Watchdogs (Industry and Regulators Committee Report)

Baroness Taylor of Bolton Excerpts

Monday 9th September 2024 Lords Chamber

[Baroness Taylor of Bolton (Lab)]

My Lords, I thank the noble Lord, Lord Hollick, for the way in which he chaired our committee and made sure that the work the committee has done has been purposeful.

I will start by coming back—as the noble Lord, Lord Skidelsky, has just done—to why we have a body of regulators in the first place. Like the noble Lord, Lord Addington, I remember the passage of the Water Bill while I was in another place. We were told at that time that independent regulators were going to be needed to protect industry and business from too much political interference by Ministers. The idea was, as the committee was told in evidence, that independent regulators can support stability and business confidence by separating important decision-making from political considerations and the electoral cycle. The committee was, and still is, interested in just how independent our regulators really are. That raises some significant questions, as we have heard this evening. Are the regulators really given a clear remit? Are their statutory duties and objectives properly defined?

The committee found that over time regulators have been given too many objectives, too many secondary objectives, and too many issues to which they “must have regard”. For example, the Office for Students was given seven general duties it has to consider. However, during our inquiry into the OfS, the regulator suggested that these duties do not necessarily have to be achieved, and the OfS merely has to show it has thought about these when making decisions. That is not a strong or clear basis on which to delegate power to an unelected body. This was clearly a cause for concern within higher education, the sector being regulated, especially when the OfS appeared not to be pursuing some of its duties, in particular in relation to institutional autonomy.

In other sectors, we noted that both the energy and water regulators face trade-offs, as we have heard this evening, between their different responsibilities—the affordability of consumer bills, the necessity of providing secure supplies and the need to protect the environment. It is challenging, and who should actually decide on the right balance—regulators, Ministers or Parliament? Quite simply, the duties and objectives given to these regulators in legislation do not provide guidelines on how to prioritise between the objectives they are given and the balances that should be struck. Government and Parliament need to give greater thought as to how they assign objectives to regulators. I welcome that the Government are conducting a review into the objectives of utilities regulators. Could the Minister give us more information on the timescale of that and whether it might be extended?

The power and influence that regulators have are very significant. It affects the lives of all of us and the viability and success of individual companies, and, indeed, our economy. It is therefore critical that regulatory bodies are accountable. They should be accountable to Ministers, where transparency is vital to ensure that there is clarity between the independent decisions of regulators and any political direction from Ministers. We cannot say that Ministers should not give directions, but when they do, there should be transparency.

As we have heard already, we need better accountability to Parliament. We acknowledge that many Select Committees in both Houses do a great deal of important work across a range of issues, but there is no drumbeat of accountability so far as the regulators are concerned, and we need to do more. The committee called this an accountability gap, and in a democracy that is very serious. We advocated for the body that has been spoken of, which would be similar in purpose to the Public Accounts Committee, but on a much smaller scale.

Independent regulators are here to stay. They have an important role, but we need changes so that their remits and responsibilities are clear; so that relationships with Ministers are clear and transparent; and so that they have a proper and appropriate degree of scrutiny, with Parliament playing a full role in this.