Select Committee on Constitution Minutes of Evidence


Examination of Witness (Questions 240-253)

WEDNESDAY 26 MARCH 2003

DR MARK THATCHER

  240. Here again I am asking for a general comment. You have given us a list of all the regulators in the various countries. The United Kingdom is the only one without any empty squares. Is that as a result of political decisions or of economic development?
  (Dr Thatcher) I think that there are a variety of factors as to why Britain differs. One is political leadership. When you have single-party majoritarian governments in control of your legislation, it is much easier to set up a regulator. If you compare that with Italy, it took them years to set up a regulator in telecoms and media, because there was not a stable majority. In part, it reflects state traditions. Britain has much more of a tradition of independent bodies than, say, France or Italy. In part, it reflects degrees of learning. Britain tends to learn from the US and so it has been more, I suppose, willing and open to import from the US than, say, continental European countries. We have different traditions. We have traditions of a unitary state, for instance, in France. So it has taken quite a long time to accept that there are going to be these independent bodies. They have had to think about how that affects their view of the state. But, yes, Britain is certainly a leader in creating these bodies.

  241. You have said that we are more willing to learn from America than from the Continent, which is a very interesting remark. Can you say what the overall effect on our regulatory system has been of that preference?
  (Dr Thatcher) We have imported these bodies perhaps earlier. We have also perhaps learned positively from the United States. I would be interested in Sir Christopher Foster's comments on this. The whole process of long, drawn-out hearings, nominees being knocked down, people's private lives being analysed in front of the Senate—that was avoided. I think that the particular emphasis on competition is undoubtedly a neo-liberal, Anglo-Saxon philosophy. It has been much more tempered in other countries. If you look at France and Italy, you have well-established doctrines of public service—what they call service public or servicio publico—which balances. They are therefore looking to balance the public interest, the general interest, which they see as involving things like universal service, protecting the poor, protecting certain regions, with competition. In Britain the emphasis has been much more on competition. These other elements have been seen as secondary and they have been seen as a problem. There were comments earlier about economic regulation versus social regulation and how on earth can we deal with social regulation? We do not really like social regulation; we do not know how to handle it, whereas in continental countries I think that it is seen as part and parcel of regulation. There is competition where there are other objectives to be pursued as well.

Chairman

  242. Most members of the Committee want to ask questions but, before we leave that one, I have one which is probably asking the same question from a slightly different perspective. The point you made at the beginning from your Table 1 was that the British regulators were generally set up before the others with which you are comparing them in the European countries. I suppose that raises the question, related to what has just been discussed, of what then has been learned from our experience by those countries you have studied. In most of the tables it is clear that there is not a great deal of difference in many respects; but in one or two areas there are differences—for example, the background from which regulators are drawn. I wonder if the differences are a consequence of essentially the point you were just making, about state tradition and the culture of those particular countries, and therefore it is natural for them to go in that direction, or is it the case that they have looked at the British experience and decided that they do not want to go down that route?
  (Dr Thatcher) British experience is generally seen very positively, with the exception of the railways—which are, I am afraid, generally very negatively regarded. Policymakers have therefore tended to want to import the British model of an independent regulator, and that has then been tempered by those state traditions. Oftel, for instance, is very highly regarded, and has been for a long time. One can see a process of importation and then politics and traditions come in. Oftel was clearly copied, for instance, by the Italians; but then the politics came in as to how would you actually set up the body. Because of issues about Berlusconi and so on, they then had a long fight and set up a very different type of body: one that covers media and telecoms; one which has nine members, who are elected by the two houses of parliament. That was really a political division, if you like, amongst the political parties. They could not allow an Oftel-style or even an ITC-style, independent regulator. Broadcasting was too political for them to let go of.

Baroness Gould of Potternewton

  243. Would you tell us whether the regulators in the other countries to which you have referred have the same sort of structure as here, where many of our regulators have parallel consumer bodies, which are allied to them but which are completely independent and which are, in a sense, representative of the consumer but also do independent research and challenge the regulatory body? Is that sort of pattern followed through, or is this just a British phenomenon?

   (Dr Thatcher) It is very much a British phenomenon. It is one of the points of institutional difference between the countries. They have not incorporated that.

  244. Is that a good or a bad thing?

   (Dr Thatcher) That is a bad thing, I think, because the voice of the residential consumer is one that is the most difficult to hear. The subjects are technical; your gains and losses are so small as a residential consumer; you have difficulties of organisation. So I think it is rather a bad thing.

  245. How do they actually get the voice of the consumer?

   (Dr Thatcher) More through politics than anything else. There is a greater level of political intervention in decisions than there is in Britain.

Lord MacGregor of Pulham Market

  246. In the earlier part of your presentation you drew attention to the importance of thinking more and more in terms of the supranational regulators. So far, we have only looked at the UK regulators. I want to ask you this question in relation to the EU, and only the EU, and thinking in terms of them in a regulator role rather than initiating regulations which are then applied nationally in individual Member States. Am I right in thinking that the main regulatory influence so far is in the competition authorities and not in some of the others, or is that wrong? To what extent do you think that we need to start thinking about their role?

   (Dr Thatcher) The general competition powers of the Commission are the exception, not the rule. In general, what happens is that the Commission issues, usually directives, sometimes regulations, and then it is up to Member States to transpose them and enforce them.

  247. Yes, exactly.

   (Dr Thatcher) So competition is very much an exception and, as you probably know better than I do, there is a long debate at the moment about which powers should be delegated back to the national competition authorities and which should remain with the European Commission—with a great deal of worry that the Commission is stronger than national bodies and you cannot trust the national bodies. There are two things I would add. One is that the effectiveness of European law depends on having both a strong and effective regulator and strong and effective courts. In general, legal action is slow and difficult. It is very much a second-best. That is very important. If you have had to go off to the Italian court, it will take you years before you actually get anywhere. The second point I would make is that the process of creating European regulation is a highly complex one. There is the formal process, but actually that only captures part of what we have. What is often very important is what happens right at the beginning, in terms of setting the agenda of what the Commission wants to do—which itself is constrained by resources and so on. This is where Member States and these independent regulatory networks play a crucial part, saying, "This is a priority. This is what we think you, the Commission, should be doing". The Commission is very sensitive to the wishes of Member States and national regulators.

  248. I am making the distinction between the creation of regulations and the regulatory body itself. I am more interested in the second, because I fully understand the point you make about the first. On the first, the impact you are drawing our attention to is that a lot of regulations can be developed at the European level, but have to be implemented at the national level.

   (Dr Thatcher) Absolutely.

  249. So it is the regulatory body. You heard the earlier discussion we had, with Sir Christopher Foster saying that he thinks that we should be thinking in terms of some further method of appeal through the courts or whatever, on regulators' decisions.

   (Dr Thatcher) Yes.

  250. Have you anything—apart from the delays, which I fully understand because I have seen some of them—that you think we can take into our own thinking, developing from that, from the European Commission competition bodies?

   (Dr Thatcher) I think what you are aiming for, if you have some kind of super body, is a body that sets principles rather than having to deal with every case. Let me give you the example of the German telecoms regulator, where every single case has been taken to court in Germany. That is not helpful. It is expensive; it is slow; it creates uncertainty. It is really not what you want. I suppose that, if I were being blunt about it, I think that looking to the courts all the time is—to put it in one way—a "cop out", because you are asking them to do jobs for which you have governments and parliaments. You cannot do that. You need to be clear where responsibility lies. There is a more general point I can make here, which may be controversial, but I think that problems of accountability and transparency apply not just to the regulators but at the European level, and perhaps most of all to ministers. There is a sense in which there are some things which you cannot, and certainly should not, hand over to judges; rather, they have to be placed with those whom you elect.

Lord Jauncey of Tullichettle

  251. I entirely agree with your last proposition, that a lot of these matters are not really appropriate to hand to the judiciary, because they are not equipped and do not have the experience necessary to deal with detailed questions of economics. The question I ask is in relation to (Table 5), where the figures of cost and the number of employees as between the various states are very disparate. Are you really comparing like with like there, or is it because in Britain we are much more heavily regulated, or even over-regulated, than they are in those three continental countries?

   (Dr Thatcher) You are absolutely right that the bodies are not always the same; they have different powers. For instance, it is not surprising that the Conseil de la Concurrence in France, a general competition body, has many fewer staff and a much smaller budget. It has many fewer powers. In terms of us being over-regulated, I think that the continentals would be amused by that suggestion. In France and Italy they generally see themselves—and in Germany—as being highly over-regulated in terms of constraining rules and legal rules. What may be the case is that in Britain, because the regulators have been around longer and because they have therefore developed a greater range of activities, more regulation is done by the independent regulators than by government ministries. There has therefore been a shift from government to regulators—a shift that has not happened to nearly the same extent in other countries.

Lord Elton

  252. Does that not tie in to what I was saying earlier? That in fact we regulate a lot of things that the others do not regulate at all, such as water, railways, the environment and food safety—according to your second table.

   (Dr Thatcher) We have independent regulatory bodies, but I do not think that I would characterise it in terms of we regulate it and they do not. They regulate it in different ways. They regulate it through public ownership; they regulate it through ministries; they regulate it through contracts; they regulate it at the local level rather than having a national body.

Chairman

  253. The fact that you are studying independent regulatory agencies does produce a rather unfortunate acronym.

   (Dr Thatcher) Indeed!

  Chairman: Dr Thatcher, you have covered a great deal of material. It has been extremely helpful for our purposes because, as you know, a comparative study helps us sensitise to particular features of our own systems we would otherwise not be aware of. That has been extraordinarily helpful for our purposes. There may subsequently be particular points that we would like to pursue with you in the light of our discussions, given the very valuable data that you have placed before us. Thank you very much indeed. We are very grateful.





 
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