Striking the right balance: How regulators are adapting to a fast-changing landscape

Good regulation is about more than just enforcement, experts and watchdogs say
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By Civil Service World

14 Feb 2023

Much has changed in the UK regulatory landscape over the past few years, with the decision to leave the European Union creating opportunities to do things differently and the Grenfell Tower disaster exposing a building-safety regime unfit for purpose.

However, developments faced by regulators are broader still, taking in elements of the public sector’s response to the Covid pandemic and the growing use of artificial intelligence. CSW brought together sector experts to discuss the state of regulation in the UK for a recent webinar, in partnership with PA Consulting. 

Research by the professional-services firm gives the UK regulatory sector much to be reassured about. A recent survey found 70% of regulated businesses felt watchdogs were effective in meeting their remit – based on a sample group of 500 leaders. Meanwhile, more than three-quarters of general-public respondents to the survey said they believed the UK has regulation that is up to the job.

Natalie Prosser is chief executive of newly-created regulator the Office for Environmental Protection, which was set up under the Environment Act 2021 to hold government and public bodies to account for environmental protection, the quality of law related to the environment and its enforcement. 

She said her experience of creating the organisation over the past year has been that while UK business may not have much appetite for more regulation, there is a hunger for “really good” regulation.

“In our sector, where we’re dealing with really severe environmental challenges, the best of industry want to invest and they want to innovate,” Prosser said.

“But in order to create the safety to do that, they want certainty in terms of regulatory futures: what the laws are going to be and, crucially, how they will be implemented. 

“The feedback is that good businesses do not want non-compliance to create a competitive advantage. They want a level playing field. And that is really positive in our sector, not just for growth but for green growth as well.”

Prosser said the idea that regulation is largely about using enforcement is a frequent misunderstanding by the public – as well as by some officials and ministers. 

“Good regulation is far more than enforcement,” she said. “Enforcement is part of the toolkit, and it’s an important part in some contexts. But it’s really only part of the picture.”

She added: “I’ve seen that simplistic understanding in government as well: but good regulators know that effective regulation is about enabling those who want to do well, removing barriers, and getting out of the way of responsible business and focusing your attention hard on areas either where it’s ‘can’t do’ or ‘won’t do’.”

Prosser said the real skill of regulation is “truly understanding the dynamic of the situation in front of you so you can best tailor your response” in order to reduce public harms and promote public benefits.

“Good businesses do not want non-compliance to create a competitive advantage. They want a level playing field” Natalie Prosser, OEP

Michael Hanton, deputy chief regulator at Ofqual, said he hoped one positive outcome from the coronavirus pandemic would be a growing appreciation of the important role regulators play in protecting society’s most vulnerable and disadvantaged. 

He said the exams and qualifications watchdog seeks to put real focus on the people it exists to protect: students and apprentices – and particularly the most disadvantaged among them. 

Hanton, who is also a director at fledgling professional body the Institute of Regulation, said that in common with other regulators, Ofqual is keen to enable growth and innovation in its sector, with the main issue being how to do that safely.

“Regulation is such a powerful tool in enabling innovation and growth,” he said. “At Ofqual, of course we want innovation that’s in the interests of students. Of course we want innovation that is going to improve how young people are assessed and that is going to make assessments fairer.

“What we’re trying to do is enable markets to function well in the interests of those that use them.”

Hanton said Ofqual is particularly keen to know if any of its rules are obstacles to good innovation. 

“Often, it’s not the presence of rules that is the question. I think it’s about where those that are regulated feel that there is ambiguity,” he said. “They don’t know what we as a regulator would think. There’s a question for regulators to ask about how we can reduce ambiguity for those that are regulated when they’re looking at innovative approaches.”

Conrad Thompson, regulation and innovation lead at PA Consulting, said the firm’s work suggested regulators need to “really rethink” their remit and priorities; try their utmost to “walk in stakeholders’ shoes”; and explore how best to get leverage through the work of others.

On the last point, Thompson said a “platform thinking” approach is required that will involve exploring the benefits of common technology and more “componentised” ways of working, including collaboration with other industry bodies to maximise impact. 

“Some of the work that we’ve done with building-safety regulations is a really great example of how they are going about addressing the Grenfell challenges by setting up a platform that allows everyone to share safety data far more easily as the real enabler to address risks in the future,” he said. 

OEP’s Prosser said the environmental regulator is very fortunate to have a broad and active stakeholder community, which it has “really lent on” for support.

“We are a product of EU exit and some of the positive feedback we’ve had is that because we’re so much better connected with all of our stakeholders – whether it’s government, those we oversee, NGOs and the public – we’re able to act in a much more nuanced way,” she said. “We can move at a greater pace than the EU Commission was able to. And that’s been a real benefit.”

Prosser said the OEP’s strategy of focusing on stakeholder feedback, being transparent and building confidence in the organisation is bearing fruit. 

She added that the OEP’s purpose has been embedded among staff “from the get-go”. “If you ask anyone at the OEP, I can guarantee they can quote to you in a heartbeat exactly what our purpose is, and that importance of contributing to environmental protection through holding other parts of government to account,” she said.

“We need to understand where society is at, what it’s ready for, and what it’s right for us to consider being addressed through AI and what is simply not appropriate” Michael Hanton, Ofqual

Ofqual’s Hanton said that when Jo Saxton became chief regulator in 2021, the organisation had “looked again” at its remit from parliament and reflected on why it had been set up, to ensure there was “real clarity”.

He said the move was accompanied by a listening tour in which he, Saxton and other colleagues travelled the country and met more than 100 school leaders and countless learners to better understand their priorities and concerns about qualifications.

“It directly helped us make good policy decisions,” he said. “In particular, it really helped us to think about how we communicate. So one of our objectives is to promote public confidence in how qualifications operate. It’s at the heart of why parliament created us.”

The use of artificial intelligence is an area in which PA Consulting’s Thompson suggested regulators need to be on the front foot. 

“Regulators have a really important role to play, at the very least in just bringing to light what is going on in the market today,” he said. “I suspect citizens get more fearful than really they should be about how AI is being used; equally, it is legitimate that they should be worried about how it might be being used in the future.”

Ofqual’s Hanton agreed, citing “huge challenges” in terms of fairness and bias. Nevertheless, he suggested traditional evaluation practices – for students, at least – will prove hard to abandon.

“We need to have skills, but we also need to understand where society is at, what it’s ready for, and what it’s right for us to consider being addressed through AI and what is simply not appropriate,” he said.

He added that it is hard to see a point in the future where the quality of children’s handwriting is not part of assessment. “Human markers are really important,” he said.

Thompson wound up the event by citing a cherished slice of regulator pro-activity: Civil Aviation Authority chief executive Andrew Haines’s 2017 decision to “call out” Ryanair on Sky News over the budget airline’s compensation practices for passengers affected by delays and cancellations.

“I’m sure they thought about it a lot. I’m sure they had their lawyers going over the implications, and obviously had the backing of the DfT,” he said. “But I thought it was a brilliant example of regulators stepping up and doing what us as citizens would want them to do.”

Ryanair changed its rules within a week, Thompson said.

This article first appeared in CSW's January magazine.

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