appearing to OFCOM to represent the best regulatory practice’.⁶² It must review the carrying out of its functions to ensure that regulation does not involve the imposition of burdens which are unnecessary or the maintenance of burdens which have become unnecessary, taking into account the extent to which its duties can be secured by self-regulation and the appropriateness of removing

⁵⁹ Ofcom, Ofcom Review of Public Service Broadcasting: Phase 3 – Competition for Quality (2005), para 2.32. See also Ofcom, A Conceptual Review of Public Service Broadcasting (2004). ⁶⁰ Ofcom, Putting Viewers First: Ofcom’s Second Public Service Broadcasting Review (2009). ⁶¹ Ofcom, ‘Annex 11: Market Failure in Broadcasting’, Ofcom’s Second Public Service Broadcasting Review – Phase One: The Digital Opportunity (2008), para 1.23. ⁶² Section 3(3).

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or reducing regulatory burdens.⁶³ Ofcom is also required to carry out impact assessments of proposals with a significant impact on businesses or the public.⁶⁴ The original Bill referred to ‘[d]uties to secure light touch regulation’, a provision heavily criticized by the Joint Select Committee on the draft Communications Bill. The latter stated that [d]uring the course of this inquiry, we have become ever more convinced that the rhetorical commitment to ‘light touch’ regulation by OFCOM is in great danger of becoming an albatross around the new regulator’s neck. On each occasion when OFCOM determines that tough and firm regulatory action is required, it will have thrown back in its face its ‘duties to secure light touch regulation’.⁶⁵

Although the Bill was amended in line with the Committee’s proposals, Ofcom emphasized that ‘[o]ur overall aim is to operate with a bias against intervention. But where we do intervene we will do so on a firm, prompt and effective basis’.⁶⁶ It has also adopted regulatory principles which state that it will adopt the least intrusive regulatory methods of achieving its policy objectives and will strive to ensure that interventions are evidence-based, proportionate, consistent, accountable, and transparent.⁶⁷ Finally, Ofcom has adopted detailed annual simplification plans and has taken a number of steps to reduce specific regulatory burdens.⁶⁸ Clearly, the regulator is fully committed to the ‘Better Regulation’ initiatives of government.

Regulation and human rights The other principal duty applying to Ofcom is ‘to further the interests of citizens in relation to communications matters’.⁶⁹ This clearly includes citizen interests in having their human rights protected. We saw earlier that the Joint Select Committee on Human Rights was critical of a number of aspects of the Communications Bill. Dealing first with procedural rights, a number of its criticisms concerned Art 6 of the European Convention on Human Rights and the right to a fair hearing, notably in relation to the power to impose penalties on, and revoke the licences of, service providers.⁷⁰ The procedural issues here are somewhat complex, varying from sector to sector. Thus in electronic communications, as a result of EU law requirements, a full right of appeal on the merits is provided to the Competition Appeal Tribunal, and the Tribunal has heard several

⁶³ Section 6. ⁶⁴ Section 7. ⁶⁵ House of Lords and House of Commons Joint Committee on the Draft Communications Bill, para 67. ⁶⁶ Ofcom, Ofcom’s Annual Plan April 2004–March 2005 (2004), para 5.2.4 (emphasis retained). ⁶⁷ Ofcom, Annual Plan 2009/10 (2009), 8. ⁶⁸ See, eg Ofcom, Annual Plan 2006/7 (2006), Annex 1, and ‘Annual Report 2007/8’, HC 608, 2007–8, 25. ⁶⁹ Communications Act 2003, s 3(1)(a). ⁷⁰ ‘Draft Communications Bill’, paras 43–7.

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such cases each year.⁷¹ Such a right of appeal also applies to competition-based broadcasting decisions.⁷² There is further appeal on point of law to the Court of Appeal.⁷³ A similar right of appeal exists where the regulator exercises concurrent powers under the Competition Act.⁷⁴ Such appeals have played an important role; thus in one case the Court of Appeal noted the breadth of the appeal right, permitting the Tribunal to substitute its own opinion for that of the regulator, and also considered arguments based on Art 6 of the European Convention on Human Rights.⁷⁵ However, in non-competition broadcasting cases there is no such right of appeal, despite the fact that they may involve major sanctions, including large fines and ultimately the revocation of licences; the only remedy here will be judicial review. Ofcom itself has adopted procedures for statutory sanctions in content and content-related cases which give broadcasters the right to reasonable opportunity to make representations before sanctions are imposed, and sanctions decisions are delegated from the Board of Ofcom to a Content Sanctions Committee to avoid accusations of the Board being judge in its own cause.⁷⁶ These procedures were drafted in an attempt to ensure that decisions are Convention-compliant; it remains to be seen whether they will succeed in this, although the English courts have so far accepted that at least on some issues judicial review is an adequate remedy to comply with Art 6.⁷⁷ Turning now to substantive human rights, these are of course at the heart of the issues arising in the determination of broadcast content regulation; in particular, Art 8 of the Convention on the right to a private life and Art 10 on freedom of expression. These rights formed part of the basis of the redrafting of Ofcom’s Broadcast Code in 2004–5; it notes that ‘[i]n particular, the right to freedom of expression, as expressed in Article 10 of the Convention, encompasses the audience’s right to receive creative material, information and ideas without interference but subject to restrictions prescribed by law and necessary in a democratic society’.⁷⁸ Sections of the code where human rights are particularly relevant cover the protection of the under-18s, harm and offence, religion, fairness, and privacy. Decisions relating to these are published in Ofcom’s frequently issued Broadcast Bulletins. One less obvious area of content regulation has also been particularly important. It will be recalled that the Secretary of State did not issue a statement of ⁷¹ Section 192. ⁷² Section 317. ⁷³ Section 196. ⁷⁴ Competition Act 1998, ss 46–49. ⁷⁵ Office of Communications v Floe Telecom Ltd [2006] EWCA Civ 768; [2006] 4 All ER 688. ⁷⁶ Ofcom, Outline Procedures for Statutory Sanctions in Content and Content-Related Cases (2008). Cf Dubus SA v France (5242/04, ECtHR, 11 June 2009). ⁷⁷ R (on the application of Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23; [2003] 2 AC 295. For an analogous discussion of the adequacy of judicial review to meet EU law appeal requirements, see T-Mobile (UK) Ltd and Telefónica 02 Ltd v Office of Communications [2008] EWCA Civ 1373; [2009] Bus LR 794. ⁷⁸ Ofcom, The Ofcom Broadcast Code (revised edn, 2008), 2–3.

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compatibility with the Convention when the Communications Bill was passing through Parliament because of concerns about European Court of Human Rights case law on political advertising, something prohibited by the Act in provisions which define such advertising extremely widely.⁷⁹ In an important case, clearance for advertising by Animal Defenders International was refused by the self-regulatory Broadcasting Advertising Clearance Centre on the ground that it breached this provision; judicial review was sought and the decision was upheld by the House of Lords as compatible with the Convention.⁸⁰ Although the case did not directly concern Ofcom, the duty to secure that political advertisements are prohibited applies directly to it, and the rules are set out in a Television Advertising Standards Code issued on its behalf, so clearly this issue is one of human rights directly relevant to the regulator, and one in which further developments may be expected in the future.⁸¹ For no other regulator is human rights law so important for regulatory decisions than for Ofcom in exercising its duties in relation to broadcast content; only the briefest summary has been given here as the relevant issues are covered in detailed treatments of the right to freedom of expression.⁸² Moving on from content regulation, protection of citizenship rights also has an important place in restrictions on media ownership. Much of the controversy around the Communications Act 2003 arose from the fact that it liberalized this area, notably in lifting the previous restriction prohibiting ownership of UK broadcasting licences by firms or individuals outside the European Economic Area and in permitting single ownership of several Channel 3 licences. The government had stated that its policy was to be ‘as deregulatory as possible’.⁸³ The Joint Committee on the draft bill took the view that it paid insufficient regard to the requirements of media plurality, with the control of mergers left only to ordinary competition law, and proposed a public interest test to be included where plurality was at issue.⁸⁴ This was initially rejected by the government, but a successful late amendment did insert such a test into the Act, though one highly dependent on the exercise of discretion by the Secretary of State.⁸⁵ Ofcom’s role is to make a report on the public interest considerations in question before the ⁷⁹ Communications Act 2003, s 321. ⁸⁰ R (on the application of Animal Defenders International) v Secretary of State for Culture, Media and Sport [2008] UKHL 15; [2008] 1 AC 1312; see Lewis, T. and Cumper, P., ‘Balancing Freedom of Political Expression against Equality of Political Opportunity: the Courts and the UK Broadcasting Ban on Political Advertising’ [2009] Public Law, 89–111. ⁸¹ The Broadcast Committee of Advertising Practice, Television Advertising Standards Code (2008), section 4. ⁸² See notably Barendt, E., Freedom of Speech (2nd edn, Oxford: Oxford University Press, 2005), ch XII. ⁸³ Department for Culture, Media and Sport, Consultation on Media Ownership Rules (2001), para 1.10. ⁸⁴ House of Lords and House of Commons Joint Committee on the Draft Communications Bill, paras 218–49. ⁸⁵ Communications Act 2003, ss 375–389, inserting new provisions into the Enterprise Act 2002.

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minister decides whether to refer the merger to the Competition Commission; it has developed guidance as to how it will approach this task.⁸⁶ The question of mergers involves the working of the market place, the maintenance of consumer choice within it, and the public interest, but Ofcom’s responsibilities are limited to public interest considerations. These are specified in the legislation as the need for accurate presentation of news and free expression of opinion in newspapers, and the need for plurality, a wide range of quality broadcasting, and commitment to Ofcom’s standards code.⁸⁷ The role of Ofcom here is thus concerned with the protection of citizenship rights whilst the policing of competitive markets is for the competition authorities and the Secretary of State.

Regulation and social solidarity Issues on access both to telecommunications services and to broadcasting have been at the heart of Ofcom’s work, and are an important way in which it fulfils its duty to further the interests of citizens. Thus a chapter of the White Paper A New Future for Communications was devoted to ensuring universal access to television, radio, telephone, and internet services.⁸⁸ Promoting access and inclusion also features as an important part of Ofcom’s Annual Plans, and access issues are central to Ofcom’s interpretation of its duty to further the interests of citizens.⁸⁹ A major part of Ofcom’s work to secure access has been through the development of universal service in electronic communications. Thus the Communications Act requires the Secretary of State to make a universal service order to secure compliance with Community obligations.⁹⁰ The Community obligations referred to include access to minimum services at a specified quality and at an affordable price regardless of geographical location. They include the right to a connection which provides functional internet access, though not yet to broadband. Ofcom may then make provision for the designation of universal service providers and set universal service conditions to secure compliance with the order.⁹¹ It has done so by requiring British Telecom and Kingston Communications (in the Hull area) to provide the specified services. The provision of universal service was one of the matters considered in the strategic review of telecommunications discussed above, but Ofcom also undertook separate consultations on this matter. In its consultation the regulator examined issues of affordability, disconnections, public call boxes, access for customers with disabilities, functional internet access, ⁸⁶ Ofcom, Ofcom Guidance for the Public Interest Test for Media Mergers (2004). ⁸⁷ See Communications Act 2003, s 375 (inserting a new s 58(2A) into the Enterprise Act 2002). ⁸⁸ Chapter 3. ⁸⁹ See Ofcom, Annual Plan 2009/2010 (2009), 25–6. Ofcom’s Consumer Policy also deals explicitly with protecting vulnerable consumers; see paras 3.11–3.17. The duty to further the interests of citizens is interpreted in Citizens, Communications and Convergence; see esp para 5.2. ⁹⁰ Section 65; the relevant Community obligations are contained in the Universal Service Directive, Directive 2002/22/EC on universal service and user’s rights [2002] OJ L108/51. ⁹¹ Sections 66–67.

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and costs of meeting the universal service obligation. It based its justifications for universal service on both social equity and economic grounds.⁹² In its decision it accepted a special tariff scheme targeted at those on low incomes, replacing older schemes, and changes in BT’s credit management procedures to cut disconnections. Ofcom agreed to the continuance of the veto by local authorities on the removal of the last public call box from a site, after a consultation process. It also agreed services for customers with disabilities, and considered that the cost of universal service could be met by BT as it was exceeded by the benefits the company gained.⁹³ Further measures were taken with the decision to abolish the last retail price controls on BT in 2006; these included assurances to protect lowspending customers and the continuation of geographical uniformity for residential tariffs.⁹⁴ The process has now moved on to consider the question of inclusion in digital services and especially the extension of fast broadband provision. This was not included in the EU universal service requirements, but in negotiations on reviewing them the UK secured amendments to permit national authorities to designate as part of the requirement functional internet access at bandwidths deemed appropriate to the market, removing the former restriction to narrowband connections.⁹⁵ Ofcom itself has undertaken a digital inclusion project, and has consulted on how to take this forward.⁹⁶ However, the main emphasis has moved to government; it is worth noting that the responsible minister, Lord Carter, was the former Chief Executive of Ofcom. In 2009, the Departments for Business, Enterprise and Regulatory Reform and for Culture Media and Sport jointly published the final report Digital Britain. This White Paper covers issues of access and universal service in detail, adopting as policies universal services in broadband at a speed of two Megabits per second by 2012 and at least 90 per cent coverage of next generation broadband by 2017. The latter will be funded by a levy on all fi xed copper lines. Linked to this is amendment of Ofcom’s principal duties to add the promotion of investment in communications intrastructures.⁹⁷ To underline the commitment, the government had in 2008 appointed its first Minister for Digital Inclusion. A comprehensive review of the existing universal service obligation and its costs was commenced by Ofcom in 2009.⁹⁸ Turning to Ofcom’s broadcasting responsibilities, we now need to consider once more the meaning of public service broadcasting as the regulator has major duties in that area which are supportive of social solidarity and inclusion. The Communications Act sets out the purposes of PSB which include the provision ⁹² ⁹³ ⁹⁴ ⁹⁵ ⁹⁶ ⁹⁷ ⁹⁸

Ofcom, Review of the Universal Service Obligation (2005). Ofcom, Review of the Universal Service Obligation (2006). Ofcom, Retail Price Controls: Explanatory Statement (2006). Digital Britain: Final Report, 53. Access and Inclusion – Digital Communications for All (2009). Digital Britain – Final Report, 53–66, and see the Digital Economy Bill, clause 1. ‘Annual Report 2008/9’, 27.

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of relevant television services which secure that programmes dealing with a wide range of subject-matters are available for viewing, the provision of services likely to meet the needs and satisfy the interests of as many different audiences as practicable, providing services which are properly balanced in nature and subject-matter, and which maintain high general standards.⁹⁹ Further requirements include that cultural activity is reflected and stimulated and that civic understanding and fair and well-informed debate on public affairs are facilitated.¹⁰⁰ The Act also sets out the public service remits of the three commercial public service broadcasters.¹⁰¹ Ofcom is to report periodically on the extent to which the overall public service remit is met by all public service broadcasters, it also enforces both the general remit and the more specific one for individual broadcasters through a system of co-regulation under which the broadcasters provide annual statements of programme policy. If the remits are not properly met, Ofcom may give directions or impose more detailed regulation on the broadcaster.¹⁰² As mentioned above, Ofcom has now undertaken two reviews of public service broadcasting. Although the starting point for the first was that market provision should be the first choice for providing such services, it nevertheless developed purposes for PSB where market provision would not satisfy citizen-focused objectives. These purposes were to inform ourselves and others and to increase our understanding of the world; to reflect and strengthen our national identity; to stimulate our interest in and knowledge of arts, science, history, and other topics; and to support a tolerant and inclusive society. These purposes required high-quality programming available to all citizens.¹⁰³ They provided a basis for strong support for the BBC with licence fee funding and for a distinctive role for Channel 4 as well as for the proposed Public Service Publisher in the final report.¹⁰⁴ In the second review reporting in 2009, many of the recommendations were determined by audience views rather than examining consumer preferences in the market-place, and once more broadly social purposes and characteristics for public service broadcasting were identified and used as the basis for recommendations.¹⁰⁵ According to the review, public service broadcasting remained important to audiences, and could not be provided only through market provision. This, rather than a market failure approach, is in keeping with Ofcom’s statutory duties; after all, the statute does not make the duty to further the interests

⁹⁹ Section 264(4). ¹⁰⁰ Section 264(6). ¹⁰¹ Section 265. ¹⁰² Sections 266–271. ¹⁰³ See Ofcom, Ofcom Review of Public Service Broadcasting: Phase 1 – Is Television Special? (2004), paras 147–8; Ofcom Review of Public Service Broadcasting: Phase 2 – Meeting the Digital Challenge? (2004), paras 2.12–2.13. ¹⁰⁴ Ofcom, Ofcom Review of Public Service Broadcasting: Phase 3 – Competition for Quality (2005). ¹⁰⁵ Ofcom, Ofcom’s Second Public Service Broadcasting Review: Putting Viewers First (2009), para 3.2 and fig 1.

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of citizens applicable only where consumer markets have been tried and found wanting.¹⁰⁶ Ofcom has also undertaken more specific social solidarity-based regulatory interventions. One controversial example was to tighten the rules on the advertising of food and drink products to children.¹⁰⁷ The initial impetus came in the form of a letter from the Secretary of State for Culture, Media and Sport to Ofcom’s chairman shortly before it commenced operations, stating that she considered the current code governing the advertising of food and drink products to children to be inadequate and in need of review; she looked forward to hearing Ofcoms plans in this area.¹⁰⁸ It should be kept in mind that this is an area in which the minister has power to give the regulator directions on the descriptions of advertisements and the forms and methods of advertising to be included in services; Ofcom must comply with the directions.¹⁰⁹ Ofcom’s first review did not recommend immediate policy action, but the government was highly critical of this in its White Paper Choosing Health, stating that ‘we will look to Ofcom to consult on proposals on tightening the rules on broadcast advertising, sponsorship and promotion of food and drink . . .’ and that if the regulator failed to produce change in the nature and balance of food promotion, the government would itself take action.¹¹⁰ The Food Standards Agency also developed a nutrient profiling scheme for Ofcom’s use in determining which foods were unhealthy. Ofcom issued fresh proposals in early 2006 setting out alternative options, and these were reissued with a further option after a threat of judicial review by health campaigners; the regulator now also promised to consider any new proposals put forward. In November 2006 Ofcom announced that it would prevent the advertising of unhealthy food and drink in programmes made for children or likely to be of particular appeal to children; the restrictions were implemented in early 2007.¹¹¹ In this case we see an important example of ministerial initiative and campaigning influencing a specialist regulator to take action on a social issue within its own area of expertise but with wider social implications. This is of course legitimate, but there is a danger of confusion of accountability due to an overlap of responsibilities; importantly, in this case the minister’s interventions were made publicly available and the ultimate decision was left to the regulator. ¹⁰⁶ For a development of the key elements of public service broadcasting from this perspective, see Born, G. and Prosser, T., ‘Citizenship, Public Service Broadcasting and the BBC’s Fair Trading Obligations’ (2001) 64 Modern Law Review 657–87. ¹⁰⁷ This is considered in detail in a case-study in Taylor, ‘Embedding Evidence Based Policy Making in a Regulatory Organisation’, 199–250. ¹⁰⁸ Ibid, 205. The letter is published on the Ofcom website at: (consulted 10 December 2009). ¹⁰⁹ Communications Act 2003, s 321(5)–(6). ¹¹⁰ Department for Health, Choosing Health: Making Healthy Choices Easier (Cm 6374, 2004), paras 55–8. ¹¹¹ Ofcom, Television Advertising of Food and Drink Products to Children – Final Statement (2007).

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Finally, the Communications Act also requires Ofcom to promote media literacy.¹¹² In its initial consultation paper on this question, Ofcom defined such literacy as ‘the ability to access, analyse, evaluate and produce communications in a variety of forms’, emphasizing the ability to choose in a market environment.¹¹³ However, in consultation greater stress was placed on critical analysis and taste, aesthetic discrimination, creativity, and empowerment; in the final statement the definition was ‘ability to access, understand and create communications in a variety of contexts’.¹¹⁴ There was some reference to social exclusion and supporting the elderly and disadvantaged in gaining experience of new communications technology, but the emphasis remained on empowering market actors to exercise choice, for example through a common labelling framework. Work is continuing on this theme, and Ofcom has undertaken a Media Literacy Audit of the UK; the Digital Britain final report proposed moving away from media literacy as a discrete subject towards a National Plan for Digital Participation, to be developed through a Consortium of Stakeholders led by Ofcom and working with the government.¹¹⁵ It is thus evident that issues of access have played a major part in Ofcom’s work, reflecting its duty to further the interests of citizens. In this sense its regulatory objectives include a major social solidarity element, and it is by no means only an economic regulator. This concern applies both to electronic communications and to broadcasting.

Deliberation The wide range of potentially conflicting statutory duties and underlying principles also makes the deliberative procedures of Ofcom particularly important. Ofcom differs from a number of the regulators discussed earlier in that its board meetings are not held in public, though brief agendas and minutes are published. The report of the Joint Select Committee on the Communications Bill noted that the Culture, Media and Sport Committee had twice recommended that meetings should be held in public; though the Joint Select Committee did not recommend that this be a statutory requirement, it urged Ofcom to give early and careful consideration to ways of ensuring wider public engagement in with its work, including through meetings between board members and the public.¹¹⁶ The comparison with the Food Standards Agency, which does meet in public, ¹¹² Section 11. ¹¹³ Ofcom, Ofcom’s Strategy and Priorities for the Promotion of Media Literacy – Consultation Document (2004), paras 1, 13. ¹¹⁴ Ofcom, Strategy and Priorities for the Promotion of Media Literacy – A Statement (2004), para 30. ¹¹⁵ Digital Britain – Final Report, 39–45. ¹¹⁶ House of Lords and House of Commons Joint Committee on the Draft Communications Bill, paras 86–9.

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was remarked on in the food and drink advertising to children decision-making discussed above.¹¹⁷ However, the Ofcom board has to handle much confidential information and regulates a particularly litigious industry, nor has there been the same degree of crisis of confidence in regulation which led to a particular stress on the need for openness in food regulation. Ofcom is required by the Act to establish a Content Board; this is of considerable importance as most (but not all) content decisions are delegated to it.¹¹⁸ It also meets in private with published minutes and agenda. The Act also requires that a Consumer Panel is set up, dealing mainly with matters relating to electronic communications; it is now entitled the Communications Consumer Panel.¹¹⁹ The Panel is independent of Ofcom and makes its views known publicly; it is required by the Act to include members able to give informed advice on the interests of people living in rural and urban areas, of small businesses, and disadvantaged persons, ie those with low incomes, with disabilities, and the elderly.¹²⁰ Ofcom is also required to establish a number of advisory committees for different parts of the UK and on elderly and disabled persons.¹²¹ There is some evidence to suggest that the advisory committees (unlike the Consumer Panel) are not influential within Ofcom, although it is attempting to improve their role.¹²² There are two ways in which Ofcom is distinctive in its deliberative arrangements: the scale of its consultations and its use of self-regulation. In some circumstances consultation is required by the Communications Act, for example in carrying out impact assessments and in consumer matters.¹²³ However, Ofcom has gone considerably beyond these statutory requirements. Thus it issued no less that 37 consultations in its first three months (though nine originated with the legacy regulators Ofcom replaced and 23 were required by the Act itself).¹²⁴ The pace has continued; in the reporting year 2008–9, Ofcom published 63 consultations including 48 impact assessments.¹²⁵ Many of the consultations are two- or three-stage, although Ofcom does not continue the practice of its predecessor, the Office of Telecommunications, in offering a second round within each consultation in which comments may be made on responses already submitted. The number of responses varies depending on the nature of the consultation, thus at each stage of the Telecoms Strategic Review around 100 responses were received in addition to views being expressed in public meetings, and in the review of the Broadcast Code there were over 950 responses, in addition to a postcard campaign from one organization. In the second Public Service Broadcasting Review, Ofcom received around 270 formal responses to the phase one consultation, and 250 to phase two; once more there was also a large number of postcard submissions ¹¹⁷ ¹¹⁸ ¹²¹ ¹²² ¹²³ ¹²⁵

Taylor, ‘Embedding Evidence Based Policy Making in a Regulatory Organisation’, 247. Communications Act 2003, ss 12–13. ¹¹⁹ Sections 16–17. ¹²⁰ Section 17(4). Sections 20–21. Taylor, ‘Embedding Evidence Based Policy Making in a Regulatory Organisation’, 125–6. Sections 7(7), 16. ¹²⁴ Ofcom, ‘Annual Report 2003–2004’ (2004), 6. ‘Annual Report 2008/9’, 40.

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on single-issue campaigns. By contrast, in 2007–8 four consultations did not attract any responses. In some cases, for example the consultation on Ofcom’s Annual Plan, consultation is supplemented by public meetings and, particularly in the Public Service Broadcasting Review, techniques such as audience research and roundtable discussions. Ofcom has published, and amended, a guide to the consultation process.¹²⁶ It must be added, however, that there appears to be scepticism within Ofcom about the value of many of the responses from the general public in the larger consultations, as consisting merely of expressions of opinion rather than reasoned analysis.¹²⁷ Nevertheless, the use of consultation by Ofcom is impressive, both in scale and in reach. Finally, Ofcom is required by the Communications Act to have regard to ‘the desirability of promoting and facilitating the development and use of effective forms of self-regulation’.¹²⁸ This has proved controversial; the only major criticism of Ofcom by consumer stakeholders referred to in an otherwise highly favourable Consumer Focus report on Ofcom was that of an over-reliance on self-regulation even where there was only a slim chance of success.¹²⁹ Ofcom has published criteria for promoting effective co- and self-regulation.¹³⁰ These are quite restrictive, requiring that new schemes meet good practice criteria of public awareness, transparency, significant industry participation, adequate resources, clarity of processes, ability to enforce codes, audits of performance, a system of redress, involvement of independent members, regular review of objectives, and non-collusive behaviour (though not all would be necessary in every case). This is very much co- rather than self-regulation, and such an approach is also evident in some major examples. Thus a controversial decision was to delegate broadcast advertising content to the self-regulatory Advertising Standards Authority.¹³¹ This was accompanied by important safeguards, including establishing an independently chaired Advertising Advisory Committee to bring lay and expert input to the industry code-making body; maintaining Ofcom’s right, as a last resort, to insist on changes to the broadcast advertising codes and to retain a right of veto over proposed changes; and to requiring clearer definition of which advertising regulation functions would be contracted out and which would remain within Ofcom. A further example concerns the regulation of premium rate services, where the Communications Act empowered Ofcom to set conditions requiring operators of such services to comply with a code of practice approved by Ofcom but administered by the self-regulatory Independent Committee for the Supervision ¹²⁶ Ofcom, How Will Ofcom Consult? Ofcom Consultation Guidelines (2007). ¹²⁷ See Taylor, ‘Embedding Evidence Based Policy Making in a Regulatory Organisation’, 125–31. ¹²⁸ Section 3(4)(c). ¹²⁹ Brooker, S. and Taylor, A., Rating Regulators: Ofcom (London: Consumer Focus, 2009), paras 6.7–6.11. ¹³⁰ Ofcom, Criteria for Promoting Eff ective Co and Self-regulation (2004); and now Identifying Appropriate Regulatory Solutions: Principles for Analysing Self- and Co-regulation (2008). ¹³¹ See Ofcom, Ofcom’s Decision on the Future Regulation of Broadcast Advertising (2004).

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of Standards of Telephone Information Services (ICSTIS), with backstop powers for Ofcom to issue its own rules.¹³² The system was, however, subject to major criticism as ineffective after serious scandals involving misuse of premium rate services in television competitions. The system was then subject to major reform, with ICSTIS renamed PhonepayPlus and subject to a new Formal Framework Agreement with Ofcom, which amongst other things, requires that a senior member of Ofcom’s staff is the sponsor for relations between the two bodies with a right to receive information; that Ofcom is represented on appointments panels for membership of PhonepayPlus; and that it can give directions to the latter body, as well as being able to reserve in advance matters for Ofcom’s own decision-making. Ofcom also agrees and approves the scope of, and strategic approach to, regulation.¹³³ Once more the approach is very much one of co- rather than self-regulation; this emphasis is continued in the new proposals for Ofcom to police online copyright infringements in conjunction with internet service providers.¹³⁴

Conclusions Ofcom is in several ways very different from the regulators examined earlier in this book. It has major responsibilities for economic regulation, and this means that, of the two regulatory visions discussed in Chapter 1, it has characteristics derived from that of regulation as a potential infringement of private autonomy rather than that of regulation as a collaborative enterprise. Indeed, Ofcom faced criticisms, especially early in its existence, that it was too focused on consumers and took an overly economic approach at the expense of properly furthering the interests of citizens.¹³⁵ This approach is reflected in a board structure similar to that of the Financial Services Authority and based on private sector good practice. Thus there is no representation of interests in the Board itself, nor are the board meetings held in public. Instead, participation is through a very extensive use of consultation; Ofcom has attracted much attention because of the sheer number of such exercises it has undertaken. On this model, participation is not built into the heart of the regulator, it is ‘external’ in the sense of something undertaken through inviting outside stakeholders and the general public to submit information which can then be used as part of the process by which Ofcom takes its ‘evidence-based’ decisions.¹³⁶ Its commitment to self-regulation also suggests ¹³² Sections 120–124. ¹³³ Ofcom and PhonepayPlus, Formal Framework Agreement Between Ofcom and PhonepayPlus (2008). ¹³⁴ Digital Britain – Final Report, 111–13; Digital Economy Bill, clauses 4–17. ¹³⁵ Ofcom has acknowledged that the use of the term consumer-citizen attracted such criticism; Citizens, Communications and Convergence, para 2.14. ¹³⁶ For the reference to an ‘evidence-based’ approach, see the fourth of the Ofcom’s regulatory principles, above, and for detailed discussion of the meaning of the approach, see Taylor, ‘Embedding Evidence Based Policy Making in a Regulatory Organisation’.

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a vision of regulation as infringement of private autonomy; self-regulation is in principle seen as superior to regulation by a public authority if feasible, although as we have seen in practice this commitment is heavily qualified and co- rather than self-regulation has been employed in the more controversial areas. Despite the importance of this model and the fact that a large majority of staff works on economic and consumer matters, Ofcom is not solely an economic regulator and has major responsibilities both in enforcing human rights (through eg broadcasting standards including protection of privacy) and social solidarity through its concern with access (especially to digital services) and with quality public service broadcasting. In these areas it resembles the regulators discussed earlier in that important responsibilities are shared with government, and indeed both the public service broadcasting reviews and the work on access have led to major decisions for government rather than for the regulator itself, notably those in the ‘Digital Britain’ report. There is some evidence that these citizenship-based objectives of Ofcom are becoming more clearly recognized within the organization, for example through the publication in 2008 of a discussion paper on Ofcom’s role in furthering the interests of citizens.¹³⁷ Although there have been tensions between the approach appropriate for economic regulation and that for rights- and solidarity-based regulation, the example of Ofcom proves that it is possible to combine them in a single organization, and indeed that both forms of regulation are relevant right across the full range of regulatory responsibilities.

¹³⁷ Citizens, Communications and Convergence.

9 The Utility Regulators: The Office of Gas and Electricity Markets, the Water Services Regulation Authority, and the Office of Rail Regulation In this chapter I shall examine the three regulators which are responsible for the public utilities: the Office of Gas and Electricity Markets (Ofgem), the Water Services Regulation Authority (Ofwat), and the Office of Rail Regulation (ORR). The coverage of each regulator will not be as detailed as in the earlier chapters, as they are already examined in considerable detail in my earlier work.¹ I shall concentrate on developments not covered in detail in that book, commencing with the Labour government’s major review of utility regulation in 1998. Two similar regulators will be excluded; thus Postcomm is likely to face abolition, its responsibilities passing to Ofcom, whilst the Civil Aviation Authority, responsible for both aviation and airport regulation, is not really a utility regulator. ² The structure of this chapter will be the same as earlier, but each of the three regulators will be assessed under the common headings used.

Background The utility regulators were created as a result of the privatization of the major public utilities under Conservative governments from 1984 onwards. Their primary function was economic regulation of remaining monopoly elements in the sectors for which they were responsible, although they also had important responsibilities for fostering the growth of competitive markets and policing their operation, as well as some social regulation. Key characteristics were the vesting of regulatory powers in individual Director-Generals, confused statutory duties, and only very limited requirements for participation and transparency. ¹ Prosser, T., Law and the Regulators (Oxford: Clarendon Press, 1997). ² For an analysis of Postcomm, see Prosser, T. ‘Regulating Public Enterprises’ [2001] Public Law, 505–26, at 506–14.

The Regulatory Enterprise. Tony Prosser. © Oxford University Press 2010. Published 2010 by Oxford University Press.

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The Labour government’s review in 1998 proposed major changes to the regulators.³ These were based on a view of the regulators as responsible for serving consumers and as contributing to the achievement of wider social and environmental objectives, including to ensure services are available to all consumers. Social objectives were, however, to be determined by ministers rather than the regulators themselves.⁴ The proposed reforms included moving away from individual Directors-General to regulatory commissions with a number of members drawn from different backgrounds, standardizing the duties of the regulators to prioritize the interests of consumers, where possible through competition, providing a new statutory power for the Secretary of State to issue guidance to regulators on social and economic matters, and establishing separate consumer councils. The regulators were also given concurrent powers to enforce general competition law in their sectors. Implementation of the reforms commenced through the Utilities Act 2000. Originally intended to apply to all utility regulators, it was amended during its passage through Parliament to apply only to the energy regulator, Ofgem. It vested regulatory powers formerly exercised by the Directors-General of Gas Supply and of Electricity Supply in a new Gas and Electricity Markets Authority; Ofgem remained a non-ministerial government department to assist the Authority.⁵ The Act created a new primary duty on the regulator to protect the interests of consumers, where possible by promoting effective competition.⁶ It also gave the Secretary of State power to issue guidance on social and environmental matters to which the regulator was required to have regard, and set up a separate Gas and Electricity Consumer Council (known as Energywatch and, as we shall see, now abolished).⁷ The Act also took steps to increase regulatory transparency, for example through requiring the publication of a forward work programme each year after consultation and the giving of reasons for a large number of decisions.⁸ Similar reform followed for other regulators; thus Ofwat was reconstituted as a commission, the Water Services Regulation Authority, by the Water Act 2003.⁹ In this case the protection of consumers, where appropriate by promoting competition, was one of several objectives, reflecting the limits to competition in water supply and sewerage; similar provision was made for ministerial guidance, an independent consumer council, and greater transparency. In the case of rail, relations between government and the Rail Regulator were particularly fraught, including the threat of emergency legislation to curb his powers should he initiate a review which might have prevented Railtrack’s passing into administration. The Railways and Transport Safety Act 2003 similarly replaced the Rail ³ Department of Trade and Industry, A Fair Deal for Consumers: Modernising the Framework for Utility Regulation (Cm 3898, 1998); the government’s conclusions were set out in Department of Trade and Industry, A Fair Deal for Consumers: The Response to Consultation (DTI, 1998). ⁴ A Fair Deal for Consumers, paras 1.11–1.16, 5.4. ⁵ Section 1 and sch 1. ⁶ Sections 9 and 13. ⁷ Sections 2, 10, 14, sch 2. ⁸ Sections 4, 42, 87. ⁹ Section 34 and sch 1.

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Regulator with the Office of Rail Regulation.¹⁰ In this case, reflecting the limited degree of competition on the railways, the competition duty is only one of a large number of different duties, and the Secretary of State has broader powers of guidance (see below). It should also be noted that there have been some further changes to the organization and functions of the regulators more recently. They have been summarized as, first, ‘boardization’ under which the regulatory commissions have been recast as boards similar to those in the private sector, with a part-time chairman, chief executive, executive, and non-executive directors; they also have regard to the Combined Code on corporate governance.¹¹ Thus particular interests are not directly represented, although the aim is to secure a wide range of expertise. Secondly, they have assumed new responsibilities in areas such as energy security and sustainable development, and thirdly, are subject to more demanding requirements through the Better Regulation initiatives (to be discussed in the following chapter).¹² Finally, they have developed their own regulatory networks, incorporating stakeholders, interest groups, and regulated companies; this is also true at European level.¹³ These developments will be considered in detail below; as a result, utility regulation looks very different from its appearance in 1997.

Functions of the utility regulators Although the three regulators have much in common, the nature of the sectors that they regulate is sufficiently different to make it necessary to discuss them separately. Beginning with Ofgem, according to its website, ‘[p]rotecting consumers is our first priority. We do this by promoting competition, wherever appropriate, and regulating the monopoly companies which run the gas and electricity networks’. Other priorities and influences include ‘helping to secure Britain’s energy supplies by promoting competitive gas and electricity markets – and regulating them so that there is adequate investment in the networks’; ‘contributing to the drive to curb climate change and other work aimed at sustainable development’ and ‘taking account of the needs of vulnerable consumers’.¹⁴ Thus Ofgem undertakes economic regulation both in the case of the remaining monopoly areas, notably high voltage electricity transmission and bulk gas transportation, and in policing competitive markets such as electricity and gas supply. It also has ¹⁰ Sections 15–16 and sch 1. ¹¹ See Wilks, S. and Doern, B., ‘Accountability and Multi-Level Governance in UK Regulation’, in Centre for the Study of Regulated Industries, Regulatory Review 2006/2007 (Bath: CRI, 2007), 341–71, 346–7. Th is followed recommendations by the Better Regulation Taskforce in its report Economic Regulators (2001), for which see the following chapter. ¹² Wilks and Doern, ‘Accountability and Multi-Level Governance’, 347–8. ¹³ Ibid, 348–9. ¹⁴ (consulted 10 December 2009).

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broader responsibilities for sustainable development, and, with government, has a concern to reduce fuel poverty. Ofwat describes its functions as to make sure that water companies provide a good quality service at a fair price, by keeping bills as low as possible, monitoring and comparing quality of service, scrutinizing companies’ costs and investment, and encouraging competition where this benefits consumers. ¹⁵ There is a particular concern with price control in the monopoly areas through periodic reviews setting limits for the next five years; so far regulation to create and maintain competition has been limited. Finally, in the case of the ORR, the regulator identifies its economic functions as being to regulate Network Rail’s stewardship of the national rail network (including determining its output targets and funding requirements), to license operators of railway assets, and to approve track, station, and light maintenance depot access. In this sector once more, periodic reviews of charges for access to Railtrack’s network by rail operating companies are of particular importance. ORR also has responsibility for health and safety on the railways, having acquired this function from the Health and Safety Executive under the Railways Act 2005.¹⁶ It should be added that Postcomm has as a major responsibility protecting the universal postal service as well as competition functions; these will pass to Ofcom should it be abolished.

The utility regulators in regulatory space: the institutions From their earliest days, the utility regulators have taken the form of nonministerial government departments (unlike Ofcom, which is a public corporation, or the Financial Services Authority, a private company limited by guarantee).¹⁷ This means that they are not funded through a sponsor department (and much of their funding is through licence fees paid by industry), but that their employees are civil servants. Ofgem is the administrative body for powers vested in the Gas and Electricity Markets Authority under the Utilities Act 2000.¹⁸ The Authority performs its functions on behalf of the Crown, and as a result of its departmental status the Comptroller and Auditor General will have jurisdiction over its accounts.¹⁹ The statute requires that there is a chairman and at least two other members.²⁰ Members may be removed by the Secretary of State on the grounds of incapacity or misbehaviour.²¹ In practice, Ofgem has moved in the direction of private sector corporate governance, and the Authority is now comprised of a chairman and ¹⁵ (consulted 10 December 2009). ¹⁶ (consulted 10 December 2009). ¹⁷ See the House of Lords Committee on the Regulators, ‘UK Economic Regulators’, HL 189, 2006–7, para 6.43. ¹⁸ See s 1 and sch 1. ¹⁹ Section 1(2). ²⁰ Schedule 1, para 1(1). ²¹ Schedule 1, para 3(2).

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four executive members, with nine non-executive members. Its duties include publishing a forward work programme after consultation.²² The structure of Ofwat is now similar, and it also acts on behalf of the Crown.²³ It now has a board comprising the chairman, three executive members and five non-executive members. Similarly, the ORR was established as a commission by the Railways and Transport Safety Act 2003, in this case to be comprised of a chairman and at least four other members.²⁴ The board currently has a chair and five executive directors alongside four non-executives. The ORR is funded entirely through licence fees and a levy for its health and safety work. Turning now to the central issue of relations between the utility regulators and government, this is an area where clarity and a degree of certainty are particularly important given the economic role of the regulators in relation to industries dependent on private investment, which is likely to be deterred by regulatory uncertainty.²⁵ The House of Lords Select Committee on the Regulators found that ‘there seemed to be few problems around the issue of independence of regulators’; the regulators all believed themselves to be independent, and the Ofcom Chief Executive even stated that ‘the idea of independent regulation has become almost quasi-constitutional’.²⁶ Where the policy of regulators and of government was in conflict, ‘there was a feeling that whilst a degree of tension between government and regulator is healthy there needed to be clear mechanism [sic] for resolving such conflict’. In relation to Ofgem, some witnesses felt that ‘the economic role of the regulator was being “encroached on at the edges by noneconomic considerations”’.²⁷ The Committee recommended that government must be explicit in the political decisions it makes and in the guidance it issues to regulators.²⁸ It is in relation to Ofgem that the question of the relationship between the regulator and government has become most topical. Guidance on social and economic matters was issued under statutory powers in 2002 and revised in 2004 after the issue of an energy White Paper; consultation was commenced in 2008 after the further White Paper of the previous year.²⁹ After setting out its social and economic goals in the new draft guidance, the government stated that Ofgem has an important role in contributing to an energy system that encourages substantial reductions in emissions, including enabling timely investment ²² Section 4. ²³ Water Act 2003, s 34 and sch 1A. ²⁴ Section 15 and sch 1; for the difficult history of the Rail Regulator which preceded the new commission, see Prosser, T., ‘The Privatisation of Britain’s Railways: Regulatory Failure or Legal Failure?’, in Holder, J., O’Cinneide, C., and Freeman, M., (eds), 57 Current Legal Problems 2004 (Oxford: Oxford University Press, 2005), 213–38, 217–19, 227. ²⁵ See Levy, B. and Spiller, P., ‘A Framework for Resolving the Regulatory Problem’, in Levy, B. and Spiller, P., (eds) Regulation, Institutions and Commitment (Cambridge: Cambridge University Press, 1996), 1–35. ²⁶ ‘UK Economic Regulators’, para 6.44. ²⁷ Ibid, para 6.49, quoting the Chief Executive of the Energy Networks Association. ²⁸ Ibid, para 6.50. ²⁹ Utilities Act 2000, s 10 (inserting a new s 4AB into the Gas Act 1986) and s 14 (inserting a new s 3B into the Electricity Act 1989).

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in transmission capacity and connection for new generations, eliminating unnecessary regulatory and market barriers to distributed energy, making further progress in eliminating fuel poverty, and ensuring that infrastructure and networks are sufficiently resilient to future climate impacts to maintain security of supply.³⁰ Ministers and members of the Ofgem board were to meet at least annually to discuss how its actions and priorities contribute to government targets and how government policies and mechanisms bear on Ofgem’s work in these areas.³¹ It was also emphasized, as in earlier guidance, that, where the government wishes to implement specific social or environmental measures with significant financial implications for consumers or regulated companies, these will be implemented not by guidance but by specific primary or secondary legislation.³² Specific joint initiatives include, for example, a Transmission Access Review by Ofgem and the Department on how to link new renewable generators and other new forms of generation to the transmission network. As the guidance makes clear, climate change policy is the area in which governmental and regulatory decision-making are most closely inter-related, but another such area is that of policy relating to fuel poverty.³³ Thus the government published its own UK Fuel Poverty Strategy in 2001, setting out demanding targets including the eradication of fuel poverty throughout the UK by 2018.³⁴ Ofgem also published its own Social Action Plan and Social Action Strategy, and in 2008 published a Fuel Poverty Action Programme. Reducing differentials for pre-payment meters was also in the package and, as we shall see, this has also been dealt with in Ofgem’s review of the supply market.³⁵ Other measures for the government included raising incomes through the benefits system and improving housing. In September 2008 the government announced a £1 billion Home Energy Saving Programme to help domestic consumers cut their energy bills.³⁶ It should be recalled that this was a period of severe price increases to energy consumers; one role of Ofgem is to ensure that the markets work properly, but in the case of fuel poverty this only makes sense in the broader context of government policies. This is an area in which there were serious criticisms of the fragmentary delivery of different parts of the fuel poverty strategy, leading the Environment Select Committee to call for a comprehensive fuel poverty strategy and action plan, and a national plan for energy efficiency.³⁷ Responsibilities have since been ³⁰ Department for Business, Enterprise and Regulatory Reform, Social and Environmental Guidance to the Gas and Electricity Markets Authority: A Consultation Document (2008), paras 2, 5. ³¹ Ibid, para 23. ³² Ibid, ‘Introduction – What Th is Consultation Concerns’, para 11. ³³ For discussion of earlier developments in this field, see Prosser, T., The Limits of Competition Law: Markets and Public Services (Oxford: Oxford University Press, 2005), 82–7. ³⁴ Department for Environment, Food and Rural Affairs, and Department of Trade and Industry, UK Fuel Poverty Strategy (2001). ³⁵ Ofgem, Fuel Poverty Action Programme (2008). ³⁶ For discussion, see Business and Enterprise Committee, ‘Energy Policy: Future Challenges’, HC 32, 2008–9, paras 39–43. ³⁷ Environment, Food and Rural Affairs Committee, ‘Energy Efficiency and Fuel Poverty’, HC 37, 2007–8, paras 154–80.

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clarified, with government (advised by Ofgem) responsible for policy and Ofgem handling the implementation of the schemes adopted. Turning now to Ofwat, the Water Act 2003 also makes provision for the issue of social and economic guidance by the minister.³⁸ Guidance was issued in 2008, stating that Ofwat ‘is expected to make an important contribution to delivering the government’s key priority outcomes’, and is to report annually on how it had contributed to delivery of the policies.³⁹ The guidance set out five guiding principles which all policies must respect in order to be sustainable; sustainable development was to be treated as a framework within which Ofwat’s activities took place.⁴⁰ A further theme related to social policy, where ‘[i]n order to ensure reasonable costs for all customers, the Government expects Ofwat to carefully consider the balance between the need to limit price increases and the need to generate improvements in services that are financed through higher bills’.⁴¹ Ofwat was also expected regularly to review the exercise of its duty to towards vulnerable groups, taking into account the government’s approach to social inclusion.⁴² There was also extensive provision in the guidance on environmental policies, including water quality. It may also be recalled from Chapter 4 above that difficulties had arisen in the process of the periodic review of water charges through uncertainty about the government’s requirements for quality standards, which would need to be funded through the prices subject to the review. This is now resolved more clearly through the Department setting out before the periodic review its water strategy and a Statement of Obligations of the companies, and the examination of the price review by the Environment Select Committee was not critical of the process as its predecessors had been.⁴³ A similar though more complex approach has been adopted in the case of rail regulation, where, as mentioned above, conflict between the regulator and the government over funding the network had been much more direct and serious than in the case of other regulators.⁴⁴ The ORR has a general statutory obligation to have regard to guidance from the Secretary of State (not limited to social and environmental matters) and a new version of the guidance was issued in 2007.⁴⁵ This is briefer than that for energy and for water, but does state that the government’s key priorities for the railways are for the industry to maintain a high level ³⁸ Section 40, inserting a new s 2A into the Water Industry Act 1991. ³⁹ Department for Environment, Food and Rural Affairs, Statutory Social and Environmental Guidance to the Water Services Regulation Authority (Ofwat) (2008), paras 2.6, 2.11. Guidance was also issued by the Welsh Assembly. ⁴⁰ Ibid, paras 2.12–2.14. ⁴¹ Ibid, para 22. ⁴² Ibid, para 2.23. ⁴³ Department for Environment, Food and Rural Affairs, Future Water: The Government’s Water Strategy for England (Cm 7319, 2008); Statement of Obligations (2007); Environment, Food and Rural Affairs Committee, ‘Ofcom Price Review 2009’, HC 554, 2008–9. ⁴⁴ For details see Winsor, T., ‘The Future of the Railways: Sir Robert Reid Memorial Lecture 2004’ (2003/2004) 13 Utilities Law Review, 145–52, and Weir v Secretary of State for Transport [2005] EWHC 2192 (Ch). ⁴⁵ Railways Act 1993, s 4(5)(a) (as amended); Department for Transport, Secretary of State for Transport: Guidance to the Office of Rail Regulation (2007).

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of safety; to control its costs and live within the public funding available to it; to meet the needs of passengers and freight users; and to contribute to the government’s sustainable development objective. There is a particularly strong emphasis on budget management and value for money. Much more important than this general guidance is the system established after the 2004 White Paper ‘The Future of Rail’ by which the Secretary of State sets out for the periodic review of access charges the governmental strategy (‘information about what he wants to be achieved by railway activities in Great Britain’) and available financial resources.⁴⁶ These take the form of ‘high level output specifications’ and ‘statements of public funds available’. This achieves a much clearer division of labour between government and regulator; the House of Lords Select Committee on Regulators concluded that, whilst the division of responsibility was ‘undeniably complicated’, this was not necessarily undesirable and the system appeared to be working; it should now be allowed to settle down.⁴⁷ What now exists, then, is a system which involves a degree of partnership between government and regulators, especially in the case of Ofgem. This is combined with greater openness in relations and clarity in allocating responsibilities between them (notably in the case of rail), although the House of Lords Select Committee did recommend that there needed to be an effective and transparent mechanism for resolving potential policy conflicts.⁴⁸ Thus the regulators participate in the formation of government policy through their advisory functions, and administer the resulting schemes. However, they remain fiercely protective of their independence in relation to individual regulatory decisions entrusted to them, particularly in order to maintain market confidence. Further complexity is added by the role of the EU, especially in the case of Ofgem. Extensive liberalization of energy policy has taken place at EU level.⁴⁹ Although it is not as far developed as in the case of electronic communications, it has important similarities, notably implementation through a network of national regulatory authorities in each Member State, coming together as the European Regulators’ Group for Electricity and Gas to advise the Commission, and a Council of European Energy Regulators to ensure cooperation between national authorities. Ofgem is of course the UK authority, and has taken a leading part in the process, including chairing the Group and the Council and assisting in the complex and politically sensitive process of developing the next stage of liberalization through the third energy package, which includes a new Agency for the Cooperation of Energy Regulators.⁵⁰ Ofgem has set up a separate European directorate to handle these issues. There has not been similar liberalization in the case of water so the role of the EU is less far reaching in Ofwat’s work. However, it will be recalled from ⁴⁶ Railways Act 2005, sch 4. ⁴⁷ ‘UK Economic Regulators’, 6.51–6.56. ⁴⁸ Ibid, 6.59. ⁴⁹ For a summary, see Prosser, The Limits of Competition Law, 188–97. ⁵⁰ See Ofgem, Corporate Strategy and Plan 2009–2014 (2009), s 4, for more information.

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Chapter 4 above that EU water quality and waste standards have been a central basis for determining investment requirements of companies during the periodic reviews, and the basis for setting the EU requirements was subject to criticism by the former water regulator. The quality requirements are now factored into the periodic review at an early stage through forming part of the Statement of Obligations mentioned above and issued by the Department to clarify the context in which the review is to take place; the process is now much more coherent and predictable than in earlier reviews. Turning finally to rail, liberalization is less advanced here than in the cases of electronic communications or of energy, but there have been some important European liberalization initiatives, for example on international passenger services, freight services and safety matters, and access decisions are increasingly shaped by European law. The ORR has worked extensively with the European Railway Agency on safety and standardization matters, in particular increasing the transparency of rules across Europe to encourage a more open rail market. It has also assisted the Department for Transport in developing a third package of European liberalization; this was adopted in 2007 and is now being implemented in the law of the Member States.⁵¹

The utility regulators in regulatory space: the duties At the beginning of this chapter a major aim of the 1998 review of utility regulation was identified as clarifying the hitherto complex and incoherent duties of the regulators, and giving priority to furthering the interests of consumers. This has been partially achieved, with all three regulators having had their duties redrafted since the review, although the differences in the sectors which they regulate have meant that full standardization has not proved possible.⁵² One result is that the duties involve a number of different ways of protecting consumers, both through competition and through other measures such as protecting universal service.⁵³ The duties of Ofgem give the clearest priority to consumer protection; thus they were amended by the Utilities Act 2000 to set the principal objective of protecting the interests of consumers, where appropriate by promoting effective competition.⁵⁴ This provision has since been amended by the Energy Act 2008 to refer to ‘existing and future’ consumers. Functions are to be carried out in the way best calculated to meet the objective, having regard to the need to secure that ⁵¹ See Directive 2007/58/EC on the development of the Community’s railways, OJ [2007] L315/44. ⁵² For a useful summary of the duties of all the economic regulators, see the House of Lords Select Committee on Regulators, ‘UK Economic Regulators’, para 3.14. ⁵³ For discussion, see ibid, paras 5.35–5.50. ⁵⁴ Section 9, adding a new s 4AA to the Gas Act 1986, and s 13, adding a new s 3A to the Electricity Act 1989.

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all reasonable demands are met, and that licence holders are able to finance their activities, and to contribute to the achievement of sustainable development.⁵⁵ The government has committed itself to amending the duties to include security of supply and reducing carbon emissions, and provision is included in the Energy Bill announced in the 2009 Queen’s speech to specify that the interests of consumers include both these matters; the regulator must also consider whether the interests of consumers would be better protected by means other than competition.⁵⁶ The regulator must also have regard to the interests of the disabled or chronically sick, of pensioners, of individuals with low incomes, and of those living in rural areas.⁵⁷ Other relevant duties include those to ensure a diverse and viable long-term energy supply and to have regard to better regulation principles; there is also now a duty to carry out impact assessments.⁵⁸ Ofgem is also under a duty to give reasons for major decisions.⁵⁹ It has powers of enforcement which can include the levying of substantial financial penalties on regulated companies.⁶⁰ As in the case of Ofcom discussed in the previous chapter, the duties of Ofgem clearly create an important space for the regulator to prioritize them and to develop its own policies, in addition to the social and environmental guidance provided by the Secretary of State. Thus in its Corporate Strategy and Plan for 2009–14, Ofgem sets out seven themes for its work: creating and sustaining competition; regulating networks effectively; helping to achieve sustainable development; helping to protect the security of Britain’s energy supplies; providing a leading voice in Europe; helping to tackle fuel poverty; and better regulation.⁶¹ Each of these is then developed in considerable detail. Even though most work is done under the first two strongly economic headings, the scope of these themes re-emphasizes the point that Ofgem is far from being solely an economic regulator. For Ofwat, the duties are contained in the Water Act 2003, though implementation was delayed until 2005 to allow completion of a periodic review of charges. The Act sets out four duties as opposed to the single objective for Ofgem; these are to further the consumer objective, to secure that the functions of water and sewerage undertakers are properly carried out as respects every area of England and Wales; to secure that the companies are able to finance their activities, and to ensure that licensed activities are properly carried out.⁶² The consumer objective is defined as to protect the interests of consumers, wherever appropriate by ⁵⁵ Gas Act 1986, s 4AA(2); Electricity Act 1989, s 3A(2). ⁵⁶ The UK Low Carbon Transition Plan: National Strategy for Climate and Energy (2009), 98; Energy Bill, clauses 16–17. ⁵⁷ Gas Act 1986, s 4AA(3); Electricity Act 1989, s 3A(3). ⁵⁸ Gas Act 1986, s 4AA(5), (5A); Electricity Act 1989, s 3A(5), (5A); Sustainable Energy Act 2003, adding a new s 5A to the Utilities Act 2000. ⁵⁹ Utilities Act 2000, s 42 adding a new s 49A to the Electricity Act 1989, and s 87 adding a new s 38A to the Gas Act 1986. ⁶⁰ Utilities Act 2000, s 59 inserting a new ss 27A–F in the Electricity Act 1989; s 95 inserting new ss 30A–F into the Gas Act 1986. ⁶¹ Corporate Strategy and Plan, 2009–14. ⁶² Section 39(3), adding a new s 2(2A) to the Water Industry Act 1991.

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promoting effective competition.⁶³ Ofwat is also to have regard to the interests of the disabled or chronically sick, of pensioners, of individuals with low incomes, of those living in rural areas, and of those whose premises are not eligible to be supplied by a licensed water supplier.⁶⁴ Subsidiary duties are to promote economy and efficiency, to secure that no undue preference is shown, to promote sustainable development, and to have regard to the principles of good regulation.⁶⁵ Ofwat is also required to give reasons for important decisions.⁶⁶ It has power to levy substantial financial penalties.⁶⁷ Ofwat sets out its policies in a Forward Work Programme, as required by the Water Act.⁶⁸ That for 2009–10 to 2011–12 sets three major objectives of protecting consumers, promoting value and safeguarding the future; it then describes how these will be developed, stating its priorities as ‘keeping consumers at the heart of what we do’; keeping companies accountable; enforcing compliance in a reasonable and transparent way; introducing competition progressively where it benefits consumers; regulating effectively where competition will not protect consumers; taking a long-term view of sustainability; and shaping the regulatory agenda at a national and EU level.⁶⁹ Finally, turning to the ORR, reflecting the different nature of the rail business and the complex history of rail regulation, the statutory duties are very different from those of the other utility regulators; this also reflects the major role of the Secretary of State, as discussed above. Thus the legislation, which has been substantially amended, imposes a duty for the regulator to exercise its functions in a manner which it considers best calculated to promote improvements in railway service performance and otherwise to protect the interests of rail users; to promote the use of the rail network and its development to the greatest extent it considers economically practicable; to contribute to the development of an integrated transport system and to the achievement of sustainable development; to promote efficiency and economy and competition; to promote measures to facilitate journeys involving more than one operator; and to impose the minimum restrictions on operators and to enable them to plan the future of their businesses with a reasonable degree of assurance.⁷⁰ Subsidiary duties include taking into account the need to protect persons from danger and to have regard to the environmental effect of activities connected with the provision of rail services.⁷¹ Yet further duties are to have regard to ministerial guidance, to act in a manner which will not render it unduly difficult for licence holders to finance their activities, to have regard to securing value for money and to the interests of persons ⁶³ ⁶⁴ ⁶⁵ ⁶⁶ ⁶⁷ ⁶⁸ ⁶⁹ ⁷⁰

Section 39(3), adding a new s 2(2B) to the Water Industry Act 1991. Section 39(3), adding a new s 2(2C) to the Water Industry Act 1991. Section 39(3), adding a new ss 2(3)–(4) to the Water Industry Act 1991. Section 51, adding a new s 195A to the Water Industry Act 1991. Section 48, adding new ss 22A–F to the Water Industry Act 1991. Section 38, adding new ss 192A–B to the Water Industry Act 1991. Ofwat Forward Programme 2009–10 to 2011–12 (2009). Railways Act 1993, s 4(1) as amended. ⁷¹ Section 4(3).

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who are disabled.⁷² The ORR also acquired important responsibility for enforcing health and safety duties under the Railways Act 2005.⁷³ It has power to levy financial penalties.⁷⁴ Such a complex pattern of duties clearly needs clarification and prioritization by the regulator, especially to secure the ability of enterprises to plan for the future. In its strategy for 2009–14, the ORR sets out a vision based on health and safety, needs of users, and efficiency. It also states its approach to achieving these, and a strategy based around seven strategic themes (including focusing on the needs of customers and excellence in asset management) which are set out in detail, together with the way in which the strategy will be delivered.⁷⁵

The utility regulators and the regulatory models Regulating for efficiency and consumer choice It is not uncommon to see the utility regulators as essentially economic regulators. As we shall see, the position is not quite as simple as that but a major part of their work is concerned with maximizing both economic efficiency and consumer choice. This has been true from the outset in relation to their role in regulating the remaining areas of monopoly provision, where key concerns are to mimic the effects of competitive markets, and to minimize costs for consumers whilst providing incentives for efficient levels of investment in network infrastructure.⁷⁶ As competitive markets have developed, the regulators have also acquired the role of policing these, and the reforms after the 1998 review of utility regulation emphasized the role of the regulators in protecting consumers. A review by the House of Lords Select Committee on Regulators found that their performance had been varied in doing so, with Ofgem having helped to achieve a successful transition to fully competitive gas and electricity markets, whilst in water competition had barely made an appearance at all.⁷⁷ Importantly, the regulators were all given concurrent powers to implement general competition law.⁷⁸ In the same report, the Select Committee found that these powers had generally been used successfully and should be retained.⁷⁹ Turning now to the individual regulators, the first theme in Ofgem’s Corporate Strategy is that of creating and sustaining competition, including through the

⁷² Section 4(5)–(6). ⁷³ Section 2 and sch 3. ⁷⁴ Transport Act 2000, s 225, adding a new s 57A to the Railways Act 1993. ⁷⁵ Promoting Safety and Value in Britain’s Railways: Our Strategy for 2009–14 (2008). ⁷⁶ For the seminal statement of the role of the regulators here, see Littlechild, S., Regulation of British Telecommunications Profitability (London: Department of Trade and Industry, 1984). ⁷⁷ ‘UK Economic Regulators’, ch 7. ⁷⁸ See the Competition Act 1998, s 54 and sch 10; Transport Act 2000, sch 8, para 14, and the Enterprise Act 2000, ss 204–205. ⁷⁹ ‘UK Economic Regulators’, paras 6.17–6.41.

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monitoring of energy markets.⁸⁰ A particularly important example out of the many that could be chosen is that of the investigation into energy supply markets conducted after major increases in prices.⁸¹ The inquiry had been undertaken after the Business and Enterprise Select Committee had commenced an inquiry of its own, and after major concerns amongst the public and MPs about the way the markets were operating.⁸² The inquiry found that the fundamental structures of a competitive market were in place, and the transition to effective competitive markets was well advanced and continuing; it did however make a number of recommendations designed to make the market work better through promoting more active customer engagement. The measures to be introduced included clearer information in bills, better information on tariffs, making it easier to switch supplier where customers have outstanding debts, and stronger rules on sales and marketing (almost half of customers who switched supplier due to direct selling did not achieve a price reduction⁸³). Ofgem also decided to adopt new licence requirements that charges for different payment types (notably prepayment meters) must be cost-reflective, and to prohibit undue discrimination in any terms and condition offered to customers, which it considered would have significant benefits for many vulnerable customers. Ofcom is also seeking a new licence condition to permit it to take more effective action against market abuse by generators; this has been approved in principle by the government and provision is made for it in the Energy Bill.⁸⁴ In the regulation of monopoly areas, notably transmission and transport, the technique adopted has been that of RPI-X based price controls. The controls link permitted price increases to the retail price index, permitting efficiency gains to be shared between the regulated company and consumers. Their setting has proved to be extremely complicated, as was already apparent before the 1998 review.⁸⁵ This technique has, however, remained the basis for the system, although Ofgem in 2008 commenced a review of the RPI-X system to decide if it was still appropriate for modern conditions.⁸⁶ Turning now to Ofwat, given the limited amount of competition in water supply and sewerage disposal, regulation of monopoly has been the central theme of its work. One of the techniques used has been that of comparative competition, through which the performance of the different water companies is assessed ⁸⁰ Ofgem, Corporate Strategy and Plan 2009–14, section 1. ⁸¹ Ofgem, Energy Supply Probe – Initial Findings Report (2008); Addressing Undue Discrimination – Final Proposals (2009), and Energy Supply Probe – Proposed Retail Market Remedies (2009). ⁸² Business and Enterprise Committee, ‘Energy Prices, Fuel Poverty and Ofgem’, HC 293, 2007–8; see also ‘Energy Policy: Future Challenges’, paras 44–6 for criticisms of Ofgem’s delay in approaching the issue. ⁸³ See Business and Enterprise Committee, ‘Energy Policy: Future Challenges’, para 34. ⁸⁴ Ofgem, ‘Protecting Energy Consumer Interests Now and in the Future – Ofgem Annual Report 2008–2009’, HC 824, 2008–9, 14; Energy Bill, clauses 18–25. ⁸⁵ See Prosser, Law and the Regulators, 97–101, 127–32, 159–66, 192–3. ⁸⁶ Corporate Strategy and Plan 2009–14, paras 2.11–2.12.

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using a wide range of quantitative and qualitative indicators as the basis for incentivizing companies to improve performance. This feeds into the periodic reviews of pricing every five years, which involve detailed examination of each company’s plans after guidance has been set by ministers on what is needed to deliver EU commitments on drinking water quality and environmental improvements. Detailed consultation takes place as part of the process.⁸⁷ Given the major monopoly elements in the water and sewerage infrastructure, and the lack of a national water grid, this work is likely to continue to be central to Ofwat’s tasks for the future. As mentioned above, the lack of progress in permitting more competition in the supply of water to consumers was heavily criticized by the House of Lords Committee on Regulators in 2007, and major reviews of this process have since been undertaken both by Ofwat and on behalf of the government.⁸⁸ The Environment Committee has recommended that there should be a fundamental review of the role and remit of Ofwat in view of the likely introduction of competition and the increased importance of water efficiency and water demand management.⁸⁹ Similarly, in the case of the ORR, much of its work is setting the prices to be charged by Network Rail for access to the rail network, again through periodic reviews. It also has responsibilities for competition regulation through its concurrent powers and has, for example, used them to make a market reference to the Competition Commission in relation to the leasing of rolling stock for franchised services. It is also responsible for determining terms of access to the rail network, and a particularly controversial issue involving competition has been that of open access, in which the regulator authorizes an operating company to compete with the incumbent franchise holder for a particular route. Although this has been very much at the margins of the system, it has provided some useful extra competitive pressure. In one case ORR’s approval of such rights was strongly opposed not only by the incumbent operator but also by government; ORR won a judicial challenge brought against its decision.⁹⁰ In the area of freight services, where there are no incumbent franchised operators, competition issues have also been important, including, for example, issuing directions to operators to remove or modify exclusionary contractual terms. This discussion merely gives a small sample of the types of work carried out by the utility regulators aimed at maximizing efficiency and consumer choice. These objectives are clearly central to their work, although where there is monopoly provision the emphasis is on efficiency and also on ensuring that costs ⁸⁷ For the outcome, see Ofwat, Future Water and Sewerage Charges 2010–15: Final Determinations (2009). ⁸⁸ Ofwat, Ofwat’s Review of Competition in the Water and Sewerage Industries Part II (2008); Professor Martin Cave, Independent Review of Competition and Innovation in Water Markets: Final Report (London: Department for Environment, Food and Rural Affairs, 2008). ⁸⁹ ‘Ofwat Price Review 2009’, paras 144–6. ⁹⁰ Great North Eastern Railway Ltd v The Office of Rail Regulation et al [2006] EWHC 1942 (Admin); [2007] ACD 13.

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to consumers are as low as possible. Turning to regulatory styles, all the regulators have expressed their commitment to ‘better regulation’ principles. One example of such commitment is through the use of impact assessments; in the case of Ofgem these are a statutory requirement.⁹¹ The House of Lords Select Committee on the Regulators found that regulators had made these an integral part of their policy-making process, but that there was room for stronger cost-benefit analysis in them.⁹² The regulators have also drawn up simplification plans and stated their commitment to the principles of better regulation, and are required by the Regulatory Enforcement and Sanctions Act 2008 not to impose or maintain unnecessary burdens, reporting annually on progress in reviewing burdens.⁹³

Regulation and human rights Many social and economic rights fall within the scope of the work of these regulators, although those relating to access and universal service will be discussed below in the context of social solidarity.⁹⁴ Examples of relevant provisions which provide rights to services are the right of the family to social, legal, and economic protection under Art 16 of the Council of Europe’s European Social Charter of 1961, and the provision in Art 36 of the EU Charter of Fundamental Rights recognizing and respecting access to services of general economic interest as provided for in national laws and practices in order to promote the social and territorial cohesion of the Union. The right to water is also of particular importance internationally.⁹⁵ It will be recalled from Chapter 4 above that, in the context of sewerage disposal, the House of Lords in the Marcic case found that the statutory scheme of regulation administered by Ofwat was the most appropriate way of achieving a fair balance between the European Convention on Human Rights Articles protecting the right to a home and to the peaceful enjoyable of possessions on the one hand, and the interests of the community on the other.⁹⁶ The regulator had a duty to act in accordance with Convention rights in balancing qualified rights against competing interests. Turning to other rights which the regulator must take into account in reaching decisions, we are likely in particular to see more cases in the future brought ⁹¹ Utilities Act 2000, s 5A, added by the Sustainable Energy Act 2003, s 6. ⁹² ‘UK Economic Regulators, 4.46–4.72. The Competition Commission was also critical of inadequate quantification in allowing an appeal against a code modification; E.ON UK and GEMA and British Gas Trading, 10 July 2007. ⁹³ Section 72. ⁹⁴ See Graham, C., ‘Human Rights and the Privatisation of Public Utilities and Essential Services’, in de Feyter, K. and Gomez Isa, F. (eds), Privatisation and Human Rights in the Age of Globalisation (Antwerp-Oxford: Intersentia, 2005), 33–56. ⁹⁵ See Morgan, B., ‘The North-South Politics of Necessity: Regulating for Basic Rights between National and International Levels’ (2006) 29 Journal of Consumer Policy, 465–87, esp 474–84. ⁹⁶ Marcic v Thames Water Utilities Ltd [2003] UKHL 66; [2004] 2 AC 42.

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by companies against regulators for infringement of Art 1 of the First Protocol to the European Convention on Human Rights where regulatory decisions are perceived as restricting property rights; such an action was threatened against the Competition Commission in relation to its plans to require disposal of airports by the British Airports Authority.⁹⁷ Finally, procedural rights are also of considerable relevance to the regulators. Currently the arrangements for appeal from regulatory decisions are a mish-mash, with some appeals on the exercise of concurrent powers lying on the merits to the Competition Appeal Tribunal, appeals against the imposition of fi nancial penalties lie to the High Court on grounds similar to those for judicial review, whilst the Competition Commission itself hears ‘appeals’ by companies against regulatory proposals to amend their licences and on some decisions of Ofgem in relation to the organization of wholesale markets. In other cases judicial review will be the only applicable remedy.⁹⁸ Whether or not the more limited procedures provide sufficient protection to comply with Art 6 of the European Convention on Human Rights (the right to a fair hearing) remains debatable.⁹⁹ A major report from the House of Lords Constitution Committee on the regulators recommended a general appeal right on the merits to a Regulatory Appeals Tribunal, but this was one of its few proposals not to be implemented by the government.¹⁰⁰ It remains to be seen whether this will be provided as part of the new General Regulatory Chamber within the First-tier Tribunal created under the Tribunals, Courts and Enforcement Act 2007, which will hear appeals under the Regulatory Enforcement and Sanctions Act 2008.

Regulation and social solidarity It may appear at first sight that the role of protecting basic rights is of relatively limited applicability to the utility regulators; however, there is considerable overlap with their role of promoting social solidarity and inclusion, which is much more fully developed. This role has increased since the 1998 review of utility regulation, and is recognized in the power for ministers to issue social and economic guidance to the regulators, emphasizing that this responsibility is one shared ⁹⁷ ‘BAA Claims Breach of Human Rights’, The Financial Times, 15 January 2009. ⁹⁸ For a more detailed examination of appeal rights, see Prosser, T., ‘The Place of Appeals in Regulation – Continuity and Change’, in Centre for the Study of Regulated Industries, Regulatory Review 2004/2005 (Bath: CRI, 2005), 195–211. ⁹⁹ For discussion of a related issue of the ability of judicial review to satisfy the EU law requirement of an effective right of appeal in electronic communications matters, see T Mobile (UK) Ltd v Office of Communications [2008] EWCA Civ 1373; [2009] Bus LR 794. ¹⁰⁰ ‘The Regulatory State: Ensuring its Accountability’, HL 68, 2003–4, paras 219–32; ‘The Regulatory State: Ensuring its Accountability: The Government’s Response’, HL 150, 2003–4, paras 60–73.

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between regulators and government. Areas of particular importance are access to services, fuel poverty, climate change, and sustainable development.¹⁰¹ Commencing with Ofgem, the legislation requires the regulator to have regard to the interests of individuals who are disabled or chronically sick, pensioners, those with low incomes, and those living in rural areas.¹⁰² Power to issue social and economic guidance to the regulator was also included in the Utilities Act 2000, as mentioned above.¹⁰³ Guidance in 2002 referred to the government’s social objectives relevant to the regulator and stated more detailed social and environmental objectives, including ensuring that the benefits of competition were fairly distributed between different groups of consumers.¹⁰⁴ The guidance was amended in 2004 after the government’s Energy White Paper; the social aspects were considerably shortened to refer only to equal access, quality of service and including social impacts in impact assessments; the Authority was also expected to put in place measures to help achieve government fuel poverty targets.¹⁰⁵ Finally, following a further Energy White Paper, the Department issued new draft guidance for consultation, as discussed above. It set out government social and environmental policies in more detail, with defined targets; it also stated that the government expected the regulator to take a strong lead in coordinating activity to help consumers on low incomes to benefit from competitive markets. This includes monitoring the operation of the market, addressing issues which have a particular impact on consumers with low incomes, and monitoring and reporting on energy companies’ social programmes.¹⁰⁶ The new guidance will take into account the government’s UK Low Carbon Transition Plan. Ofgem itself has undertaken a considerable amount of work concerned with social issues, and in particular with access to energy for those on low incomes.¹⁰⁷ This took the form of taking steps to limit disconnection of supply, attempting to ensure that pre-payment meters did not attract an extra charge beyond that reflecting costs, and requiring special protections for vulnerable consumers. The initiatives came together in the form of a Social Action Plan, first issued by the predecessors of Ofgem in 1998 at the request of the government.¹⁰⁸ This was heavily criticized by the Trade and Industry Select Committee, which expressed ¹⁰¹ For an examination of developments in social regulation of the utilities up to 2004, see Prosser, The Limits of Competition Law, ch 4. ¹⁰² Utilities Act 2000, ss 9 (inserting a new s 4AA(3) into the Gas Act 1986) and 13 (inserting a new s 3A(3) into the Electricity Act 1989). ¹⁰³ Sections 10 (inserting a new s 4AB into the Gas Act 1986) and 14 (inserting a new s 3B into the Electricity Act 1989). ¹⁰⁴ Department of Trade and Industry, Social and Environmental Guidance to the Gas and Electricity Markets Authority (2002). ¹⁰⁵ Social and Environmental Guidance to the Gas and Electricity Markets Authority (2004). ¹⁰⁶ Social and Environmental Guidance to the Gas and Electricity Markets Authority: A Consultation Document (2008). ¹⁰⁷ For a summary, see Prosser, The Limits of Competition Law, 82–7. ¹⁰⁸ Office of Electricity Regulation and Office of Gas Supply, The Social Dimension: Action Plan (1998).

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its disappointment that it had taken a direct instruction from the government for the regulators to issue such a plan, and that the plan was so highly qualified.¹⁰⁹ Ofgem issued a new plan which was much more far-reaching, covering changes to be effected through licence modifications and new codes of practice, broader structural measures such as improved access to the competitive market for customers in debt, further research to be undertaken, and indicators for monitoring progress. A report was issued annually on progress. The Social Action Plan became the five-year Social Action Strategy launched in 2005, based around the four themes of compliance with regulatory obligations, encouraging best practice among energy suppliers, influencing the debate about measures to help tackle fuel poverty, and how best to inform customers about ways to lower their energy bills. New social tariffs were developed by a number of suppliers after clarification from Ofgem as to their permissible scope and a new self-regulatory safety net established to prevent disconnection of vulnerable customers.¹¹⁰ The strategy has been regularly updated, and further work has continued on protecting vulnerable consumers, for example Ofgem named and shamed the worst performing companies in relation to debt and disconnection policies whilst highlighting best practice.¹¹¹ A particular concern has been that of excessive charges for pre-payment meter customers, a matter seriously criticized by select committees.¹¹² As mentioned above, the 2008–9 review of supply markets resulted in new licence requirements on suppliers providing that charges for different payment types must be cost reflective, and a prohibition on undue discrimination (social tariffs would be an exception to this). As we saw earlier in this chapter, fuel poverty is an area in which Ofgem works closely with government, which is responsible for developing overall strategy; the UK Low Carbon Transition Plan has committed the government to legislating for statutory social price support, to be administered by Ofgem which will not, however, set the levels of support.¹¹³ Thus Ofgem has roles here both in advising on policy-making and administering the resulting schemes. The same is true in the area of sustainable development. Ofgem was criticized by the Sustainable Development Commission in relation to a number of aspects of energy markets and transmission networks, and the Commission recommended that Ofcom’s primary duty be amended to include an obligation to reduce emissions of greenhouse gases; it also made a number of more detailed proposals to be implemented in price control reviews.¹¹⁴ Ofgem’s duties were in ¹⁰⁹ ‘Developments in the Liberalisation of the Domestic Electricity Market’, HC 781, 1997–8, para 38. ¹¹⁰ See Ofgem, Social Action Strategy (2005). ¹¹¹ Ofgem, ‘Protecting Energy Consumer Interests – Annual Report 2007–08’, HC 856, 2007–8, 35. ¹¹² See, eg ‘Energy Prices, Fuel Poverty and Ofcom’, paras 83–8. ¹¹³ The UK Low Carbon Transition Plan: National Strategy for Climate and Energy (2009),102; the Energy Bill, clauses 8–15 provide for regulation-making powers to enable the Secretary of State to establish such schemes. ¹¹⁴ Sustainable Development Commission, Lost in Transmission? The Role of Ofgem in a Changing Climate (2007).

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fact amended by the Energy Act 2008 to add ‘existing and future’ before the word ‘consumers’ whose interests are to be protected under its primary duty, and to raise the status of its duty to contribute to the achievement of sustainable development; further duties on security of supply and reducing carbon emissions are to be introduced in later legislation.¹¹⁵ Ofgem now issues an annual sustainability report, and includes ‘[h]elping to achieve sustainable development’ as a section in its Corporate Strategy, although given its present primary duty it interprets this as requiring it ‘to ensure, so far as we can, that emissions reductions are made cost-effectively to minimise the burden on consumers, especially those in fuel poverty’.¹¹⁶ This is a further area in which joint action with government is particularly important, through government setting broader policy and in the form of Ofgem advising government.¹¹⁷ Ofgem has undertaken extensive work on facilitating access to the transmission network for renewable generators jointly with government.¹¹⁸ It also administers a number of schemes on the government’s behalf, notably the renewables obligation. To reflect the growing importance of the low carbon strategy, the regulator was restructured in 2009 to create a new sustainability division for policy matters and a new business unit, Ofgem E-Serve, to administer environmental and sustainability programmes. Turning now to Ofwat, this regulator is also subject to ministerial guidance on social and environmental matters. The guidance was issued after consultation in 2008, and, as mentioned above, issues of sustainable development are central to it.¹¹⁹ Like Ofgem, Ofwat had earlier developed policies to reduce disconnections; these were finally banned in the case of domestic premises by the Water Industry Act 1999.¹²⁰ Interventions on affordability were undertaken more directly by government through the issuing of regulations enabling the most vulnerable customers to pay an average charge rather than one based on their metered consumption. These proved ineffective and were reviewed by the Department; amended regulations were issued in 2005, expanding the numbers eligible for assistance.¹²¹ The government set up an independent review of water charging, the report of which recommended moving towards much more metering with a package of measures to secure affordability; it proposed a much more proactive role for Ofwat in addressing affordability issues, including a discount for low income families.¹²² ¹¹⁵ Section 83. ¹¹⁶ Corporate Strategy and Plan 2009–2014, para 3.3. ¹¹⁷ See the Environment, Food and Rural Affairs Committee, ‘Energy Efficiency and Fuel Poverty’, paras 154–80. ¹¹⁸ Ofgem, ‘Protecting Energy Consumer Interests Now and for the Future – Annual Report 2008–2009’, 17–18. ¹¹⁹ Department for Environment, Food and Rural Affairs, Statutory Social and Environmental Guidance to the Water Services Regulation Authority (Ofwat) (2008). For discussion of earlier interventions on social grounds in water regulation, see Prosser, Law and the Regulators, 87–9. ¹²⁰ Sections 1–2, inserting new s 61(1A) and sch 4A into the Water Act 1991. ¹²¹ Water Industry (Charges) (Vulnerable Groups) Regulations 1999, SI 1999/3441; Water Industry (Charges) (Vulnerable Groups) (Amendment) Regulations 2005, SI 2005/59. ¹²² Department for Environment, Food and Rural Affairs, The Independent Review of Charging for Household Water and Sewerage Services – Final Report (2009), ch 11.

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This proposal was echoed by the Environment Committee, which recommended that Ofwat’s remit should be strengthened to enable it to require water companies to adopt more progressive methods of tackling water affordability.¹²³ Ofwat is subject to a secondary duty to contribute to the achievement of sustainable development, and considers this to be a key element in all its work.¹²⁴ Measures taken to implement it include, in the periodic review of charges, developing a framework for each company to include environmental and social costs of its proposals, and requiring the companies to prepare and publish 25-year strategic direction statements. Ofwat has also published a sustainable development action plan and a climate change policy statement. Of course, sustainability is also central to the statement of government policy within which the regulator must work, notably in setting price limits.¹²⁵ In the case of the ORR, the rail network is of course a most striking example of a public utility to which the provision of access is central; indeed this is reflected in the massive scale of public funding to support it.¹²⁶ The ORR, like other regulators, has statutory duties (which also apply to the Secretary of State) obliging it to have regard to the interests of persons who are disabled and to the effect on the environment of activities connected with the provision of rail services.¹²⁷ However, the major responsibilities for protecting social access (as distinct from the regulator’s task of ensuring access through interconnection between different businesses) are now the responsibility of the Secretary of State. As already described, it is the minister who lays down the requirements as to the desired outputs required from periodic reviews of access charges for use of the network, which will set out the required size of the network and frequency of services.¹²⁸ The withdrawal of passenger services, formerly a matter for the regulator with appeal to the Secretary of State, may now be referred to the ORR after consultation, but there is no full appeal to the regulator on the merits.¹²⁹ In fact, the government White Paper on ‘The Future of Rail’ in 2004 did not envisage reductions in the network so the issue has not arisen in any important case since the new arrangements were introduced. The increased role of government directly reflects the huge amount of public spending needed to maintain the network and passenger services, spending for which the government wishes to be directly responsible.¹³⁰ The ORR has also adopted a sustainable development policy. The utility regulators are thus not simply economic regulators, they have a number of important social duties concerned with the maintenance of access and universal service, as well as securing sustainable development. In some cases these ¹²³ ‘Ofwat Price Review 2009’, para 68. ¹²⁴ Water Act 2003, s 37(4) inserting a new s 2(3)(e) into the Water Industry Act 1999. ¹²⁵ Department for Environment, Food and Rural Affairs, Future Water. ¹²⁶ For the somewhat tortuous history since privatization, see Prosser, ‘The Privatisation of Britain’s Railways’. ¹²⁷ Railways Act 1993 (as amended), s 4(3)(b), (6). ¹²⁸ See the Railways Act 2005, sch 4. ¹²⁹ Railways Act 2005, s 32. ¹³⁰ Department for Transport, The Future of Rail (Cm 6233, 2004).

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duties have been made more clearly the responsibility of government, as in the case of the specification of network outputs required in rail. In others, such as in relation to climate change policy, the regulators are more closely involved in government policy than in an earlier, market-led stage after privatization. In both cases, this means that the relationships between the utility regulators and other institutions, in particular government departments, have become even more central to their work.

Deliberation Given the complexity of the statutory duties, even after the post-1998 reforms, procedures for deliberation are of particular importance. In the early years the utility regulators were criticized as secretive and unaccountable, although even before 1998 they began to take major steps to increase transparency, particularly through consultation. Indeed, the Office of Telecommunications under Don Cruickshank was in the forefront of developing innovative consultative procedures.¹³¹ As mentioned earlier, the post-1998 reforms did go some way to imposing more structured procedural requirements, for example through requiring publication of forward work programmes after consultation and creating more independent forms of consumer representation. One area of particular importance is that of Parliamentary scrutiny, which has been more fully developed in relation to the utility regulators than for any other regulators discussed in this book. House of Lords’ committees have been particularly important. Thus the Select Committee on the Constitution published a major report in 2004 on ‘The Regulatory State: Ensuring its Accountability’ which concentrated on the work of the utility regulators.¹³² The report adopted a sophisticated ‘360 degree’ view of accountability, emphasizing multiple accountabilities to Parliament, the courts, interest groups, regulated companies, customers and consumers and their representative bodies, citizens, and ministers.¹³³ Although the Committee noted that there had been notable improvements in regulatory transparency and accountability, it made a number of recommendations for further improvement, most of which were accepted by the government.¹³⁴ One of these was for the creation of a new joint Parliamentary committee on the regulators; in fact a House of Lords’ Committee was created, and this produced a report on the ‘UK Economic Regulators’, including the utility regulators, in 2007.¹³⁵ This report was broadly supportive of the regulators; ‘[o]ur evidence suggested that, on the whole, the legislation is thought to be working well and the ¹³¹ See Prosser, Law and the Regulators, 83–6. ¹³² HL 68, 2003–4. ¹³³ Ibid, ch 3. ¹³⁴ ‘The Regulatory State: Ensuring its Accountability: The Government’s Response’, HL 150, 2003–4. ¹³⁵ HC 189, 2006–07.

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regulators and regulated industries are satisfied with its provisions. . . . most of the regulators are interpreting their remits both appropriately and effectively.’¹³⁶ Turning to House of Commons scrutiny, the National Audit Office and the Public Accounts Committee have also examined the work of the utility regulators, in some cases in detail. Thus, early on, the Office and Committee examined the work of the utility regulators as a group, and later looked at the special problems of regulating networks.¹³⁷ They have also looked at the work of individual regulators; for example Postcomm, Ofwat, and Ofgem.¹³⁸ Other select committees have often examined the work of the utility regulators; examples were discussed above in relation to Ofgem, where the Business and Enterprise Committee undertook reviews of energy policy which included the regulator’s work in both 2007–8 and 2008–9. Turning now to deliberation organized by the utility regulators themselves, the pattern they follow is very much that suggested in the previous chapter when discussing Ofcom, and not that of the regulators discussed earlier in the book. Thus boards meet in private, although minutes and agendas are published and some open meetings are held in addition to the regular board meetings. Indeed, Postcomm decided to end its public meetings, which had attracted few members of the public, and to concentrate on more targeted business fora and stakeholder meetings instead.¹³⁹ Although the regulators now take the form of commissions rather than individual Directors-General, there is no direct representation of different interests within them on the Health and Safety Executive model, and they have adopted the private sector model of a board including non-executive directors, as described above. As in the case of Ofcom, rather than direct internal representation of interests, consultation to obtain evidence from stakeholders is the major means of deliberation employed by the utility regulators. For major decisions, several stages of consultation are employed, with reasons given for the ensuing decisions, a major advance on the procedures adopted in the early days of utility regulation. The House of Lords Select Committee on Regulators noted that ‘[s]everal representatives of regulated industries have told us that communication channels are working well and they feel fully consulted and in the loop’.¹⁴⁰ Moreover, ‘[r]egulators seem to have put a lot of effort into developing their consultation procedures. Witnesses from regulated industries frequently commended the regulators for ¹³⁶ Ibid, paras 1.2–1.3. ¹³⁷ National Audit Office, ‘The Work of the Directors General Telecommunications, Gas Supply, Water Services and Electricity Supply’, 1995–96, HC 645; Public Accounts Committee, ‘The Work of the Directors General Telecommunications, Gas Supply, Water Services and Electricity Supply’, 1996–97, HC 89; National Audit Office, ‘Pipes and Wires’, 2001–2, HC 723; Public Accounts Committee, ‘Pipes and Wires’, 2002–3, HC 831. ¹³⁸ National Audit Office, ‘Opening the Post: Postcomm and Postal Services’, HC 521, 2001–2; ‘Ofwat – Meeting the Demand for Water’, HC 150, 2006–7; ‘Ofgem: Social Action Plan and Household Energy Efficiency’, HC 878, 2003–4. ¹³⁹ Annual Report 2004–05 (2005), 28. ¹⁴⁰ ‘UK Economic Regulators’, para 5.6.

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developing consultation procedures that are thorough, open and continually improving’.¹⁴¹ However, the Committee recommended that regulators continued to look at ways in which the procedures might be improved, and in particular that a period of 12 weeks should be allowed to give industry a reasonable amount of time to respond.¹⁴² There was also some criticism of publication of too many consultation papers; it was pointed out that in 2006 Ofgem published 218 consultations and other documents, with 295 in 2005 and 290 in 2004.¹⁴³ All the regulators examined in this chapter use consultation extensively. For example, in the ostensibly technical issue of reviewing price controls for transmission networks, Ofgem issued three consultation papers, followed by initial proposals, updated proposals, draft licence conditions, and final proposals; there were also numerous meetings with companies and a public workshop on the initial proposals. All this went far beyond the limited period of statutory consultation required at the end of the process. Ofgem also organized a review of the process after its completion to determine whether it could be improved.¹⁴⁴ Ofwat commissioned an independent review of the way in which it had undertaken the price review which it had reported in 2004; the review found a high level of satisfaction with the process, with most external contributors agreeing that it was a major improvement on previous reviews in terms of transparency and openness.¹⁴⁵ The ORR also issued a large number of consultations in preparing its periodic review of access charges. This consultation on specific issues is of course in addition to consultation on forward plans and strategies which has become a standard part of the regulators’ policy development. A final and important issue for discussion in relation to deliberation is that of consumer representation, where there has been a somewhat chequered history of different institutional arrangements. After the 1998 review of utility regulation, the preferred model became that of consumer councils independent of the regulators, and these were established in energy, postal services and water in the form of Energywatch, Postwatch, and WaterVoice (later CC Water). In addition, in rail a single Rail Passengers Council (operating as Passenger Focus) was created under the Railways Act 2005 to replace the earlier regional arrangements.¹⁴⁶ However, a further review was undertaken after some serious criticism of Energywatch and Postwatch by the Public Accounts Committee, which considered their overall achievements to be unimpressive.¹⁴⁷ Studies also revealed some serious tensions and adversarial relationships between consumer councils and regulators, culminating in a judicial review claim brought by Postwatch against Postcomm.¹⁴⁸ ¹⁴¹ Ibid, para 5.24. ¹⁴² Ibid, para 5.34. ¹⁴³ Ibid, para 5.31. ¹⁴⁴ Ofgem, Transmission Price Control Review 4 – Assessment of the Process (2007). ¹⁴⁵ Ofwat, ‘Ofwat’s Annual Report 2005–2006’, HC 1058, 2005–6, 7. ¹⁴⁶ Section 19. ¹⁴⁷ ‘Energywatch and Postwatch’, HC 654, 2005–6. ¹⁴⁸ See House of Lords Select Committee on the Constitution, ‘The Regulatory State: Ensuring its Accountability’, paras 58–69; R (on the application of the Consumer Council for Postal Services) v Postal Services Commission [2007] EWCA Civ 167; (2007) 104(12) LSG 34.

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Other influences for change were pressures for regulatory rationalization after the Hampton Report (to be discussed in the following chapter) and reform of general arrangements for consumer representation in all markets. The government issued two consultation papers which culminated in reform under the Consumers, Estate Agents and Redress Act 2007.¹⁴⁹ Energywatch and Postwatch were abolished, and their functions merged into a new National Consumer Council representing the interests of consumers in all sectors, which has taken the name Consumer Focus. In energy and postal services the legislation requires that the regulators prescribe service standards; the Secretary of State may require providers of services to be members of redress schemes approved by the regulator; criteria are set out for such approval in the Act, and Ofgem has appointed an Energy Ombudsman Service. It has also appointed a consumer panel drawn from household energy consumers. There is thus a movement towards co-regulation, as discussed in the previous chapter in relation to electronic communications.¹⁵⁰ Provision is also made in the Act for the future abolition of CC Water; arrangements in rail are unchanged. Clearly it will take time for the new arrangements to bed in, however they have already been criticized by two Select Committees: the House of Lords Select Committee on Regulators was ‘sceptical that the new arrangements will lead to improvements in consumer representation’ and the House of Commons Business and Enterprise Committee expressed concern that the new arrangements are opaque and risk reducing Ofgem’s awareness of issues of concern to consumers.¹⁵¹ Consumer Focus early on in its new life reviewed the performance of a number of regulators, including Ofgem and Ofwat, and drew broadly favourable conclusions whilst noting concern by stakeholders that the regulators had a misplaced confidence in market mechanisms to protect consumers, that they over-relied on self-regulatory mechanisms, that relations with government were unclear, and that they should take a more proactive approach in relation to the affordability of lifeline services.¹⁵²

Conclusions As in the case of Ofcom, these are very different regulators from those examined earlier in this book. The organization of their boards is increasingly close to that in the private sector and specific interests are not directly represented in them, ¹⁴⁹ See Department of Trade and Industry and HM Treasury, Consumer Representation in Regulated Industries (2004); Consultation on Consumer Representation and Redress (2006); and Consultation on Consumer Representation and Redress – Summary of Responses and Government Response to Consultation, (2006). ¹⁵⁰ Sections 30, 42–52. ¹⁵¹ UK Economic Regulators, para 5.66 (emphasis retained) and ‘Energy Policy: Future Challenges’, para 47. ¹⁵² Brooker, S. and Taylor, A., Rating Regulators (London: Consumer Focus, 2009). There are also more detailed reports on the individual regulators.

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though a range of different expertise is a feature of the boards. Instead, deliberation is ‘externalist’ and involves the collection of a massive amount of evidence through the extensive use of consultation; it seems that this has worked well, with a considerable degree of dialogue through successive rounds of consultation on key issues. The representation of consumers has worked less well, as indicated by the frequent changes in institutional structures. Although Consumer Focus has reported broadly favourably on the regulators, there remains concern that the end of specialist consumer councils in energy and post could result in a loss of focus and expertise. For the utilities, regulatory independence is much more important than in the case of some of the other regulators discussed earlier, especially to maintain regulatory predictability for private investors in the regulated industries. Again, experience currently seems good, after some earlier problems, notably in the case of the pressure put on the rail regulator in the context of Railtrack’s collapse. However, the context within which the regulators work is changing. This is most noticeable in the context of energy where, as the Sustainable Development Commission has put it, Ofgem has operated as an extremely efficient regulator, facilitating improved competition between energy suppliers, and leading to consumer price reductions. However, during recent years there has been a dramatic change in the landscape, with a focus on climate change, energy security, and the need to accelerate the UK’s move to a low carbon economy becoming of crucial importance.¹⁵³

This is reflected in regulatory partnership with government on policy matters alongside strongly defended regulatory independence in decisions entrusted to the regulators themselves. The question is thus whether this partnership can be managed in an open and accountable way. There are signs of improvement in the way in which relations between government and regulators are managed, notably in the clearer public specification of required outcomes by government in rail and in water, and in the more developed use of social and environmental guidance in energy. Indeed, one role for the regulators is to ‘keep the government honest’ through ensuring that decisions are taken transparently. However, there are signs that confusion of responsibilities still exists, a point made by both the Sustainable Development Commission and Consumer Focus. The biggest challenge for the future will be to develop a clear and transparent framework for regulatory partnership with government, building on the steps already taken, whilst maintaining independence on matters entrusted to the regulators themselves.

¹⁵³ Lost in Transmission, 6.

10 Regulating the Regulators This chapter will examine the regulatory reform initiatives of government insofar as they apply to the regulators considered earlier. It might appear to be a curious time for devoting space to these developments given that, in the financial crisis of 2008–9, part of the blame has been put on insufficiently rigorous regulation, yet a major theme in regulatory reform has been the lifting of regulatory burdens. Illustrating the new mood, the minister formerly responsible for financial services regulation stated that ‘[t]hose who think the global market economy can be run without regulation or with self regulation or light-touch regulation have been entirely routed’.¹ Self-regulation and light-touch regulation have been central themes of regulatory reform. The chairman of the Financial Services Authority, in his review of bank regulation, recommended not reduced regulation but a new approach which will be more intrusive than the ‘light touch’ adopted before the crisis.² Thus regulatory reform may appear to be an approach whose time has passed, or which will at least need radical change.³ However, there are two reasons why regulatory reform still requires extended coverage in this book. The first is that the regulation of regulation by government and other agencies is still active and growing, not just at the domestic UK level but also in the EU and more widely as part of the initiatives urged on national authorities by the OECD.⁴ In the UK it has gone through a variety of guises, starting as deregulation, then better regulation, then returning to a more deregulatory approach. A further point of relevance is that, as Julia Black has pointed out, ‘[c]entralisation and consolidation can be seen in the enhancement of powers being given to state-based regulators to regulate non-state regulatory bodies, and . . . in the increased role of the Cabinet Office and the Treasury in driving and overseeing state-based regulators’, thus raising once more the issue

¹ Ed Balls, MP, quoted in ‘Ministers Accused of Regulatory Amnesia’, The Financial Times, 23 September 2008. ² Financial Services Authority, The Turner Review – A Regulatory Response to the Global Banking Crisis (2009), section 2.7. ³ See also the Regulatory Reform Committee, ‘Themes and Trends in Regulatory Reform’, HC 329, 2008–9. ⁴ For a comprehensive survey of the area, see the essays in Weatherill, S. (ed), Better Regulation (Oxford: Hart Publishing, 2007).

The Regulatory Enterprise. Tony Prosser. © Oxford University Press 2010. Published 2010 by Oxford University Press.

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of regulatory independence.⁵ Regulatory reform has had a major influence on the map of the regulatory state through imposing centralized requirements on regulators; although as we have seen, all the regulators studied have taken important steps to implement ‘Better Regulation’ requirements, there are signs of tension. For example, in evidence to the House of Commons Regulatory Reform Committee, the Environment Agency, the Health and Safety Executive and the Food Standards Agency were all critical of ‘initiative overload’ from the government’s Better Regulation Executive. The Environment Agency also claimed that the Executive ‘has failed to strike the right balance. Seemingly distracted by the current emphasis on reducing the burden on business, it may have lost sight of how regulation and the outcomes that it delivers can be supported and made most effective’.⁶ The second major issue requiring examination is that of whether the substance and procedures of regulatory reform are sufficiently sensitive to the different regulatory rationales and practices identified in this book. It will be argued that were the initiatives concerned only with lifting burdens they would not be sensitive in this way, but that in fact there are other themes within regulatory reform which are potentially more appropriate for the full range of regulation examined here. Thus there is a second theme in regulatory reform of improving deliberation, and a third is beginning to develop, that of monitoring regulation to ensure compliance with human rights, with equality and with sustainable development. Before describing the background to regulatory reform in the UK, it will be useful to examine these themes in a little more detail.

Models of regulatory reform One example of regulatory reform which was not sufficiently sensitive to the range of regulatory concerns identified here was that of the Australian National Competition Policy, analyzed in detail by Bronwen Morgan.⁷ The approach adopted there, which corresponds in important ways to the ‘lifting burdens’ terminology used here, required cost-benefit analysis of regulatory strategies against the yardstick of maximizing market competition. As a result it institutionalizes a presumption in favour of market governance, and this causes bureaucrats to reform or ‘translate’ aspects of social welfare that previously may have been expressed in the language of need, vulnerability or harm into the language of market ⁵ ‘Tensions in the Regulatory State’ [2007] Public Law, 58–73, at 59. ⁶ ‘Getting Results: The Better Regulation Executive and the Impact of the Regulatory Reform Agenda’, HC 474, 2007–8, paras 11–13, 26. ⁷ See her Social Citizenship in the Shadow of Competition: The Bureaucratic Politics of Regulatory Justification (Aldershot: Ashgate, 2003) and for this theme in particular, ‘The Economization of Politics: Meta-Regulation as a Form of Non-Judicial Legality’ (2003) 12 Social and Legal Studies, 489–523.

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failures or market distortion. Not only does this translation tend to silence certain critical modes of demanding justice, particularly those that rely on moral or distributive values, but the institutional solutions which bureaucrats advance to secure the ‘translated’ social welfare values render them politically vulnerable.⁸

We have examined regulators who take decisions on a mix of economic and social values in this book, so any attempt to ‘silence’ the latter through institutional change would be of major concern. The danger of such an approach (not only in Australia) is to see the task of regulation as essentially a technical matter of making rules; these rules are then seen as constraints on the freedom of business to compete in open markets and are thus to be minimized. Yet, as has been demonstrated throughout this book, in fact regulatory decision-making revolves around deep conflicts of social values and is not merely the outcome of technical processes. Translating this to the UK, we can see two closely associated themes of regulatory reform which adopt a similar approach. They are that existing regulatory rules can be cut back, where possible using a methodology which assesses the costs rules impose on businesses (the ‘standard cost model’) and sets quantified targets for their reduction. The second is that new regulatory rules can only be adopted after they have been justified through some form of cost-benefit analysis. Neither theme has been fully adopted in the UK, but nevertheless they have provided the basis for a particular view of regulation, here termed the ‘lifting burdens’ approach. To adopt this approach raises two major problems; those of quantification and of confusion of means and ends. As we shall see below, the issue of how to quantify the benefits of regulation has been one which has proved resistant to any serious attempt to resolve it, and as a result quantification has been largely a matter of counting costs, which can obviously produce an antiregulation bias. This should come as no surprise; ‘[i]n comparing monetized benefits to monetized costs, and making this comparison the criterion for judging public policies protecting people and the environment, the analysis also stacks the decks against such policies’.⁹ Many of the regulatory policies identified earlier are likely to be impossible to quantify in these terms, and so to be under-valued in the cost-benefit analysis which has become central to some major versions of the ‘lifting burdens’ approach. Secondly, concentrating on reducing the means of regulation in the form of rules can lead to a neglect of the various ends of regulation. In particular, in much of the more polemical literature there is a confusion between reducing policy and administrative costs. The former are the direct costs of meeting the policy goal and are matters for political decision based on a variety of different economic ⁸ ‘The Economization of Politics’, 491 (emphasis retained); see also 499, 509, 515, 516, 517. Regulatory reform in Australia has now moved on considerably, and employs a much broader range of approaches than burden lifting. ⁹ Ackerman, F. and Heinzerling, L., Priceless: On Knowing the Price of Everything and the Value of Nothing (New York: The New Press, 2004), 40; see also 149–51 and ch 9.

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and social rationales, or for decision by regulators themselves in determining what is necessary to fulfil their duties. The latter are administrative overheads, for example record keeping, inspection, and enforcement. The more sophisticated literature, for example the influential Hampton Report to be discussed below, does make this distinction, and thus acknowledges that regulatory reform should not be about reducing policy options available to regulators but about streamlining administrative costs and making regulation more effective, but this is a distinction easily lost in debates which often see regulation itself as the burden. Moreover, as Baldwin has pointed out, the assumption that it is possible to separate policy and administrative costs may be unrealistic.¹⁰ The lifting burdens approach is not, however, the only one in the regulatory reform initiatives. Alongside it there is a more deliberative model which encourages rigour, transparency, and participation in decision-making.¹¹ To caricature the relationship between the different approaches, we could say that the cost-benefit approach associated with lifting burdens aims to make regulatory decision-making easier through providing quantifiable criteria through which decisions can be reached, whilst the deliberative approach aims to make it more difficult through opening up the range of views which have to be taken into account by the decision-maker. Thus regulatory reform can in principle contribute to a deliberative vision through requiring consultation, a disciplined consideration of different viewpoints through impact analysis, requiring the giving of open justifications for regulatory outcomes, and demanding proportionate justifications for enforcement action.¹² The relationship between the ‘lifting burdens’ and deliberative approaches will be considered in more detail later; they are often closely intertwined in practice. We are also beginning to see the development of other forms of regulating regulation which are quite distinct from the regulatory reform initiatives, but are based instead on the extent to which they comply with non-economic values. The most obvious is that regulators are of course public authorities under the Human Rights Act 1998, and so an infringement of a right in the European Convention on Human Rights can be the basis for direct challenge in domestic courts; as we have seen in earlier chapters, a number of such rights are of great importance. Moving away from the role of the courts, monitoring of rights related to race, gender and disability equality as well as more general human rights is undertaken by the Equality and Human Rights Commission; impact assessment has also

¹⁰ Baldwin, R., ‘Better Regulation: Tensions Aboard the Enterprise’, in Weatherill, Better Regulation, 27–47, 39. ¹¹ For an analogous discussion of the relationship between rational-instrumental and deliberative-constitutive paradigms of administrative constitutionalism, see Elizabeth Fisher, Risk – Regulation and Administrative Constitutionalism (Oxford: Hart Publishing, 2007). ¹² Some elements of this were present even in the Australian initiative, see Morgan, ‘The Economization of Politics’, 505.

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been required in this area, notably in Northern Ireland.¹³ The Equality Bill will extend this to a new general equality duty applying to public bodies, including regulators and public bodies which they regulate. In addition, as we have seen in earlier chapters, the Parliamentary Joint Committee on Human Rights has taken an important role in reviewing the work of some of the regulators studied here, especially those in health and social care. Indeed, it has made important recommendations for ensuring that regulators in these areas take steps to promote and protect the human rights of service users. In addition, it should be noted that there is a growing number of legal requirements that regulators have regard to sustainable development in their decisionmaking. Arrangements for monitoring this include the work of the House of Commons Environmental Audit Committee; for example this has included examination of the role of impact assessments by regulators, carbon trading, and also the structure of government and climate change policy, including the role of Ofgem.¹⁴ Once more there has also been an increased use of impact assessment here in the form of strategic environmental assessment.¹⁵ Overall, the arrangements for monitoring human rights and social solidarity are far less well-developed than those in the regulatory reform initiatives, despite the presence of the Equality and Human Rights Commission. However, their existence makes an important point: if we accept that regulation has a mixture of rationales, monitoring and improvement is not simply a matter of ensuring that regulation is limited and permits markets to operate freely wherever possible, it is also to ensure that regulators are acting properly to implement these other rationales. A coherent system for regulating regulation would include this type of monitoring and improvement, which may be just as important as the more conventional forms of regulatory reform. I shall return to this point later after examining the various regulatory reform initiatives and then looking in more detail at those applicable to the regulators studied in this book.

Regulatory reform: development and overview The origins of regulatory reform can be traced to the steps taken in the United States for detailed executive oversight of the regulatory process, beginning with the celebrated Executive Order 12,291 in 1981 requiring, amongst other things, costbenefit analysis of proposed regulatory rules and their submission to the Office

¹³ Equality Act 2006, ss 11–12. For the history of impact assessment in the fields of both equality and sustainable development, see Jenkins, V. and Rainey, B., ‘Moving into the Mainstream: An Analysis of Regulatory Responses to Impact Assessment in Equality and Sustainable Development’ (2007) 58 Northern Ireland Legal Quarterly, 78–107. ¹⁴ ‘The Structure of Government and the Challenge of Climate Change’, HC 740, 2006–7. ¹⁵ Jenkins and Rainey, ‘Moving into the Mainstream’, 85–96.

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of Management and Budget for review.¹⁶ The requirements were substantially reformed under the Clinton administration, but nevertheless provided a harbinger of things to come elsewhere. In the UK, the Conservative governments’ deregulation initiatives were the first stage of regulatory reform; after only limited success the deregulation initiative was relaunched in 1992 with a number of task forces to examine areas where rules could be lifted. A code for enforcement agencies was issued, and alongside these initiatives the Citizen’s Charter provided a new stress on quality standards in public services. These developments initially occurred without a legislative basis, but the Deregulation and Contracting Out Act 1994 provided the basis for orders to improve enforcement procedures and, most importantly, for the lifting of burdens on business through the making of administrative orders, even if such burdens were imposed by statute. At this early stage two key themes were already apparent: a hostility to the regulatory imposition of burdens on business (which could extend to hostility to regulation itself ); the initial White Paper was indeed entitled Lifting the Burden.¹⁷ Alongside this was a more deliberative concern to ensure that enforcement procedures were fair. More important, however, were the measures introduced by the incoming Labour government, moving the emphasis from ‘deregulation’ to ‘better regulation’.¹⁸ A Better Regulation Task Force was quickly established within the Cabinet Office, acting as an advisory body with business representation; a Better Regulation Unit, also in the Cabinet Office, replaced the former Deregulation Unit, and in 1999 it was renamed the Regulatory Impact Unit. Principles of good regulation were issued, expressed to be applicable to all state regulation; they were transparency, accountability, proportionality, consistency, and targeting.¹⁹ The principles were of considerable importance, being incorporated into a number of statutory requirements applying to regulators and forming the basis for other initiatives. The procedures under the Deregulation and Contracting Out Act were amended by the Regulatory Reform Act 2001, including giving a broader power to make regulatory reform orders to remove regulatory burdens, subject to a proportionality test and restrictions on removing ‘any necessary protection’ or preventing ‘any person from continuing to exercise any right or freedom which he might reasonably expect to continue to exercise’.²⁰ Provision was also made for the issue of codes of practice relating to enforcement; a concordat on enforcement was issued for local authorities and adopted by some regulators. In addition, a ministerial Panel for Regulatory Accountability was set up to scrutinize departmental simplification plans and major policy proposals; it was chaired by the Prime Minister from 2004. In 2002 an Action Plan on Regulatory Reform was ¹⁶ See, eg Friedmann, H., ‘The Oversupply of Regulatory Reform: From Law to Politics in Administrative Rulemaking’ (1992) 71 Nebraska Law Review 1169–93. I shall return to this issue in my concluding chapter. ¹⁷ Department of Trade and Industry (Cmnd 9571, 1985). ¹⁸ For a brief summary see Baldwin, ‘Better Regulation: Tensions Aboard the Enterprise’, 27–9. ¹⁹ Cabinet Office Better Regulation Unit, Principles of Good Regulation (2000). ²⁰ Section 3(1)–(2).

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issued containing over 260 proposals to reduce administrative and regulatory burdens. Despite this frenetic activity, the measures proved to be inadequate for the government’s aims; the statutory power to issue regulatory reform orders was limited by the concept of burdens used and by restrictions in the legislation, and by the end of 2005 only 27 such orders had been made. Indeed, it appeared that a regulatory reform order took the same resources to pass through Parliament as a Bill, thereby removing the point of providing a simpler procedure to lift burdens by order.²¹ In the 2005 budget it was announced that further steps would be taken based on two reports. The first was that by the Better Regulation Taskforce entitled Regulation – Less is More: Reducing Burdens, Improving Outcomes.²² This proposed a new approach through the use of a ‘standard costs model’ to assess administrative costs imposed on business by regulation and to enable effective monitoring of their reductions against targets. It also recommended a ‘One in, One out’ approach by which departments had to prioritize between new regulations and simplifying and removing existing regulations. Further measures to be taken included developing a robust mechanism for submission of proposals for simplification by business and other stakeholders and a rolling programme of simplification; regulatory impact assessments should require consideration of compensatory simplification measures where new regulation was introduced. The government should also develop a methodology for assessing the total cumulative costs of regulatory proposals. Although the report accepted that there was a need for appropriate, good quality regulation, and noted the distinction between policy and administrative costs, it considered that those being regulated are primarily interested in the total costs, and its proposals were designed to reduce both, although the standard costs model concerned administrative burdens only.²³ The model has been criticized as over-simplifying the distinction between the two types of costs, and failing to identify properly costs which would be incurred by any competent management without regulation, thereby greatly exaggerating the costs of regulation and likely savings.²⁴ Overall the Less is More proposals fall very clearly into the ‘lifting burdens’ approach within regulatory reform, and indeed took this much further than previously through its emphasis on quantification and meeting quantitative targets and on the ‘One in, One out’ approach. The government accepted the recommendations in full. The second report was the Hampton Report on Reducing Administrative Burdens: Eff ective Inspection and Enforcement, which will be considered in more detail below.²⁵

²¹ Better Regulation Task Force, Regulation – Less is More: Reducing Burdens, Improving Outcomes (2005), 41. ²² Ibid. ²³ Ibid. 11, 13, 18, 23. ²⁴ Baldwin, ‘Better Regulation: Tensions Aboard the Enterprise’, 39. ²⁵ Hampton, P., Reducing Administrative Burdens: Eff ective Inspection and Enforcement (London: HM Treasury, 2005).

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The outcome of the government’s acceptance of both reports was a Better Regulation Action Plan emphasizing a risk-based approach to regulation and drawing on Hampton to merge regulators. The Better Regulation Executive and Commission replaced the earlier institutions, and in November 2005 the Prime Minister announced targets to reduce burdens by 25 per cent by 2010. Simplification plans were also to be produced to identify where reductions in burdens could be made to meet the targets, to be monitored by the Better Regulation Commission. These reforms reflected a major change in emphasis ‘away from the pursuit of better regulation and towards less regulation through the imposition of lower costs on business’.²⁶ A separate review was undertaken of the implementation of EU legislation.²⁷ A consultation was issued on new legislation to broaden the powers to lift regulatory burdens by means of regulatory reform orders; it was also proposed to implement the Hampton recommendations through up-dating the enforcement concordat, streamlining regulatory structures and reforming the regulatory penalty regime to include administrative penalties. The original legislative proposals proved highly controversial as they were seen as a means by which ministers could by-pass Parliamentary procedures on a wide range of matters. The controversy extended to their application to the economic regulators. It will be recalled from the previous chapter that Tom Winsor as rail regulator had had a fierce conflict with government at the time of Railtrack’s collapse in which the minister had threatened to introduce emergency legislation to reduce his powers. He argued that the bill would enormously strengthen the hand of a minister to take a regulator under political control, or transfer part of his jurisdiction to a body that is politically responsive. After a cursory process, ministers would judge the merits of their own proposals, and would only have to be satisfied that their measure reduced a burden – including to their own plans – and that certain, far from adequate protective conditions are met.²⁸

A debate was held in the House of Lords on this issue during the passage of the Legislative and Regulatory Reform Bill, but an amendment to provide that an order must not restrict the jurisdiction or undermine the independence of the economic regulators was defeated after ministerial assurances that the new powers would not be used to deliver highly controversial proposals or erode the independence of statutory regulators.²⁹ As enacted, the Legislative and Regulatory Reform Act 2006 makes provision for orders to reduce burdens, including administrative inconvenience or obstacles to efficiency, productivity, or profitability.³⁰ This can include a burden which affects only a minister or a government department ‘unless it affects the Minister

²⁶ ²⁷ ²⁸ ²⁹

Baldwin, ‘Better Regulation: Tensions Aboard the Enterprise’, 38. Davidson Review: Implementation of EU Legislation – Final Report (London: HMSO, 2006). ‘Power to the Regulators’, The Guardian, 26 October 2006. HL Debates, vol 685, cols 1343–55 (26 October 2006). ³⁰ Section 1(3).

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or department in the exercise of a regulatory function’.³¹ The minister is also given the power to promote by order regulatory principles that regulatory activities are carried out in a way which is transparent, accountable, proportionate, and consistent, and targeted only at cases where action is needed. Orders may amend the constitution of a regulatory body, transfer regulatory functions to a new body, or abolish a regulatory body, though they may not abolish regulatory functions or confer new ones.³² Powers to use orders for regulatory reorganization are thus extensive; as we saw in Chapter 5, the Health and Safety Commission and Executive have been merged by order under the Act.³³ A number of preconditions for the making of orders are set out in the Act, including that their effect is proportionate to their policy objective, that the provision does not remove any necessary protection or prevent the continued exercise of a right or freedom which a person might reasonably expect to continue to exercise, and that the order makes provision which ‘is not of constitutional significance’.³⁴ As in the earlier legislation, special Parliamentary procedures apply for the approval of orders under the Act, although these are made more flexible than in the past. Part 2 of the Act explicitly concerns regulators, stating that they must have regard to the regulatory principles that activities should be carried out in a way which is transparent, accountable, proportionate, and consistent and should be targeted.³⁵ The minister may also issue, after consultation, a code of practice in relation to the exercise of regulatory functions to which regulators must have regard.³⁶ However, it is specified that these provisions do not apply to the economic regulators (Ofgem, Ofcom, ORR, Postcomm, and Ofwat).³⁷ This is to preserve their independence and to reflect the fact that they are all committed to such regulatory principles anyway; as we have seen, observance of the principles is already a statutory requirement for Ofcom, Ofgem, and Ofwat. Further important developments have taken place in regulatory reform since the enactment of the legislation. The Better Regulation Executive was moved from the Cabinet Office into the Department for Business, Enterprise and Regulatory Reform (now the Department for Business, Innovation and Skills) in 2007. A Regulators’ Compliance Code was issued under the 2006 Act in late 2007, and will be considered below. In 2008 the Better Regulation Commission was replaced by the Risk and Regulation Advisory Council with a more limited remit focusing on risk-based regulation; the House of Commons Regulatory Reform Committee noted that this ‘seems to have led to a perception that there is something of a vacuum of both scrutiny and strategic thinking’.³⁸ Potentially the most important substantive proposal was for the introduction of regulatory budgets that would set out the costs of new regulation that could ³¹ ³³ ³⁴ ³⁸

Section 1(4). ³² Section 2. Legislative Reform (Health and Safety Executive) Order 2008, SI 2008/960. Section 3(2). ³⁵ Section 21. ³⁶ Sections 22–3. ³⁷ Section 24. ‘Getting Results’, para 52.

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be introduced in a given period.³⁹ If implemented, this would have been a major further step forward in the ‘lifting burdens’ approach, particularly as the proposals were for a system in which only gross costs were considered, making no reference to the value of benefits, although these could be considered in setting and justifying the level of the budget.⁴⁰ The proposed budgets would not apply to economic regulators to maintain their independence from detailed political oversight, but were likely to apply to other regulators, although those with statutory independence such as the Food Standards Agency would only be invited to opt in.⁴¹ However, in a brief written statement to the House of Lords, the Secretary of State announced that proposals would be dropped; in addition, a new better regulation sub-committee of the National Economic Council would replace the Panel for Regulatory Accountability and an external Regulatory Policy Committee would be established to advise government on the assessment of the costs and benefits of regulation and on whether regulators are appropriately risk-based in their work.⁴² This overview of the regulatory reform initiatives has emphasized a number of important points. First, regulatory reform is highly centralized, and potentially has a major effect on the regulators irrespective of their independent status. This has given rise to constitutional concerns, but the arrangements under the Legislative and Regulatory Reform Act only partially resolve these; ministerial powers for lifting burdens and reorganizing regulators by order are potentially far-reaching. Secondly, despite the shift of emphasis by the incoming Labour government in 1997 towards ‘better regulation’ rather than ‘deregulation’, since 2005 the initiatives have been dominated by a concern with lifting burdens through quantified targets. Finally, alongside this there is a second theme, mainly based around enforcement but also of wider application, on creating a more deliberative and open regulatory process. In the next section I shall examine the implications of some of the major regulatory reports and initiatives for the regulators.

Regulatory reform: the major reviews and the regulators Throughout the regulatory reform process attention has been paid to the regulators, unsurprisingly in view of their importance alongside government in setting regulatory requirements. For example, in 2001 the Better Regulation Task Force issued a report on the economic regulators.⁴³ Major themes which it identified were the role of government in regulation; problems due to the complex duties of the regulators, especially where there were social and economic goals; the effects ³⁹ Better Regulation Executive, Regulatory Budgets: A Consultation Document (2008). ⁴⁰ Ibid, para 8.7 and ‘Technical Annex on Methodological Issues’. ⁴¹ Ibid, paras 4.8, 4.12. ⁴² The Secretary of State for Business, Enterprise and Regulatory Reform (Lord Mandelson), 709 HL Debates, vol 709, cols WS99–100 (2 April 2009). ⁴³ Economic Regulators (2001).

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of price controls on investment; the relationship of the regulators’ work with competition law; appeals against regulatory decisions; and the move to commissions rather than individual directors-general. It made recommendations that annual business plans should include clear explanations of how each regulator would prioritize different objectives; there should be a requirement to provide assessments of costs and benefits in the form of regulatory impact assessments; innovative approaches to consultation should be adopted allowing a real dialogue between stakeholders and demonstrating how proposals had been amended after consultation; and regulators should adopt programmes for the lifting of price controls and the removal of outdated licence conditions. A particularly important recommendation, as seen in the previous chapter, was that the boards of regulatory bodies should include both executive and non-executive members, who should be appointed for their expertise rather than to represent stakeholder groups. The government responded favourably to the recommendations, notably in relation to regulatory impact assessments and board membership. The Better Regulation Task Force issued a follow-up report on independent regulators (not limited to economic regulators and including healthcare) in 2003, concentrating on issues of independence, accountability, better regulation tools, governance, enforcement, and appeal mechanisms.⁴⁴ This set out similar recommendations; all the regulators needed to follow the principles of good regulation, they should prepare regulatory impact assessments, follow the government’s Code of Practice on Consultation, hold at least one open meeting for stakeholders per year, have an appeals mechanism, sign up to the enforcement concordat, and share best practice. They should also have a board and a separate chair and chief executive. Management statements should be agreed with ministers to contain the regulator’s overall objectives and targets in support of the departments’ wider strategic aims and Public Service Agreement, as well as the conditions under which public funds would be paid to the regulator and how the regulator was to be held to account. Once more the government’s response was favourable, but with some reservations on appeal rights. The important report by the Better Regulation Executive, Regulation – Less is More, did not deal directly with the regulators, except to insist that in measuring the regulatory burden it was important to include all regulations, whether imposed by government or by independent regulators; these should all be covered by the target for reducing burdens.⁴⁵ The Hampton Review, however, being concerned with inspection and enforcement, considered the work of regulators more directly. However, it excluded from consideration the work of the economic regulators (Ofgem, ORR, Ofwat, Ofcom, Postcomm, and the Civil Aviation Authority) ‘because they concentrate on economic solutions to market failures covering a small group of businesses, and have been the subjects of a series of recent studies, including by the Better Regulation Task Force’. It also excluded the work ⁴⁴ Independent Regulators (2003).

⁴⁵ At 22, 24.

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of the Healthcare Commission and the Commission for Social Care Inspection as they were subject to another review.⁴⁶ Nevertheless, other regulators covered in this book did fall within its scope, including the Food Standards Agency, the Environment Agency, and the Health and Safety Executive. The review clearly distinguished policy and administrative costs, and examined the latter, not considering whether a particular area should or should not be regulated.⁴⁷ The review found that the use of risk assessment was patchy, yet it was an essential means of directing regulatory resources where they can have the maximum impact on outcomes. Penalties for breach of regulatory requirements were too low, and regulatory structures too complicated with too many small regulators at national level. The review recommended that the problems should be tackled by ‘entrenching the principle of risk assessment throughout the regulatory system, so that the burden of enforcement fall most on highest-risk businesses, and least on those with the best records of compliance’.⁴⁸ Principles of regulatory enforcement were set out in the review, including the use of such risk assessment, accountability, and proportionate sanctions.⁴⁹ There should also be a consolidation of regulators and increased scrutiny by the National Audit Office and Parliament. These proposals were accepted in full by the government. Post-Hampton, it is apparent from earlier chapters that regulators have all attempted to adopt a more risk-based approach.⁵⁰ Probably the most important specific development was the publication of the statutory Regulators’ Compliance Code at the end of 2007.⁵¹ The Code was issued under powers provided by s 22(1) of the Legislative and Regulatory Reform Act; as noted above, the economic regulators do not fall within the scope of these powers. However, the regulatory bodies to which the Code applies include the Environment Agency, the Food Standards Agency, the Health and Safety Executive in relation to most of its functions, and the Human Fertilisation and Embryology Authority; regulatory functions under the Water Industry Act 1991 are also included.⁵² These regulators must have regard to the Code when determining any general policy or principles, setting standards or giving general guidance, though the Code does not apply to the exercise of regulatory functions in individual cases.⁵³ The Code sets out the Hampton principles and elaborates them in more specific provisions. The principles are as follows; • regulators should recognize that they have a duty to allow, or even encourage, economic progress and only to intervene where there is a clear case for protection; ⁴⁶ Reducing Administrative Burdens, para A1. ⁴⁷ Ibid, paras 1.7–1.8. ⁴⁸ Ibid, para 24. ⁴⁹ Ibid, para 2.92. ⁵⁰ For more details on the steps taken to do so after Hampton, see HM Treasury, Better Regulation Executive and Cabinet Office, Implementing Hampton: From Enforcement to Compliance (2006). ⁵¹ Department for Business, Enterprise and Regulatory Reform, Regulators’ Compliance Code: Statutory Code of Practice for Regulators (2007). ⁵² Legislative and Regulatory Reform (Regulatory Functions) Order 2007, SI 2007/3544, Sch 1. ⁵³ Regulators’ Compliance Code, paras 2.3–2.4.

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• they should use comprehensive risk assessment to concentrate resources in the areas that need them most; • they should provide authoritative, accessible advice easily and cheaply; • no inspection should take place without a reason; • businesses should not have to give unnecessary information or give the same piece of information twice; • the few businesses that persistently break regulations should be identified quickly and face proportionate and meaningful sanctions; and • regulators should be accountable for the efficiency and effectiveness of their activities, while remaining independent in the decisions they take. This was supplemented by the publication in 2008 of a Code of Practice on Guidance in Regulation which set out expectations as to what users could expect from guidance issued by government departments and their agencies.⁵⁴ A final review which needs to be mentioned as of central importance to regulators is the Macrory Review of Regulatory Penalties.⁵⁵ Once more this did not cover all regulators, with the economic regulators (except the Office of Rail Regulation) considered only for comparative purposes and the Healthcare Commission and Commission for Social Care Inspection considered to be outside the scope of the review.⁵⁶ The review recommended that penalties principles should be developed to which regulators would be obliged to have regard, and new forms of penalty introduced. Chief amongst these was a power for regulators to impose ‘monetary administrative penalties’ as an alternative to criminal prosecution; appeals would be heard by a Regulatory Tribunal rather than the criminal courts. Powers to issue statutory notices and enforceable undertakings should also be introduced, as should schemes of restorative justice. These recommendations were accepted in full by the government, subject to the funding implications of establishing a new appeal tribunal. Regulators would only get the full range of penalties when they had demonstrated their compliance with the principles set out in the Hampton and Macrory Reviews. Implementation has occurred through the Regulatory Enforcement and Sanctions Act 2008 which provides for ministers to issue orders empowering regulators to impose a new range of civil sanctions, including financial sanctions, various forms of notices and undertakings. The regulators which can be covered include the Environment Agency, the Food Standards Agency, the Health and Safety Executive, the Human Fertilisation and Embryology Authority, Ofcom, and the ORR, though not Ofgem or Ofwat (which already have powers to impose civil penalties).⁵⁷ Appeals will lie to the First-tier Tribunal created by the Tribunals, Courts and Enforcement Act 2007.

⁵⁴ Department for Business, Enterprise and Regulatory Reform, Code of Practice on Guidance on Regulation (2008). ⁵⁵ Macrory, R., Regulatory Justice: Making Sanctions Eff ective – Final Report (Cabinet Office, 2006). For useful discussion, see Black, ‘Tensions in the Regulatory State’, 69–73. ⁵⁶ Macrory, Regulatory Justice, Annex C. ⁵⁷ Schedule 5.

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It can thus be seen that much of the work has been associated with the ‘lifting burdens’ approach, for example through requiring simplification plans and the setting of targets for the reduction of costs imposed by regulation. However, other elements are present as well. Risk regulation has been a major concern; this can be seen as a means of ‘lifting burdens’ through reducing regulatory requirements for low-risk enterprises. However, it can also be seen as a more procedural concern through requiring better targeting and a more proportionate approach in regulatory inspection and enforcement. Other measures, such as the issuing of the compliance code, have a more deliberative base in improving the quality of regulatory enforcement. Together with the new arrangements for civil penalties, they may increase the involvement of the courts: ‘[t]he proposals . . . will also increase the legal accountability of governmental regulators, and have significant, if not directly intended, consequences for the development of administrative law’.⁵⁸ In considering more directly the deliberative aspects of regulatory reform, something now needs to be said about the role of regulatory impact assessments, perhaps the most important new forms of regulatory procedure introduced by the regulatory reform initiatives.

Regulatory reform, impact assessments and deliberation Regulatory impact assessments form a bridge between the ‘lifting burdens’ approach and a more deliberative type of regulatory reform. Thus one function is to ensure that new regulatory requirements which cannot be justified are not introduced; another is, according to the departmental guidance, to help the policy-maker fully think through and understand the consequences of possible and actual Government interventions in the public, private and third sectors; and . . . to enable the Government to weigh and present the relevant evidence on the positive and negative effects of such interventions, including by reviewing the impact of policies after they have been implemented.⁵⁹

One important point is that they are designed to ‘inform decision-making, not to determine decisions or to substitute for political accountability’.⁶⁰ The approach is thus distinct from cost-benefit analysis, which may be seen as a substitute for political decision-making through reducing the relevant variables to a quantifiable form which can be weighed directly against each other to determine an outcome.

⁵⁸ Black, ‘Tensions in the Regulatory State’, 69. ⁵⁹ Department for Business, Innovation and Skills, Impact Assessment, at (consulted 16 December 2009). ⁶⁰ Baldwin, R., ‘Is Better Regulation Smarter Regulation?’ [2005] Public Law, 485–511, at 491.

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This procedural emphasis in regulatory impact assessment has not, however, avoided similar criticisms to those made against cost-benefit analysis. Amongst the leading academic commentators, Baldwin has suggested that it tends to militate against ‘smarter’ forms of regulation through concentrating on individual proposals rather than combinations of approaches, and also neglects issues connected with the practical enforcement of regulatory requirements.⁶¹ Rather similarly (and prophetically) Black criticized the use of impact assessment by the Financial Services Authority on the basis that [w]hich firms the FSA should put most of its efforts into ensuring do not cause loss to consumers, and which in comparison they should not really concern themselves with, is a highly political decision masked in the technical and apparently neutral language of the risk assessment model. For determining impact thresholds is an art, not a science.⁶²

Some of the criticisms may have been met through changes introduced in April 2007, aiming to make the impact assessment process simpler, more transparent, and embedded in the earliest stage of policy-making. ⁶³ However, the process still included a major stress on monetization. The new guidance states that the full range of costs and benefits, economic, social and environmental, must be taken into account and monetized so far as possible; when non-monetary costs and benefits were considered, they need only be annexed to the assessment.⁶⁴ The compendium reports produced by the National Audit Office on regulatory impact assessments have also been critical, notably of attempts to quantify costs too precisely and in a way which did not fully reflect uncertainties, with only limited quantification of benefits.⁶⁵ In 2004–5, of the sample of assessments examined, there was quantification in eight out of ten, but was this applied to the benefits in only four.⁶⁶ Nevertheless, the impact assessments had a vital communicative role, and consultation was generally done well.⁶⁷ The Office also noted that additional criteria, such as sustainable development and health impact assessment, had been added to the assessments as they had developed: ‘[t]he inclusion of these tests has enabled policy makers to undertake a full analysis of likely impacts – social, economic and environmental – of a policy change, and the options for implementing it’. However, it also found little rigour in the ⁶¹ Ibid, 503–7, 511. ⁶² Black, J., ‘The Emergence of Risk-Based Regulation and the New Public Risk Management in the United Kingdom’ [2005] Public Law, 512–48, at 532. For similar, more general criticism, see Hood, C., Rothstein, H., and Baldwin, R., The Government of Risk: Understanding Risk Regulation Regimes (Oxford: Oxford University Press, 2001), 179–84. ⁶³ Cabinet Office, New impact assessments will increase transparency and improve regulation, Press Release CAB/030/07, 2 April 2007. ⁶⁴ Department for Business, Enterprise and Regulatory Reform, Impact Assessment Guidance, (2007) at: (consulted 16 December 2009). ⁶⁵ ‘Evaluation of Regulatory Impact Assessments Compendium Report 2003–04’, HC 358, 2003–4, paras 2.30–2.56. ⁶⁶ ‘Evaluation of Regulatory Impact Assessments Compendium Report 2004–05’, HC 331, 2004–5, paras 2.1–2.20. ⁶⁷ Ibid, paras 2.35, 3.15.

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way in which these additional tests were conducted.⁶⁸ The Office continued to find in later reports that the quality of assessments was mixed, with the assessment of costs and benefits continuing to be the weakest area and with insufficient consideration of post-implementation impact. In the latest report, it noted that the 2007 changes had helped to improve the standard of impact assessments and there was now a greater incidence of quantification. However, the standard still varied widely, with strengths including the statement of the policy problem, the use of consultation, and the clarity of recommendations. The analysis of costs and benefits of a range of options was the weakest area.⁶⁹ It appears that regulatory impact assessment is strongest when it adopts a deliberative approach and weakest when it attempts to quantify costs and benefits. The deliberative role of regulatory impact assessment was also considered by the House of Commons Environmental Audit Committee in relation to sustainable development.⁷⁰ The Committee noted that regulatory impact assessments had now replaced separate environmental appraisals. It considered that the assessments did offer a ‘uniquely viable platform from which coordinated and widespread integration of sustainable development principles could be achieved’.⁷¹ However, they were ill-suited to balancing environmental impacts against social and economic concerns given their origins in minimizing regulatory burdens. Thus ‘[w]e strongly believe that RIAs should be used as a tool for ensuring policies meet objectives that stretch beyond the economic sphere to meet environmental concerns’. The Committee was also highly critical of the stress in the current guidance on quantification, arguing that many environmental impacts cannot easily be assigned a monetary value, for example species loss. Thus ‘we believe that the RIA system as its stands must be reconsidered to ensure that non-monetised assessment can be successfully included, and that it also must be recognised as a standard and suitable form of assessment, rather than an undesirable last resort’.⁷² In its response the government pointed to the changes made in the impact assessment process in April 2007, designed to introduce a simple and more transparent process embedded in the earliest stage of policy-making. However, the government considered that there should be a strong focus on monetizing the costs and benefits of policy proposals as much as possible. The new guidance did refer more fully to the principles of sustainable development, and where necessary non-monetized costs and benefits could be annexed to the assessment.⁷³ Impact assessment can thus have a deliberative role through forcing consideration of a wide range of options; as Ofgem’s Managing Director put it to the ⁶⁸ ‘Evaluation of Regulatory Impact Assessments 2005–06’, HC 1305, 2005–6, paras 1.4, 2.21. ⁶⁹ ‘Delivering High Quality Impact Assessments’, HC 128, 2008–09, paras 2.4–2.16. ⁷⁰ ‘Regulatory Impact Assessments and Policy Appraisal’, HC 353, 2006–07. ⁷¹ Paragraph 10. ⁷² Paragraphs 15–16, 45 (emphasis retained). ⁷³ Environmental Audit Committee, ‘Government’s Response to the Committee’s Th ird Report of Session 2006–07: Regulatory Impact Assessments and Policy Appraisal’, HC 849, 2006–7.

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Environmental Audit Committee, ‘I think the process of setting out and being required to set out all of these issues and noting, if it is possible to do so, the tensions and testing them externally through consultation really helps to identify where those tensions are and give rise to helping us to consider possible ways forward’.⁷⁴ Against this must be set the view of the National Audit Office that the failure to consider a full range of options, including non-regulatory options, is a weakness of the process, and the difficulty discussed above in considering matters that are not quantifiable.⁷⁵ Impact assessment may also have a deliberative role through ensuring consultation of stakeholders; this is the area where it appears from the National Audit Office reports to have had the greatest success.⁷⁶ It is also associated with general improvements in consultation through the successive versions of the Government’s Code of Practice on Consultation, which applies to government departments and has also been adopted by a number of regulators, including the Environment Agency, the Food Standards Agency, and the Health and Safety Executive; individual regulators have also produced their own guidance on consultation.⁷⁷ Finally, what has been the role of impact assessment in the work of the regulators? The Better Regulation Task Force recommended that all the economic regulators should produce regulatory impact assessments on all new major policies and initiatives, and this was accepted by the government; in some cases it is now a statutory requirement.⁷⁸ The House of Lords Select Committee on Regulators commissioned the National Audit Office to examine the use by the economic regulators of impact assessment, and concluded that, although consultation procedures were good in all cases, there was room for improvement in other aspects of assessment and current practice was poor. Thus cost-benefit analysis should be strengthened; in particular it included only limited quantification. Assessments were also commonly used to justify decisions already taken and were completed merely as a tick-box exercise. Post-implementation evaluation should also be improved.⁷⁹ The findings thus support the general point made earlier, that impact assessments have been more successful as a deliberative tool than as a form of cost-benefit analysis. In its reply, the Department stated that ‘[a]s independent entities, regulators may exercise their professional judgment on appropriate adaptations to central Government’s Impact Assessment process, in accordance with the particular needs of the industries they regulate. However, in

⁷⁴ ‘Regulatory Impact Assessments and Policy Appraisal’, evid, q 82. ⁷⁵ ‘Evaluation of Regulatory Impact Assessments 2005–06’, para 1.7. ⁷⁶ But for reservations see the Environmental Audit Committee, ‘Regulatory Impact Assessments and Policy Appraisal’, paras 60–4. ⁷⁷ Better Regulation Executive, Code of Practice on Consultation (revised edn, 2008). See also Baldwin, ‘Is Better Regulation Smarter Regulation?’, 493–4. ⁷⁸ Utilities Act 2000, s 5A; Communications Act 2003, s 7; Regulatory Enforcement and Sanctions Act 2008, s 72. ⁷⁹ ‘UK Economic Regulators’, HL 189, 2006–7, paras 4.46–4.76.

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all cases, the spirit of the Impact Assessment should be followed’. It also pointed to the added flexibility of the revised process introduced in 2007.⁸⁰ Overall, then, the regulatory impact assessment process appears to have several different functions: as a means of assessing costs and benefits of regulatory proposals and as a means of deliberation and participation in regulatory decisionmaking.⁸¹ Both in relation to the economic regulators and more generally, it is the second which appears to have been most successful; indeed, it is the only appropriate approach for non-economic regulation where benefits, in particular, will often be impossible to quantify. The danger of any other approach is of course that qualitative benefits of regulation will be crowded out by more easily quantified costs. Are there other means of monitoring the qualitative aspects of regulation?

Monitoring human rights and social solidarity It has been clearly established in earlier chapters that regulatory objectives include protecting human rights and social solidarity, including sustainability. These are precisely the values which are likely to be lost in a process of cost-benefit analysis. They can be incorporated into a more deliberative vision of regulatory reform, but what mechanisms are there to ensure that their use by regulators is not neglected in favour of an economistic approach? Compared to the mechanisms for implementing regulatory reform discussed above, those for monitoring human rights and social solidarity are relatively few.⁸² One important development is that impact assessments are now to incorporate impact tests relating to sustainable development, carbon impact, health impact, race impact, disability impact and human rights impact.⁸³ The problem of quantification discussed above is acute here, however; the most important role of the tests will be to ensure that these matters are considered and they will prove impossible to quantify fully. In relation to human rights, the most obvious form of outside scrutiny is, of course, the ability to bring an action against a regulator as a public authority under the Human Rights Act 1998 for infringement of a Convention right, something which is likely to grow in importance in the future. The Equality and Human Rights Commission has duties including monitoring the effectiveness of ⁸⁰ Department for Business, Enterprise and Regulatory Reform, Government Response to the House of Lords Select Committee on Regulators – Report on UK Economic Regulators (2008), 8. ⁸¹ See also the National Audit Office’s discussion of three approaches to regulatory impact assessment, distinguishing ‘pro-forma RIAs’, ‘informative RIAs’, and ‘integrated RIAs’; ‘Evaluation of Regulatory Impact Assessments Compendium Report 2004–05’, paras 3.1–3.5. ⁸² For an overview of early developments, see Jenkins and Rainey, ‘Moving into the Mainstream’. ⁸³ Department for Business, Innovation and Skills, Specific Impact Tests at: (consulted 16 December 2009).

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equality and human rights legislation. One example has been the Commission’s assessment of the role of inspectorates and regulators in promoting human rights standards in public services, concluding that a wide range of activities had been undertaken to incorporate human rights into strategies and polices, though there was no single over-arching approach to this and there was some uncertainty as to the extent to which human rights were embedded in inspection frameworks.⁸⁴ Ombudsmen are also playing an increasing role in giving force to human rights.⁸⁵ Public bodies are required to publish equality schemes and to undertake race, disability, and gender impact assessments; these requirements apply to most regulators directly, and also to public bodies which they regulate such as healthcare providers, as well as applying to government departments.⁸⁶ The Equality Bill includes a new duty on public authorities in taking strategic decisions to have regard to the desirability of exercising them in a way designed to reduce inequalities of outcome resulting from socio-economic disadvantage, and also includes a generic duty to have regard to the elimination of discrimination, the advancement of equality of opportunity, and the need to foster good relations.⁸⁷ These duties will apply to some regulated public bodies in the health sector, and to those regulators which have the status of government departments. Further monitoring of human rights obligations of regulators occurs through the work of Parliamentary committees, including the Joint Committee on Human Rights. For example, as noted in Chapter 6, the Joint Committee in its report on ‘The Human Rights of Older People in Healthcare’ recommended that the Commission for Equality and Human Rights monitor the implementation of human rights and equality legislation in this area, and that the Care Quality Commission report on understanding of and compliance with the Human Rights Act.⁸⁸ The Committee also recommended that the new Care Quality Commission should have as a major part of its role the monitoring of service providers against human rights standards. Government has also taken action through the publication of Human Rights in Healthcare – A Framework for Local Action and Human Rights: Human Lives – A Handbook for Public Authorities.⁸⁹ The monitoring can operate at several levels, ensuring that the work of the regulators themselves complies with human rights and equality duties, and that they have suitable arrangements in place to ensure that those regulated comply with

⁸⁴ Equality Act 2006, s 11; Equality and Human Rights Commission, The Role and Experience of Inspectorates, Regulators and Complaints-Handling Bodies in Promoting Human Rights Standards in Public Services (2008). ⁸⁵ O’Brien, N., ‘Ombudsmen and Social Rights Adjudication’ [2009] Public Law, 466–78. ⁸⁶ Race Relations Act 1976 (Statutory Duties) Order 2001, SI 2001/3458; Disability Discrimination (Public Authorities) (Statutory Duties) Regulations 2005, SI 2005/2966; Sex Discrimination Act 1975 (Public Authorities) (Statutory Duties) Order 2006, SI 2006/2930. ⁸⁷ Clauses 1 and 148. ⁸⁸ ‘The Human Rights of Older People in Healthcare’, HC 156, 2006–7, paras 65–6, 138, 190. ⁸⁹ Department of Health (2007); Department for Constitutional Affairs (2006).

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these obligations, something particularly important in the health and social care field. Turning to social solidarity, monitoring is more fully developed in relation to sustainable development than for other aspects such as social inclusion. As we have seen, there are several statutory duties requiring regulators to have regard to sustainable development in their decision-making, and impact on sustainable development is incorporated into the impact assessment process.⁹⁰ Monitoring also takes place through the work of the Environmental Audit Committee of the House of Commons and other select committees, and through the role of the Sustainable Development Commission. These requirements are of considerable importance in environmental law in general, but so far have not had a major effect on decision-making by regulators. Nevertheless, sustainability is now achieving a much greater role in regulators’ annual reports and many of them go beyond this by publishing specific sustainability plans. Overall, the extent to which noneconomic issues are monitored in relation to regulators is still limited, especially in comparison to the massive activity applied under the regulatory reform process to lift and minimize regulatory burdens, but could well increase in future as equality and sustainability concerns are more effectively mainstreamed into regulatory reform.

Conclusions The first conclusion to be drawn from this chapter relates to the question of regulatory independence, which is once more shown to be a much more complex matter than might appear at first sight. It is quite clear that even the most independent regulators are expected to follow the regulatory reform agenda, even where there is no statutory duty requiring them to do so; this is evident from government statements on a risk-based approach and on the use of impact assessments. There is some irony in this as the idea of regulation as a joint enterprise is most associated with the social regulators and inspectorates; however, here a joint approach by government and regulators is part of moves to free up markets. Moreover, despite the misgivings expressed at the time of the passing of the Bill, the Legislative and Regulatory Reform Act includes very extensive powers for ministers to reorganize regulators and lift regulatory burdens by order. Some attempt has been made to respect the independence of the economic regulators, notably in relation to the Compliance Code, which does not apply to them. However, we are far from having a coherent approach to the question of which regulatory reform requirements are most appropriate for different types of regulator. ⁹⁰ For discussion of the duties, see Jenkins, V., ‘Putting Sustainable Development at the Heart of Government in the UK: The Role of Law in the Evolution of Sustainable Development as the Central Organising Principle of Government’ (2002) 22 Legal Studies, 578–601.

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This brings us to the different types of regulatory reform which can be identified in the initiatives and processes described here. They can be divided into three, which fit quite neatly with different regulatory rationales described earlier in the book. The first has been described here as the ‘lifting burdens’ approach, which is designed to remove or minimize restrictions on the working of open markets; it thus fits most closely with the regulatory rationale of maximizing efficiency and consumer choice. This type of regulatory reform involves some ambiguity. If it is limited to lifting administrative costs, it can be applied to all regulators; no-one outside the artificial world of bureaucrats caricatured by public choice theory is against streamlining administrative burdens, and indeed simplification may help regulators meet their duties to protect consumers. However, the ‘lifting burdens’ approach may go further than this. To quote the Better Regulation Commission, ‘[t]he BRC believes that regulation plays an important role in society – but only appropriate regulation that meets our Five Principles and is brought in reluctantly as a last resort rather than first instinct. As we have said before, where regulation is concerned, “Less is More”’.⁹¹ This clearly does not concern simply administrative costs but aims to limit regulation itself. It is thus not surprising that some of the regulators have expressed concern at ‘initiative overload’ and a failure by the Better Regulation Executive to consider how regulation can be made more effective, as mentioned at the beginning of this chapter. The chairman of the Healthcare Commission also delivered a stinging attack on this approach, suggesting that regulation is not inherently burdensome because it involves protecting patients’ rights; it may be seen as burdensome by those affected, but this may mean that it is good regulation. Proportionate regulation can simply be used as an argument for less regulation; ‘[w]e are in the realm of dogma, of ideology (or theology)’.⁹² Clearly the ‘lifting burdens’ version of regulatory reform does not sit easily with the approaches of all the regulators described in this book. However, there is a second approach within regulatory reform which is concerned with maximizing opportunities for deliberation, through requiring consultation of stakeholders, using impact assessment to ensure that a range of options is properly considered when decisions are being made, and requiring fair enforcement procedures. This differentiates the UK approach from that of the Australian policy referred to above; in fact, deliberation seems to have been the aspect of impact assessment that has been most successful, especially given the difficulties of quantification which have dogged attempts to use such assessment as a rigorous means of minimizing regulatory burdens. This deliberative approach sits far more easily with the work of the regulators considered in this book than does the ‘lifting burdens’ approach, largely because it repeats what ⁹¹ Risk, Responsibility and Regulation – Whose Risk is it Anyway? (2006). ⁹² Sir Ian Kennedy, ‘Learning from Bristol: Are We?’ (2006), 63–6, at: (consulted 16 December 2009); see also ‘Health Watchdog Warns of Future Crunch’, The Financial Times, 11 October 2006.

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would anyway be general principles of good administration. It is this deliberative approach which is most appropriate for future development of regulatory reform in the areas covered here, as it does not have the bias towards treating efficiency maximization and consumer choice as the sole goals of regulatory policy which can be detected in much of the ‘lifting burdens’ literature. Indeed, there may be some recent official recognition of this with the publication by the Better Regulation Executive of work on regulatory benefits, recognizing their importance and proposing improved delivery through better procedural approaches to clarity, commitment and compliance.⁹³ Finally, we have seen some attempt to develop monitoring of human rights and social solidarity. However, such monitoring is both very limited in comparison to the general better regulation initiatives and has as yet limited arrangements for central organization of the sort provided by the Better Regulation Executive, although the Equality and Human Rights Commission is undertaking important work to lay the foundations for more coherent monitoring. There is also space for considering these matters in the impact assessment process in its more flexible form since 2007. Given the importance of human rights and social solidarity as regulatory rationales, this is the major area where more work needs to be done. After all, ‘better regulation’ is not simply a matter of ‘less is more’; it is a matter of ensuring that, so far as possible, regulators do their best to implement properly the rationales for their work, not only in maximizing efficiency and consumer choice but also in, for example, protecting the environment, health and safety and patients’ rights. The most appropriate approach will differ depending on the rationales, for example for those regulators concerned with protecting human rights the ‘lifting burdens’ approach will be less appropriate than monitoring their effectiveness in achieving such protection. Thus regulatory reform needs to be tailored more clearly to the differences between regulators identified in this book. The Regulatory Reform Committee of the House of Commons emphasized that better regulation principles should be applied to regulatory reform initiatives themselves; one such principle is that different types of regulatory reform are appropriate for the tasks of each regulator.⁹⁴

⁹³ Better Regulation, Better Benefits: Getting the Balance Right (2009), especially at 47–8. ⁹⁴ ‘Getting Results’, para 17.

11 Comparisons and Conclusions In this book I have examined a number of different regulatory bodies with widely varying functions and characteristics. Of course, this coverage has been by no means comprehensive, but nevertheless a number of more general themes are apparent from the work. In this chapter I shall develop them with reference to the different visions and models set out in my introductory chapter, and shall try to illuminate them by examining similar experience in the United States and France.

Regulatory visions and regulatory independence At the outset I set out two different regulatory visions: those of regulation as infringement of private autonomy and regulation as an enterprise. These were associated with a cluster of different characteristics, for example the first was associated with independence from government and regulation through calculable rules, the second with collaboration with government, discretion and responsiveness to different actors in the regulatory space. Clearly there has been ample evidence of both visions in the institutions examined here. Thus in the case of the more ‘economic’ regulators (Monitor, Ofcom, and the utility regulators) there has been greater emphasis on independence, rules, and calculability. However, other regulatory bodies examined fall closer to the second vision. For example, many work closely with government, often applying standards developed by government departments or through the EU (eg the Care Quality Commission and the Environment Agency). There is less emphasis on rules as a necessary basis for relations with those regulated; instead the emphasis has been on collaboration and partnership, perhaps most strikingly in the case of the Food Standards Agency and through the tripartism of the Health and Safety Executive. In these cases attempts have been made to build participation and deliberation into the heart of the regulatory process, not only through tripartism but also through public meetings of the boards and other procedures such as the use of advisory committees. Indeed, the Food Standards Agency is a regulator which works extensively through partnerships whilst being extremely transparent. The encouragement by regulators of self-regulation, notably by the Health and Safety Executive and

The Regulatory Enterprise. Tony Prosser. © Oxford University Press 2010. Published 2010 by Oxford University Press.

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Ofcom, also seems to be based on a delegation of powers through partnership (the second vision) rather than a recognition of private autonomy; indeed, it is better characterized as co-regulation. What is most important, though, is that neither vision offers a complete account of any regulator. The visions are ideal types for use in analysis rather than descriptions and in practice both are mixed. This is most striking with Ofcom which has both major economic and social regulatory functions. Perhaps most important of all, even in the more ‘economic’ regulators, a growing collaborative role with government is developing, notably on sustainability and, in the case of Ofgem, fuel poverty. This involves government setting goals and also some joint decision-making for regulators and government. A key issue which has emerged from this work is the importance of the location of regulators within complex networks involving government, the EU and other levels of governance with multiple accountabilities running through them. This is not surprising, a similar point was made strongly in the most developed empirical examination so far of an economic regulator. Thus, in examining the former telecommunications regulator, Oftel, ‘[w]e found that what we call extended mechanisms of accountability, the day to day involvement of interested public and private actors in Oftel’s activities, provided a more important check on Oftel’s activities than those formal accountability mechanisms to which Oftel was subject’.¹ Indeed, the extended division of power between regulators and others, especially government, has some major advantages; it provides a means of coordination with other policies, an ability to rely on a range of different types of expertise and (as in the case of the Human Fertilisation and Embryology Authority) the ability for each actor to spur the others into action. This division of responsibilities also raises major questions of what we mean by regulatory independence. Independence is clearly different from autonomy, thus all regulators examined in this book claimed to be independent, but none were autonomous in the sense of being able to develop on their own the regulatory context in which they work. In fact, independence of regulators means two things. The first is that there is a clear and transparent division of powers between the different bodies involved in the overall regulatory process, especially between regulator and government. The second is that the regulator is not subject to governmental pressure in areas which clearly do fall within its own powers; this autonomy will be more important for day-to-day decision-making rather than policy development. Thus government issuing general guidance under statutory powers to regulators does not infringe their independence; putting pressure on a regulator to change a decision clearly within the latter’s responsibilities clearly does (eg to prevent the rail regulator reviewing Railtrack’s access charges).

¹ Hall, C., Scott, C., and Hood, C., Telecommunications Regulation: Culture, Chaos and Interdependence Inside the Regulatory Process (London: Routledge, 2000), 206.

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This version of independence is ultimately compatible with the requirements of independent regulation under EU law. Where national governments have retained a role in operational functions, effective structural separation is required between regulation and activities associated with ownership or control; this does not prevent a governmental role in policy-making. The European Court of Justice has emphasized that a ministerial role in regulation is acceptable so long as the ministerial authorities are neither directly nor indirectly involved in operational functions.² Moreover, in the most recent legislation on electricity, aimed at enhancing regulatory independence, Member States are required to guarantee the independence of national regulatory authorities; this includes both ensuring that they act independently from any market interest and ‘do not seek or take direct instructions from any government or other public entity when carrying out the regulatory tasks’. However ‘[t]his requirement is without prejudice to close cooperation, as appropriate, with other relevant national authorities or to general policy guidelines issued by government not related to the regulatory powers and duties under [EU law]’.³ For each of the regulators examined in this book, the clarity of relations with government has varied. In some cases it is underdeveloped, especially where there was uncertainty about the roles of the two bodies in policy development; the Human Fertilisation and Embryology Authority was heavily criticized by Parliament on this point. However, there were also some examples of excellent practice. These include the publication by the Food Standards Agency of its advice to government, Ofcom’s publication on its website of letters from ministers, and the use of social and environmental guidance (so long as this is properly done to set out a framework coordinated with government policy). A further important improvement has been the publication of a clear statement of government policy and of what it is prepared to fund before the regulator takes decisions reflecting these requirements; this is now the position in rail and water. A means of coordination with potential but which seems to have worked less well is that of concordats or memoranda of understanding which have generally been brief and vague. The situation is now made more complex by the centralizing role of the regulatory reform initiatives, and we have seen that some regulators have criticized the role of the Better Regulation Executive as producing ‘initiative overload’, losing sight of how regulation can be made more effective, and confusing lines of accountability.⁴ ² C-82/07 Comisión del Mercado de las Telecomunicacions v Administración del Estado [2008] ECR I-1265 para 26. ³ Directive 2009/72/EC concerning common rules for the internal market in electricity [2009] OJ L211/55, art 35(4). For similar provisions relating to gas, see Directive 2009/73/EC concerning common rules for the internal market in natural gas [2009] OJ L211/94, Art 39(4). ⁴ House of Commons Regulatory Reform Committee, ‘Getting Results: the Better Regulation Executive and the Impact of the Regulatory Reform Agenda’, HC 474, 2007–8, paras 11–17 and evid 120–1.

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Regulatory independence: international comparisons The United States The questions relating to the meaning of regulatory independence just discussed are, in fact, familiar from the United States. Whilst we tend to think in Europe of the paradigmatic US model as the independent regulatory agencies such as the Federal Trade Commission and the Federal Communications Commission, in fact these are not the only type of agency, and nor are such agencies completely independent from the executive. Thus many US agencies are located within executive departments, or take the form of executive rather than independent agencies.⁵ Examples of these performing similar functions to regulators examined in this book include the Food Safety and Inspection Service, the Occupational Safety and Health Administration and the Federal Energy Regulatory Commission. Moreover, there is no simple distinction between the two different types of agency. The courts established that members of the independent agencies cannot be removed except ‘for cause’, thus preventing removal because of policy differences with the Executive (as is also the case under statute for the UK agencies).⁶ However, in other respects it has been frequently suggested that there is little difference between executive and independent agencies in origins or in practice; thus rather than concentrating on the ‘truly insignificant’ differences between the independent agencies and other agencies, it has been argued that we should focus on the relationships between all agencies and other branches of government. ‘Each such agency is to some extent “independent” of each of the named branches [of government] and to some extent in relationship with each. The continued achievement of the intended balance and interaction . . . depends on the existence of relationships between each of these actors and each agency within which that function can find voice.’⁷ This is very similar to the argument made in this book. Moreover, the important restrictions on ex parte communications with agencies, meaning communications made by a party without being revealed to others or the public, does not apply to communications from the Federal Government to agencies conducting rule-making, so permitting them to influence an Agency’s choice through private conversations.⁸ ⁵ For a summary, see Lavrijessen, S., ‘An Analysis of the Constitutional Position of the US Independent Agencies’, in Caranta, R., Andenas, M., and Fairgrieve, D. (eds), Independent Administrative Authorities (London: British Institute of International and Comparative Law, 2004), 1–45, at 3–4, 5–8. ⁶ Humphrey’s Executor v United States 295 US 602 (1935). ⁷ Strauss, P., ‘The Place of Agencies in Government: Separation of Powers and the Fourth Branch’ (1984) 84 Harvard Law Review, 573–669, at 579. For a detailed examination of the issues coming to broadly similar conclusions, see ‘Symposium: The Independence of Independent Agencies’ [1988] Duke Law Journal, 215–99. ⁸ Strauss, ‘The Place of Agencies in Government’, 666; Sierra Club v Costle 657 F.2d 298 (DC Cir 1981), 404–8. For background, see Verkuil, P., ‘Jawboning Administrative Agencies: Ex Parte Contacts by the White House’ (1980) 80 Columbia Law Review, 943–89.

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Indeed, there has been considerable controversy about the extent to which the President is able to exert personal control over the executive agencies even in the absence of specific legal power to do so.⁹ This was largely inspired by the expanded use of powers by President Clinton to advance pro-regulatory policies through the executive agencies, even to the extent of issuing specific orders to executive agency officials.¹⁰ More recent examples have illustrated very strongly the extent of presidential initiative using informal means. Thus both Presidents Clinton and Bush communicated controversial requirements relating to Federal funding for stem cell research to the National Institutes of Health, an executive agency, using highly informal mechanisms. In the case of the latter, the restriction on funding was communicated by a televized address and a factsheet; nothing was published in the Federal Register (the official record of government communications) nor was it subject to the notice and comment requirements for public participation under section 553 of the Administrative Procedure Act.¹¹ The use of executive action in relation to regulatory bodies is even more striking in the US process of regulatory reform. The initial Executive Orders 12,291 and 12,498 made by President Reagan did not apply to the independent regulatory agencies but did apply to the executive agencies. They required regulatory impact analysis, and submission to the Office of Management and Budget of a statement of regulatory policies, goals, and objectives and information on all pending or planned regulatory actions; the Office was to review these to assess their consistency with Administration plans and priorities. As a result, ‘the final version of the regulatory program was determined within the White House’.¹² The exemption of the independent regulatory agencies seems not to have been based on constitutional principle but on political considerations; fear of the ‘political fuss’ the agencies might make.¹³ President Clinton replaced the orders with his new requirements under Executive Order 12,866; this retained the exclusion of independent agencies from the requirement of submitting proposed and final rules to the Office, but did extend the regulatory planning process to them.¹⁴ The George Bush Administration retained the Order with amendments to increase the powers of the Office of Management and Budget, including requiring agencies to identify a ‘specific market failure’ as the basis for a rule.¹⁵ The Bush amendments were repealed by the incoming President Obama, who ⁹ Cf. Kagan, E., ‘Presidential Administration’ (2001) 114 Harvard Law Review, 2245–2385 and Stack, K., ‘The President’s Statutory Powers to Administer the Laws’, (2006) 106 Columbia Law Review, 263–323. ¹⁰ Kagan, ‘Presidential Administration’, 2246–50, 2323–8. ¹¹ See Heled, Y., ‘Of Presidents, Agencies and the Stem Cells Between Them: A Legal Analysis of President Bush’s and the Federal Government’s Policy on the Funding of Research Involving Human Embryonic Stem Cells’ (2009) 60 Administrative Law Review, 65–126, 83–5, 89–90. ¹² Harris, R. and Milkis, S., The Politics of Regulatory Change: A Tale of Two Agencies, (2nd edn, New York: Oxford University Press, 1996), 101. ¹³ Strauss, ‘The Place of Agencies in Government’, 662–3. ¹⁴ See Breger, M. and Edles, G., ‘Established by Practice: The Theory and Operation of Independent Federal Agencies’, (2000) 52 Administrative Law Review, 1111–1294, 1201. ¹⁵ EO 12866 of September 30 1993, as amended, s 1(b)(1).

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invited agencies themselves to submit recommendations to develop a new Order; views were sought on, inter alia, improved disclosure and transparency and how to encourage public participation. It is thus clear that in the United States, as in the UK, both independent and executive agencies are closely linked to the more general framework of governmental policy-making; they do not have the complete autonomy which is sometimes implied by references to agencies as independent. It has been argued, however, that there is one area in which independence is important, that of adjudication, characterized as deciding contested matters on a case-by-case basis.¹⁶ Moreover, adjudication was identified as a case in which conversations with the Executive Branch might need to be made public because they affect the rights of individuals.¹⁷ The special emphasis on independence in adjudication corresponds to the point made above concerning the UK; it is in deciding particular issues within their remit that independence becomes a core value for regulators. Thus overall, the situation in the United States is similar to that in the UK as documented in this book; rather than a strict separation of regulator and government, what is important is the existence of ‘checks and balances’ to structure and make public relations between them.¹⁸

France The position is in many ways similar in France, though here it has been complicated by constitutional debate as to the extent to which it is proper to permit independent administrative authorities autonomous powers to set rules of their own independently of central government. European Union liberalization has given additional impetus to the establishment of such authorities, but there have been other grounds as well for doing so. In an authoritative study of independent administrative authorities in 2001, the Conseil d’Etat listed 34 such bodies with two main functions: economic regulation and the protection of civil liberties.¹⁹ In one case, that of the Conseil Supérieur de l’Audiovisuel, both responsibilities are combined in the same institution in a way analogous to the functions of Ofcom described in Chapter 8 above. The French independent authorities act very much in collaboration with the government; this is evident, for example, in the many cases where agreement, or homologation, is needed from the latter before a decision of an agency can take effect, and rules made by the agencies may require ministerial approval.²⁰ Independence is associated with the inability of the government to dismiss members of the agencies in case of policy disagreement and the lack of a general veto ¹⁶ Verkuil, P., ‘The Purposes and Limits of Independent Agencies’ [1988] Duke Law Journal, 257–79. ¹⁷ Sierra Club v Costle Costle 657 F.2d 298 (DC Cir 1981), 404, 407. ¹⁸ Strauss, ‘The Place of Agencies in Government’, 578. ¹⁹ Rapport Public 2001: Etudes et Documents No 52, Les Autorités Administratives Independentes (Paris: La Documentation Française, 2001), 300–12. ²⁰ Ibid, 320–5.

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over their decisions.²¹ The position of the agencies has been profoundly affected by the allocation of the power to make regulatory rules in the French Constitution, which allocates such powers to the President and the Prime Minister; according to Art 21, the latter is the sole holder of the power to make regulatory rules at a national level. Thus an allocation of powers to independent authorities must only be in a specified area and must be defined by law.²² The Conseil Constitutionnel in a number of decisions relating to the establishment and operation of the broadcasting regulator considered there was no objection to giving to an independent authority rule-making powers which went beyond simply applying the existing law, so long as they only involved measures in a defined and limited field.²³ This was developed further in a 2004 decision on the law relating to electronic communications, where the Conseil considered that it was acceptable to confer on an authority other than the Prime Minister the power to make the rules within an area defined in a statutory delegation to it. Indeed, this could be done even without a requirement for ministerial approval of the rules, a position which permitted a solution complying with the requirements of independence in EU law.²⁴ It is also acceptable for an independent authority to impose sanctions; indeed, here the importance of independence has been emphasized by the Conseil Constitutionnel.²⁵ However, in a case involving the granting of powers to take action on internet piracy similar to the backstop powers proposed in the UK for Ofcom, the Conseil found that sanctioning powers infringed the right of internet users to freedom of expression and the presumption of innocence.²⁶ This constitutional background ensures that there is a very considerable ministerial role in both the making of general rules and in particular decisions such as tariff-setting, where normally this has been a matter for government on a proposal from the regulatory body.²⁷ A provision in the legislation implementing the EU electronic communications package which permitted a government décret to establish conditions under which the regulatory authority could set a framework for universal service tariffs and object to a particular tariff survived constitutional challenge in the electronic communications case discussed above; similar provisions have now been adopted for postal services. The relations between regulatory ²¹ Ibid, 290–3. ²² Ibid, 284–6, 294–9. ²³ Décision 86–217 DC du 18 septembre 1986 relative à la Commission nationale de la communication et des libertés, Rec. 141; Décision 88–248 DC du 17 janvier 1989 relative au Conseil supérieur de l’audiovisuel, Rec. 18. ²⁴ Décision 2004–497 DC du 1 juillet 2004 relative aux communications électroniques et aux services de communication audiovisuelle, Rec. 107. ²⁵ Décision 88–248 DC; Décision 89–260 DC du 8 juillet 1989 relative à la Commission des opérations de bourse, Rec. 71. ²⁶ Décision 2009–580 DC du 10 juin 2009 relative à la diff usion et la protection de la création sur internet. ²⁷ For a summary of the position on tariff-setting, see Prosser, T., The Limits of Competition Law: Markets and Public Services (Oxford: Oxford University Press, 2005), 111, and now see also in relation to postal services Calley, G., ‘La loi no 2005 – 516 du 20 mai relative à la régulation des activités postales’ (2006) 22 Revue Française de Droit Administratif, 96–118, at 114–18.

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authorities and government have given rise to some problems, for example in relation to rule-making through the use of quasi-rules in licences instead of adopting more formal and general provisions. The Conseil d’Etat has also recommended clearer rules relating to the publication of advice from regulatory authorities in relation to rules made by the government or Parliament.²⁸

Regulatory purposes and regulatory models This book has given ample evidence of the wide range of regulatory purposes underlying the activities of the institutions described here. Moreover, it is hoped that the different regulatory models have been useful in clarifying these; in particular the distinction between regulation to promote efficiency and consumer choice, regulation to protect human rights, and regulation to promote social solidarity (I shall deal with regulation as deliberation later). It is also striking, however, that no regulator corresponds to a single model, each regulator model is characterized by a cocktail of different ones and each is useful for understanding the mix but does not give a comprehensive account of the regulator’s role. For example, efficiency and consumer choice are particularly strong in the case of the utility regulators, in Ofcom’s work on electronic communications and in Monitor, though all of these also have social responsibilities. The Human Fertilisation and Embryology Authority, the Care Quality Commission, and Ofcom on broadcasting content are broadly concerned to protect rights. Social solidarity is apparent in the sustainability duties increasingly important for many regulators, as well as in the implementation of universal service and access to networks on the part of the utility regulators and Ofcom. The Food Standards Agency is an interesting example of a regulator with major consumer protection responsibilities as well as roles in promoting sustainability and solidarity. This range of responsibilities, then, goes far beyond the economic and the correction of market failures, appealing to principles of citizenship as well as choice and efficiency. This is also an area where we can learn from comparative analysis.

Social regulation: international comparisons The United States It is well-established that in the United States there are important types of regulation based on social rather than economic rationales. Thus Richard Stewart has pointed to the role of ‘non-commodity values’ in regulation.²⁹ He identifies ²⁸ Les Autorités Administratives Independentes, 335–41. ²⁹ ‘Regulation in a Liberal State: The Role of Non-Commodity Values’ (1983) 92 Yale Law Journal, 1537–90.

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the key values as aspiration, diversity, mutuality, and civic virtue, corresponding to a number of the key themes of social solidarity used in this book.³⁰ They are particularly important in environmental and broadcasting law. Interestingly, he contrasts these values with regulation based on rights in the sense of personal entitlements, which he sees as too heavily based on stable, categorical and determinate rules and principles rather than the ‘probabilistic, collective good nature of the benefits provided by regulation’.³¹ Sunstein has pointed to the ‘rights revolution’ in which during the 1960s and 1970s there was a vast expansion of legally protected rights through regulation, especially in the fields of air and water pollution, discrimination, and management of social risks.³² As mentioned in my first chapter, he develops a set of interpretative principles of regulation with a strong normative dimension, which correspond in part to the normative principles derived from the models of regulation in this book, although they reflect the US context in being more court-centred than would be the case for regulation in the UK.³³ Similarly, other writers have identified the ‘new social regulation’ introduced in the 1970s in environmental policy, occupational safety, public health, consumer affairs, and equal opportunity.³⁴ This was particularly strongly associated with arrangements for citizen participation in regulatory institutions. The United States thus has strong elements of regulation which reflect both the social solidarity and rights-based approaches used here. However, these approaches are particularly well established in France, and discussion of France will be especially useful here as its administrative law has gone far further than any other jurisdiction in developing principles of public service to specify more clearly the implications of a solidarity-based approach.

France Despite the problems of constitutional legitimacy referred to above, French regulatory authorities have been given responsibilities for implementing human rights; indeed, the first such authority was set up for the protection of rights in relation to data protection, and the process has continued with, for example, the establishment of HALDE (Haute Autorité de Lutte Contre les Discriminations et pour l’Egalité) in 2004 to perform functions similar to those of the British Equality and Human Rights Commission. The Conseil Supérieur de l’Audiovisuel also has responsibilities for content regulation in broadcasting similar to those of Ofcom in the UK; these are largely rights-based.

³⁰ Ibid, 1566–9. ³¹ Ibid, 1557. ³² Sunstein, C., After the Rights Revolution: Reconceiving the Regulatory State (Cambridge, Mass: Harvard University Press, 1993), 24–31. ³³ Ibid, 147–59, 160–92. ³⁴ Harris and Milkis, The Politics of Regulatory Change, 4–6, 15, and ch 3.

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Turning to social solidarity, in relation to sustainability France took a major step forward with the addition to its Constitution of a Charter for the Environment in 2005.³⁵ This includes an obligation for public policies to promote sustainable development: ‘[t]o this end they shall reconcile the protection and enhancement of the environment with economic development and social progress’. The Charter also obliges public authorities to respect the precautionary principle. Most importantly, however, the French administrative courts have developed a sophisticated set of principles of service public which categorize and develop social solidarity in a directly legally enforceable form. I have dealt with this body of law and its adaption to modern regulatory conditions elsewhere and so need not do so in any detail here.³⁶ The key principles are the so-called ‘laws of Roland’ which are based around three core principles: the continuity of public service; equality of users of public service; and the adaptability of public service; a number of others have been added more recently, most notably the quality of public service. It is important to note that the principles are essentially noneconomic and distributive in nature; ‘it is the essence of service public, as a means of consolidation of the social contract and of social solidarity, that it contributes to some types of redistribution and of transfers between social groups’.³⁷ This is particularly the case with the principle of equality, which is designed to provide equality of access to public services for all citizens, and equal treatment of users, for example through the charging of equal prices irrespective of costs of supply. The principles of public service show both that it is possible to protect values of social solidarity through legal as well as political means, and that it is possible to categorize and develop the values with a considerable degree of sophistication. Enforcement of the principles is a matter mainly for the administrative courts, although the civil courts are also prepared to apply them in appropriate contexts. However, the regulatory authorities themselves have increasingly acquired the responsibility of applying such principles, largely as a result of EU law where independent regulation has been required and principles of universal service developed. The latter are not identical to those of service public, but share some important characteristics with it.³⁸ This is evident in the process of tariff-setting which, as mentioned above, is a joint responsibility of the minister and of the regulatory agencies.³⁹ The regulators have a special responsibility for tariffs for universal service. They also have responsibilities for assessing the costs to providers of the provision of such service. Thus regulators, as well as the courts, are ³⁵ See Bourg, D. and Whiteside, K., ‘France’s Charter for the Environment: Of Presidents, Principles and Environmental Protection’ (2007) 15 Modern & Contemporary France, 117–33. For the current text of the French Constitution, see (consulted 16 December 2009). ³⁶ See Prosser, The Limits of Competition Law, ch 5. ³⁷ Conseil d’Etat, Rapport Public 1994: Etudes et Documents No 46, Le Service Public (Paris: La Documentation Française, 1995), 53 (my translation). ³⁸ See Voisset, M., ‘Le Service Public Autrement’ (1995) 11 Revue Française de Droit Administratif, 304–19. ³⁹ See Prosser, The Limits of Competition Law, 111–12.

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involved in the protection of the principles of service public, just as we have seen some British regulators protecting principles of social solidarity.

Deliberation and conflicting principles It is thus evident from this brief discussion that comparative study confirms that, as well as promoting efficiency and consumer choice, values relating to rights and to social solidarity play an important part in regulators’ remits, and that it is possible to classify them in such a way that they can be made the subject of legal rather than simply political protection. However, one major question remains unanswered, how can we deal with the inevitable conflicts between the different regulatory models described here? What happens where efficiency and consumer choice point in one direction, and human rights and social solidarity in others? Given the fact that each regulator has a mix of different regulatory purposes associated with the different models, such conflicts are likely to be pervasive in regulatory decisions, both for policy-making and for individual cases. This brings us to the role of deliberation. It is now no longer controversial that arrangements for effective participation of stakeholders and the public are an essential part of good regulatory design. This is true at a number of levels, including gathering facts, making policy, and opening up relations with government. The record of the various regulators we have examined here has generally been impressive in relation to deliberation, and far in advance of the position of 15 years ago. Some particularly impressive examples of good practice have also been identified, for example the Health and Safety Executive’s use of tripartism in its advisory committees, Ofcom’s extensive consultations and the self-reflection of the Food Standards Agency through its establishment of a permanent committee to evaluate its processes of consumer engagement. Moreover, we have seen that some elements in regulatory reform, perhaps the most successful elements, have been designed to develop such deliberation through requiring consultation and regulatory impact assessment. It is also apparent that there is a distinction to be made between different models of deliberation; the ‘internal’ one through the inclusion of major interests in the regulator and holding policy-making in public, and the ‘external’ one through the seeking of outside evidence as the basis for the regulator itself to take an ‘evidence-based’ decision.⁴⁰ Deliberation is also the first choice for the resolution of problems due to conflicting principles of the kind mentioned above. A useful tool in the process will be the principle of proportionality, which will enable some weighing to take place of the effects of applying different principles so that, for example, restrictions on ⁴⁰ For a useful theoretical elaboration of this distinction, see Lenoble, J. and Maesschalck, M., ‘The Specific Nature of the REFGOV Project and the Hypothesis of Reflexive Governance’, in Lenoble, J. and de Schutter, O., Reflexive Governance (Oxford: Hart Publishing, forthcoming 2010).

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consumer choice are not disproportionate to purposes of social solidarity which they are meant to serve. Sunstein has suggested that proportionality is most appropriate in the case of economic regulation where benefits and costs can be more easily assessed and the problems of assertions of absolute and inalienable ‘rights’ to protection do not occur. He does, however, accept that a proportionality principle is also appropriate in cases involving other values where economic costs and benefits are not the only criteria for decisions.⁴¹ The wide scope of proportionality has been illustrated also by the approach of the UK courts in determining the scope of qualified rights under the European Convention on Human Rights; it is mainly such qualified rights which figure in the regulatory schemes described here. This test has now become central to the process of judicial review where the balance between a right and a countervailing public interest has to be drawn, and is far from any mechanistic process of cost-benefit analysis.⁴² However, deliberation and proportionality will not solve particularly intransigent conflicts between different regulatory purposes and models, nor will answers be given by construing the statute conferring regulatory powers which, as we have seen, often include contradictory duties.⁴³ In this case the only possible solution to such a conflict is to refer the question up to government which has electoral legitimacy for deciding such fundamental conflicts of value. It was argued in the introductory chapter that lack of electoral legitimacy should not disqualify regulators from taking decisions in the vast majority of cases; however, it will provide justification for referral of such particularly intransigent decisions to government, subject of course to their resolution being undertaken in a transparent way. Government will also be able to see the general context of the decision, and its interaction with other policies, much better than will an individual regulator. We have seen some examples of such governmental responsibility for intransigent decisions in this book. Thus the Human Fertilisation and Embryology Authority had an important role in acting as a stimulant to government to take decisions which might otherwise not have been taken to avoid political conflict. Similarly, major decisions based on the work of Ofcom and involving balancing of different principles have ultimately been for government, notably in the case of digital inclusion and the future of public service broadcasting. Thus the existence of a collaborative approach to regulation, involving both the regulator and government, shows a way forward.

⁴¹ After the Rights Revolution, 90, 181–3. ⁴² For the role of proportionality here, see R (on the application of Daly) v Secretary of State for the Home Department [2001] UKHL 26; [2001] 2 AC 532; R (on the application of Begum) v Denbigh High School Governors [2006] UKHL 15; [2007] 1 AC 100. ⁴³ For discussion of the limits of proceduralism, see Brownsword, R., Rights, Regulation and the Technological Revolution (Oxford: Oxford University Press, 2008), 126–30.

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Conclusion It is hoped that the conception of regulators as part of a complex network of decision-makers at different levels is both more descriptively accurate than concentrating on regulators in isolation, and also provides an answer to the questions which have been raised about regulatory legitimacy. The latter relate to the networks of multiple accountabilities between interacting institutions, not to individual regulatory bodies. It is also hoped that the identification of the different regulatory models has contributed both to showing the complexity of regulation whilst also demonstrating that it is possible to make sense of this complexity by identifying key characteristics of regulatory duties or practice. Regulation is neither a bleak terrain where all that needs to be done is to apply correct economic principle, nor a post-modern realm of incommensurable political values where anything goes so long as everyone has been heard. Regulation is a realm of principle; principles which are economic, rights-based, social, and procedural. The regulatory enterprise is one of collaboration in determining the correct balance of different principles in each social and political context. The diversity of regulatory experience described in this book is to be celebrated, but it can also be understood as having a deeper coherence.

Index Aarhus Convention 85 Action Plan on Regulatory Reform 206–7 Advertising Standards Authority 173 Agency for the Cooperation of Energy Regulators 183 Australian National Competition Policy 202–3, 221 Baldwin, R. 89, 90, 93, 105, 204, 206, 207, 208, 214, 215, 217 BBC 153, 154, 159, 162, 163, 169, 170 ‘better regulation’ see regulatory reform Better Regulation Action Plan 208 Better Regulation Commission 208, 209 Better Regulation Executive 3, 9, 33, 37, 42, 56, 57, 58, 69, 70, 72, 79, 80, 81, 84, 94, 95, 98, 101, 104, 107, 108, 202, 208, 209, 210, 211, 217, 221, 222, 225 Better Regulation Task Force 3, 206, 207, 210, 211, 217 and economic regulators 210–11 Black, J. 1, 2, 3, 8, 9, 10, 14, 17, 19, 201, 213, 214, 215 Bristol Inquiry 112–13, 122–3, 129–30, 131 Broadcasting Standards Commission 153 Brownsword, R. 9, 11, 12, 13, 16, 21, 29, 30, 32, 33, 34, 36 BSE 45, 47, 50, 61 Care Quality Commission 14, 111, 114–15, 116–17, 119, 121–2, 125, 128–9, 130–1, 133–5, 223, 230 and ‘better regulation’ 125 deliberation 133–4 duties 121–2 economic regulation 122–5 functions 116–17 and government 119, 134–5 human rights 128–9, 134 and Monitor 138, 140–2, 147, 152 origins 114–15, 124 and social solidarity 130–1, 134 strategy 122 Statement on User Involvement 133 structure 119 Carter, N. 66, 67, 68 CC Water 198, 199 Civil Aviation Authority 176 Codex Alimentarius 50

Commission for Social Care Inspection 111, 113–14, 116, 118–19, 120–1, 123, 126–8, 130, 132–3, 134, 135 and ‘better regulation’ 123 Children’s Rights Director 114, 127 competition 123 consultation 132–3 corporate plan 116, 130, 132–3 deliberation 132–3 duties 120–1 ‘experts by experience’ 132, 133, 135 functions 116 and government 118–19 human rights 126–8 origins 113–14 and social solidarity 130 structure 118 competition 12–13 see also Office of Communications, Office of Gas and Electricity Markets, Office of Rail Regulation, Water Services Regulatory Authority Competition Appeal Tribunal 164, 191 concordats 51–4, 65, 94, 225 concurrent powers 160, 165, 177, 187, 189, 191 Constitution Unit 105 consumer choice 12–13, 14, 16, 18, 20, 33, 57, 100, 123, 113, 115, 116, 121, 122, 124, 134, 136, 146, 161, 162–3, 167, 187–9, 221, 222, 230, 233–4 Consumer Focus 43, 49, 56, 59, 61, 62, 173, 199, 200 Convention on the Rights of the Child 58 Cooperation and Competition Panel see NHS Cooperation and Competition Panel co-regulation 169, 173–4, 199, 223–4 cost/benefit analysis 10, 13, 55, 57, 62, 75, 77–8, 79–80, 87, 99–100, 109, 202, 203–4, 205, 210, 211, 214, 215–6, 217, 218 deliberation in regulation 5, 6, 7–8, 9, 17–18, 223, 233–4 see also Care Quality Commission, Commission for Social Care Inspection, Environment Agency, Food Standards Agency, Health and Safety Executive, Healthcare Commission, Human Fertilisation and Embryology Authority, Monitor, Office of

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deliberation in regulation—continued Communications, Office of Gas and Electricity Markets, Office of Rail Regulation, Water Services Regulatory Authority Department for Business, Innovation and Skills 72, 157, 209, 214, 128 Department for Constitutional Affairs 219 Department for Culture, Media and Sport 170 Department for Energy and Climate Change 72 Department for Environment, Food and Rural Affairs 51, 53, 70, 72–3, 77, 181, 182, 189, 194, 195 Department of Health 21, 23, 29, 40, 45, 46, 47, 50, 52, 53, 112, 113, 114, 115, 116, 118, 120–1, 124, 126, 128, 136, 138, 140, 150, 151, 170, 219 Department for Transport 182, 184, 195 Department for Work and Pensions 92–4 Digital Britain 156, 157, 158, 168, 171, 174, 175 dignitarianism 16, 36 efficiency maximization 4–5, 6, 12–13, 18, 19 embryo research 21, 23, 24, 26, 32, 35, 26, 39 Energywatch 177, 198, 199 Environment Agency 66–88 access to information 85–6 advisory committees 84–5 and ‘better regulation’ 80–1, 202, 212, 213 ‘Champion of the Environment’ 71, 87 collaboration by 69, 87 corporate strategy 78–9 cost/benefit analysis 75, 77–8, 79–80, 87 deliberation by 68, 83–6 duties 76–9 and economic regulation 79–81 and European Union 73–4 functions 69–70 and government 71–3, 74–6, 77–8 and human rights 81–2 and local authorities 73 management responsibilities 66, 67–8, 70, 87 Management Statement 73 membership 70 and Ofwat 74–6 origins 66–8 permitting regimes 69 public meetings 84 risk regulation 70, 77, 80–1 and social solidarity 82–3

structure 70–1 sustainability 75, 76–7, 82–3 trading schemes 80 waste management licensing 69, 77 and water price controls 74–6 Equality and Human Rights Commission 204, 205, 218–19, 222 European Agency for Safety and Health at Work 94 European Commission 9, 94, 99, 157–8 European Committee of Social Rights 101–2 European Convention on Human Rights 14, 15, 34–5, 42, 81–2, 126–7, 155, 164–6, 190–1, 204, 218 European Convention on Human Rights and Biomedicine 30 European Court of Justice 94, 99, 225 European Court of Human Rights 34–5, 36 European Food Safety Authority 50 European Railway Agency 184 European Regulators Group 158 European Social Charter 15, 58, 101–2, 125, 190 European Union 7, 20, 24, 28, 29, 35, 47, 50, 54, 56, 58, 62, 68, 69, 70, 71, 72, 73–4, 76, 78, 79, 84, 85–6, 87–8, 90, 93, 94, 95, 99–100, 102, 117, 154, 157–8, 159, 164, 168, 183–4, 189, 190, 201, 223, 224, 225, 228, 229, 232 Charter of Fundamental Rights 15, 35, 102, 125, 190 financial services 10, 20, 144, 201 fines 97–8 First-tier Tribunal 191, 213 food safety crises 44–5 Food Standards Agency 8, 44–65, 223, 225, 230, 233 advertising to children 170 advice to government 46, 47–8, 53, 55, 60, 64 advisory committees 60–62 Advisory Committee on Consumer Engagement 61–2 and ‘better regulation’ 57–8, 202, 210, 212, 217 Code of Practice on Openness 60 collaboration by 44, 51–4, 64–5 concordats 51–3, 65 consultation by 62–4, 217 consumer choice 57 cost/benefit analysis 55, 57, 62 Dean Review 50, 52–3, 56, 60, 63 deliberation by 59–64, 233 duties 54–5 and European Union 50

Index functions 47–8 and genetically modified crops 62–4 and government 50–3, 55, 62–4, 225 and human rights 58 and local authorities 48, 51, 53–4 membership 49 nutrition 47, 48, 50–1, 52–3, 59 origins 44–6 public meetings 60, 171–2 and risk regulation 57–8 and social solidarity 58–9 strategic plans 55–6 structure 48–9 sustainability 58–9 foundation trusts see NHS foundation trusts France Conseil Constitutionnel 229 Conseil Supérieur de l’Audiovisuel 228, 231 Constitution 232 government 228–30 Haute Autorité de Lutte Contre les Discriminations et Pour l’Egalité 231 independent administrative authorities 228–30 service public 232–3 social regulation 231–3 sustainability 232 Gas and Electricity Markets Authority 177 see also Office of Gas and Electricity Markets genetically modified crops 62–4 GM Nation consultation 62 government and regulation 6–8, 223–5, 226–30, 234 see also Care Quality Commission, Commission for Social Care Inspection, Environment Agency, Food Standards Agency, Health and Safety Executive, Healthcare Commission, Human Fertilisation and Embryology Authority, Monitor, Office of Communications, Office of Gas and Electricity Markets, Office of Rail Regulation, Water Services Regulatory Authority governmentality 2 Hampton Report 204, 207, 211–12 Hampton Implementation Reports 33, 42, 56, 57, 69, 79, 80, 84, 94, 98, 100–101 Hancher, L. 5, 7 Health and Safety Commission see Health and Safety Executive

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Health and Safety Executive 11, 12, 13, 45, 46, 49, 89–110, 179, 180, 187, 202, 209, 212, 213, 217, 223–4, 233 advisory committees 107–8 appeal 93 and ‘better regulation’ 100–1, 202, 212, 213, 217 Collective Declaration on Worker Involvement 102–3, 106 consultation by 106–8, 109, 217 consumer choice 100 cost/benefit analysis 99–100, 109 decision-making process 104 deliberation by 104–8, 233 Departmental Strategic Objective 93, 95, 96 duties 95, 98–100 economic regulation 98–101, 109 and European Union 94, 99 functions 91 and government 91, 92–4 and human rights 101–3 and local authorities 91, 92, 94–5 membership 92 openness 104–5 origins 89–90 public meetings 107 Public Service Agreement 93, 95, 96 risk assessment 100, 103–4 risk regulation 101, 102 rule making 93 and self-regulation 98, 101, 106 and social solidarity 103–4 stability of 89, 109–10 strategic planning 96 strategic programmes 96 structure 92 tripartism 89, 105–6, 107, 109–10, 233 Healthcare Commission 111–13, 115, 117–18, 120, 122–3, 125–6, 129–30, 131–2, 134, 135 and ‘better regulation’ 122–3, 221 concordat 118 consultation 131–2 consumer choice 122 deliberation 131–2 duties 120 functions 115 and government 117–18 human rights 125–6 management statement 118 origins 111–13 risk assessment 122 and social solidarity 129–30 strategic plan 120 structure 117

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Her Majesty’s Inspectorate of Pollution 66, 69 Human Fertilisation and Embryology Authority 13–14, 21–43, 72, 224, 225, 230, 234 appeals 27, 41–2 and ‘better regulation’ 32–3, 212 civil penalties 213 code of practice 22, 24, 26, 30, 36, 37, 38–9 consumer protection 32 consultation by 38–41 corporate planning 31, 37 deliberation by 36–42 duties 30–31 and economic regulation 31–33 entry, powers of 42 functions 23–4 and government 26–7, 42–3, 224, 234 human rights 33–5 hybrid and chimera embryos consultation 40–1 informed consent 34–5 inspection 24, 31, 32, 37, 42 licensing 40, 41–2 membership 24–5 origins 22–3 and Parliament 27–9, 38–41 policy-making 25–9 public meetings 37 register of data 37 and risk regulation 32–3 and social solidarity 35–6 structure 22, 24–5 welfare of the child consultation 38–40 Human Genetics Commission 38 human rights 13–15, 18, 204–5, 218–20, 222, 230, 231, 234 see also Care Quality Commission, Commission for Social Care Inspection, Environment Agency, Food Standards Agency, Health and Safety Executive, Healthcare Commission, Human Fertilisation and Embryology Authority, Monitor, Office of Communications, Office of Gas and Electricity Markets, Office of Rail Regulation, Water Services Regulatory Authority Human Tissue Authority 29 Hutton, Dame Deirdre 49, 57 Independent Committee for the Supervision of Standards of Telephone Information Services see PhonepayPlus informed consent 34–5 International Covenant on Economic, Social and Cultural Rights 58, 125

International Labour Organisation Convention C187 102 Kennedy, Sir Ian 112, 113, 122–3, 131, 134, 135, 221 Krebs, Sir John 46, 63 Littlechild, S. 3, 12, 187 local authorities 48, 51, 53–4, 73, 91, 92, 94–5 local involvement networks (LINKs) 121, 131–2, 151 Lowe, P. 66, 67, 68 Majone, G. 1, 6–7, 19 Major, John 66 market failure 1, 3, 129, 146, 160–1, 162–3, 169, 211 Macrory Review 213 Meat Hygiene Service 47, 49–50, 51 Mental Health Act Commission 114, 116, 128 Ministry for Agriculture, Food and Fisheries 44, 57 Monitor 117, 118, 122, 124, 125, 129, 133, 136–52 authorization 138–9 and ‘better regulation’ 145–6 and Care Quality Commission 138, 140–2, 147, 152 and commissioning bodies 142 Compliance Framework 138, 145, 149, 150 consultation 143, 150 Corporate Plan 143–4 Business Plan 142, 144, 150 deliberation 149–51 duties 142–3 economic regulation 144–7 enforcement 138–9, 143 functions 137–9 governance of NHS Foundation Trust Hospitals 149, 150–1 and government 139–40, 148 human rights 147 incentivization 144–5 independence 139–40 membership 139 Memorandum of Understanding 140, 142 monitoring of foundation trusts 138–9 origins 136–7 prudential borrowing code 143, 145 risk-based approach 138–9, 143–4 and social solidarity 147–9 structure 139–40 Moran, M. 1, 5, 7, 10, 89, 109–10 Morgan, B. 4, 13, 202–3, 204

Index National Audit Office 197, 212, 215–16, 217 see also Hampton Implementation Reports National Care Commission 114 National Economic Council 210 National Institute for Clinical Excellence 112 National Rivers Authority 66, 67, 70 A New Future for Communications 154, 160–1, 167 NHS Constitution 134, 148, 152 NHS Cooperation and Competition Panel 115, 122, 138, 144, 147 NHS Foundation Trusts 136–7 see also Monitor Office of Communications (Ofcom) 15, 153–75, 223–4, 225, 228, 229, 230, 231, 233, 234 advertising restrictions 157, 165–6, 170, 173 advisory committees 172, 173 and ‘better regulation’ 158, 163–4, 213 Broadcast Code 165, 172 broadcasting 162–3, 165–7, 168–70 citizenship 155, 158, 162–3, 169, 174–5 and competition 158, 160–2, 166–7 concurrent powers 160, 165 conflict of duties 159 consultation 172–3, 233 consumer interest 158, 160–3, 174 Consumer Panel 157, 172 Content Board 157, 172 content sanctions committee 165 corporate governance 156 deliberation 171–4 duties 158–60 economic regulation 160–4 and European Union 154, 157–8, 167–8 fair hearing, right to 164–5 freedom of expression 165–6 functions 155–6 and government 157, 167–8, 170, 225, 234 human rights 164–7 impact assessments 159, 162, 164, 172 media literacy 159, 171 media ownership 162–3 membership 156 mergers 162–3 origins 153–5 political advertising 165–6 public service broadcasting reviews 162–3, 168–70, 172–3 regulatory principles 159–60, 163–4 self-regulation 173–5 social solidarity 167–71 spectrum regulation 161 strategic framework 160

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Strategic Review of Telecommunications 161–2 structure 156–7 universal service 157, 167–8 Office of Gas and Electricity Markets (Ofgem) and ‘better regulation’ 190, 209, 211 and competition 187–8 consultation 197–8 consumer representation 198–9 corporate strategy 185 deliberation 196–9 duties 184–5 energy supply probe 188, 193 and European Union 183 fuel poverty 181–2, 192–3 functions 178–9 and government 180–2, 194 guidance on social and economic matters 180–1, 192 human rights 190–1 membership 179–80 and monopoly 188 origins 176–8 Social Action Strategy 181–2 social solidarity 192–4 structure 179–80 sustainable development 193–4, 200 Office of Rail Regulation (ORR) and ‘better regulation’ 190, 209, 211 and competition 189 consultation 197–8 consumer representation 198–9 deliberation 196–9 duties 186–7 and European Union 184 functions 179 and government 182–3, 195 guidance from government 182–3 high level output specification 183 human rights 190–1 membership 180 and monopoly 189 origins 176–8 social solidarity 197 statements of public funds available 183 strategy 187 structure 180 Office of Water Services (Ofwat) 74–6, 81–2 see also Water Services Regulation Authority ombudsmen 199, 219 Panel for Regulatory Accountability 206, 210 Parliamentary scrutiny 196–7 see also National Audit Office, Select Committees

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participation see deliberation PhonepayPlus 173–4 postal service 156, 178 Postcomm 176, 179, 197, 198 Principles of Good Regulation 3, 9, 21, 56, 158, 206, 211 Proportionality 233–4 public service 15–16 see also France, service public public service broadcasting 162–3, 168–70, 172–3 Puttnam, Lord David 154 Radio Authority 153 Radiocommunications Agency 153 Rail Regulator see Office of Rail Regulation regulation definition 2, 18–19 as an enterprise 5–6, 43, 235 by independent agencies 4–5, 6–8, 220, 224–5, 226–30 as infringement of private autonomy 4–5, 223–4 legitimacy of 6–8 models of 18–19 rationales for 11–18, 19 reorganization of regulators 209 see also Care Quality Commission, Commission for Social Care Inspection, Environment Agency, Food Standards Agency, Health and Safety Executive, Healthcare Commission, Human Fertilisation and Embryology Authority, Monitor, Office of Communications, Office of Gas and Electricity Markets, Office of Rail Regulation, Water Services Regulatory Authority regulatory capture 5, 6, 8, 44, 45 regulatory contract 5 Regulatory Policy Committee 210 regulatory reform 3, 32–3, 57–8, 80–1, 100–1, 122–3, 125, 145–7, 158, 190, 201–22, 225 compliance code 209, 212, 214, 220 deliberation 204, 214–18, 221–2 human rights 204–5, 218–20, 222 impact assessments 214–18 ‘lifting burdens’ approach 202–4, 206–10, 221 policy and administrative costs 203–4, 207, 212, 221 penalties 208, 212, 213 regulatory budgets 209–10 sustainable development 205, 215, 216, 218, 220

United States 205–6, 227–8 regulatory space 5, 6, 7, 8, 18, 20 responsive regulation 2, 6, 8, 9, 18 Review of Utility Regulation 177 Rhodes, R. 7 Risk and Regulation Advisory Council 209 risk regulation 9–11, 32–3, 57–8, 70, 77, 80–1, 101, 102, 122, 125, 138–9, 143–4 see also Hampton Report Robens Committee 90, 95, 104, 105 Royal Commission on Environmental Pollution 67, 83–4 Scott, C. 1, 2, 7, 20 select committees Business and Enterprise 187, 197, 199 Constitution 191, 196, 198 Culture, Media and Sport 153, 171 Environment 62, 67, 68, 69, 71, 72, 73, 75, 76, 78, 80, 83, 84, 85, 97, 180, 182, 194, 195 Environmental Audit 74–5, 75–6, 79, 205, 216–17, 220 Food and Rural Affairs 63 Food Standards 46, 50–1, 52, 53–4, 55 Health 116, 118, 119, 122, 125, 127–8, 137, 138, 140, 141, 144, 145, 148, 149, 151 Joint Committee on the Draft Communications Bill 154, 164, 166, 171 Joint Committee on Human Rights 126, 127–8, 155, 164, 205, 219 Joint Committee on the Human Tissues and Embryos (Draft) Bill 21, 23, 27, 28–9, 33 Public Accounts 53, 56, 72, 98, 197, 198 Regulators 179, 180, 183, 187, 189, 190, 197–8, 199, 217, 218 Regulatory Reform 80–1, 101, 201, 202, 209, 222 Science and Technology 21, 25, 26, 27, 29, 32, 33, 35, 37, 38, 40, 41 Trade and Industry 192–3 Work and Pensions 92, 93, 94, 95, 97, 101, 102, 103, 104, 105, 106, 107 self-regulation 1, 5, 6, 22, 45, 56, 98, 90, 101, 106, 173–4, 174–5, 199, 223–4 social solidarity 15–17, 18, 230, 232 see also Care Quality Commission, Commission for Social Care Inspection, Environment Agency, Food Standards Agency, Health and Safety Executive, Healthcare Commission, Human Fertilisation and Embryology Authority, Monitor, Office of

Index Communications, Office of Gas and Electricity Markets, Office of Rail Regulation, Water Services Regulatory Authority Stewart, R. 230–1 Sunstein, C. 10, 11, 14, 16, 19, 231, 234 sustainability 16–17, 58–9, 76–7, 82–3, 205, 215, 216, 218, 220 see also Environment Agency, Food Standards Agency, Office of Gas and Electricity Markets, Office of Rail Regulation, Water Services Regulatory Authority Sustainable Development Commission 193, 200 Sutherland Report 113–14 United States regulation 14, 226–8, 230–1 environmental 66–7 ex parte communications 226 and the Executive Branch 226–8 Federal Communications Commission 226 Federal Energy Regulatory Commission 226 Federal Trade Commission 226 Food Safety and Inspection Service 226 Occupational Safety and Health Administration 226 regulatory reform 205–6, 227–8 social regulation 230–1 stem cell research 227 Universal Declaration on Bioethics and Human Rights 30, 33–4

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Universal Declaration on the Human Genome and Human Rights 30 universal service 16, 157, 167–8 utilities, public 12–13, 223 see also Office of Gas and Electricity Markets, Office of Rail Regulation, Water Services Regulation Authority Vogel, D. 66–7, 83, 87–8 Warnock Report 22, 32, 33 Water Services Regulation Authority (Ofwat) affordability of water 194–5 and ‘better regulation’ 190, 209, 211 and competition 188–9 consultation 197–8 consumer representation 198–9 deliberation 196–9 duties 185–6 and European Union 183–4 Forward Work Programme 180, 186 functions 179 and government 182 guidance on social and economic matters 182, 194 human rights 190–1 membership 180 and monopoly 188–9 origins 176–8 social solidarity 194–5 structure 180 sustainable development 182, 195 Winsor, T. 182, 208 World Trade Organization 7, 50