The House of Lords Select Committee on Regulators was appointed on 23 November 2006 with a broad remit to "consider the regulatory process". Presented with such a broad remit and only one parliamentary session in which to operate we were forced to set strict limits on the scope of the work we wished to complete. We agreed to narrow the scope of our inquiries to focus on regulators rather than regulation; and to look only at the economic regulatory work of the major UK economic regulators.
Within this remit we have considered the statutory remits of the regulators; their working methods; working relationships; and the value for money they provide. We have also looked at the extent to which the regulators have successfully promoted competition and de-regulated where possible and we ask whether they should now be given an additional statutory duty to facilitate the competitiveness of UK firms.
In March 2007 we invited the National Audit Office to conduct a review of the way in which Impact Assessments are used by regulatorstheir report is published in full as an Appendix to our Report.
August and September 2007 brought the liquidity crisis at Northern Rock. Due to time constraints we have not been able to consider these events in this Report. We note, however, that the House of Commons Treasury Select Committee is currently inquiring into the Northern Rock crisis in the context of a wider inquiry into Financial Stability and Transparency.
Our conclusions and recommendations are listed in full at the start of this Report. We conclude that, broadly speaking, the legislation establishing the regulators is working well. Whilst we do not recommend any immediate re-writing of legislation we propose that over time, as opportunities arise, a measure of standardisation of regulators' remits should be introduced with the aim of ensuring that they are all statutorily required to follow best practice.
We would encourage other regulators, in addition to the FSA, to complete more Impact Assessments and to improve those they produce by strengthening their use of cost/benefit analysis, introducing clearer sign-posting and including an executive summary. We encourage regulators to commit to evaluating the impact of their work and monitoring the extent to which they are providing value for money, using post-implementation evaluation where appropriate and possible.
We welcome the willingness of the regulators to develop relationships between themselves to increase their effectiveness and recommend that the Joint Regulators Group be formalised. We further recommend that an inter-ministerial forum be established to require ministers to compare views and share best practice.
We conclude that in most sectors regulators have played an important role in helping to promote competition and we examine possible reasons for the lack of competition in the water industry. We do not accept that there is something specific about the nature of water itself which means that the sector can never develop effective competition. Whether or not the argument that the physical nature of water is a barrier to competition is a valid one will never be put to the test until the obstacles to competition presented by the threshold and the access pricing rule have been removed. We urge Ofwat to take account of the general comments made by the Competition Appeal Tribunal on its access regime.
We conclude that there is a crucial need for greater parliamentary oversight over regulatory bodies and we recommend that a Joint Committee of both Houses be set up in line with the recommendations given in Chapter 10 of the House of Lords Constitution Committee Report, 6th Report (2003-04): The Regulatory State: Ensuring its Accountability (HL 68). If it proves impossible to set up such a Committee we recommend that a sessional Select Committee be established in the House of Lords.