Government Review of Regulation Must Reflect Far – Reaching Public Services Reforms

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The government needs to shape the future role and structure of regulation to fit its far-reaching public services reforms, according to a recent discussion paper issued by the Audit Commission, the independent body responsible for ensuring public money is spent efficiently.

“The Future of Regulation in the Public Sector”, which forms part of a wider current debate regarding the scope and focus of regulation, sets out ten principles which should ideally inform the design of regulatory regimes. While the paper argues that government should not seek to override the professional judgement of regulators it goes on to contend that only government can determine the overall regulatory framework, the structure of local public services institutions, and the pace of change in public services reform.

Changing Times

“Regulation has played, and will continue to play, an important role in guaranteeing accountability for the spending of taxpayers” money. But as public services change, so too should regulation,” explained Sir Michael Lyons, Acting Chairman of the Audit Commission, adding: “The government is encouraging service providers to widen their role by fostering innovation and a greater diversity of supply.”

According to the Audit Commission, regulation serves a complex purpose, providing “essential assurance to the public”, while simultaneously driving improvement. As such, the Commission argues, regulation must reflect the changing expectations of both public services providers and the various stakeholders that regulation serves. To this end the report establishes five basic principles primarily for government consideration.

First, it stipulates, “the approach” to the regulation of public services must take place within a “stable and coherent” framework describing how these services are to be funded, commissioned and delivered, which will be determined by government. Within this framework, however, the government must be clear on the role it wishes to play, and the functions it will service, around which the role of regulators will be shaped.

Boundaries

Similarly, the government will determine the scope and scale of regulatory activity, including the number of bodies, their functions, and their resource allocation. Changes to this established framework should be “infrequent, transparent and clearly explained”, as should any necessary departures from core principles, the report adds. In terms of operational procedure, however, the regulators will remain independent, and their professional judgements not overruled by government.

Further to these guidelines, the Commission provides secondary principles for the consideration of both the regulators and government combined. First, it argues, public sector regulation must be designed to support the government in “remedying any deficiency in the model of accountability appropriate to the sector”. Flexibility is important, it continues, to ensure the “right balance” between providing assurance to both service users and taxpayers, which should in turn promote improved accountability.

In addition, the specific approach in each sector should both reflect the views, and meet the needs of both service users and taxpayers through the incentives inherent in the regulatory regime. The report goes on to add that where market mechanisms exist, regulation should distinguish between different types of providers, and no undue burdens should be imposed on one kind. Finally, it stipulates regulators must be accountable, and regulation itself must be proportionate and cost-effective.

In its closing remarks, the paper stresses that the nature of regulation must change, keeping pace with the reform of public services, developing its “predictive power” and capacity for focus, and connecting more clearly with the views of those who use public services. “We, as regulators, must move beyond a narrow view of the individual responsibilities of public services bodies and take up the challenge to focus more broadly on promoting efficiency and value for money,” concludes Lyons.

Michelle Price

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