Examination of Witness (Questions 162-179)
WEDNESDAY 12 MARCH 2003
SIR BRYAN CARSBERG
162. Sir Bryan, welcome to the meeting of the
Committee this afternoon. We are most grateful to you for coming.
We are also most grateful to you for the paper that you put in
to us. I note in your paper you say, "My experience of giving
evidence to Parliamentary Committees showed that there was sometimes
room for improvement in the effectiveness of those Committees."
I hope we will not disappoint you this afternoon. Before we put
questions to you, is there anything you wish to say in opening
to add to your paper?
(Sir Bryan Carsberg) No, thank you very
much, my Lord Chairman. I am content to go straight to questions.
163. In the paper, you drew out the point that
in practice the main duty of regulators is clear and that duty
is acting on behalf of customers. I wonder in terms of answerability
who regulators are answerable to?
(Sir Bryan Carsberg) I recognise that it is a difficult
question and one that naturally causes concern. You are focusing
on accountability and accountability can mean many different things
to many different people. The reason for some degree of satisfaction
with the way things are is that in practice a regulator is exposed
to many pressures which encourage him or her to perform effectively
if he or she is a conscientious sort of person. Among those pressures
accountability to Parliament and parliamentary committees is very
important. Indeed, if you force me to specify one line that is
the main line of accountability, I would say a regulator is accountable
to Parliament and you might be interested in talking a little
more later about the vehicles for parliamentary accountability.
In practice, it is important though that there is quite a lot
of public interest in regulation and a regulator in practice has
to answer questions from various kinds of organisations, from
consumerist organisations, from industry organisations. There
is a lot of media interest and a regulator will be exposed often
to tough questioning by the media. All of those things help a
regulator who really wants to do a good job to keep in touch with
opinion. There could be some concern that a regulator who really
is not interested in doing a very effective job might perform
rather poorly but not outrageously. The Act under which I was
appointed says a regulator could be removed for misconduct or
misbehaviour or something like that. It is very difficult in practice
to exercise a right like that. You might get a poor performance
but not an outrageously bad performance and not be able to do
anything about it. If Parliament or ministers were to have the
right to do something about itthat is to say, to fire the
regulatorthat would open the system up to the danger of
political pressure and I think Parliament very wisely set up a
system that immunised the regulator somewhat from political pressures,
because the interests that are given effect through political
pressures are very often different from those of the economic
needs of the industry. If one were to take a very dramatic view
of this and look for drastic change, I suppose one could see the
establishment of some independent commission to make regulatory
appointments and remove them. Moving to the establishment of regulatory
boards helps a lot in this because it is pretty unlikely that
the whole board will be tarnished with this problem. My view,
from what I have seen of the workings up to now, is that I would
not feel there was a case for dramatic change.
164. In terms of who you are answerable to in
order to justify decisions, you are justifying decisions presumably
on the grounds that they fulfil the duty that you refer to in
the paper. In terms of the quality of decision making that may
be influenced by the input side, in terms of consultation with
those stakeholders or however you want to define those who have
a relationship to the regulator. Could you tell us a bit about
the process of consultation? Is that very much in the hands of
the regulator to decide who they will consult with and therefore
it is your discretion in how you structure that?
(Sir Bryan Carsberg) In my time, although I ought
to put on the table that I do not claim to be fully up to date
with all the most recent developments in this area, I elected
to undertake a consultation process. I used to publish a consultative
document when I was facing major decisions and invite anyone who
was interested to give their views. I had a number of meetings
with people representing various constituencies as part of that
and I think that is very healthy for regulation. I would wish
to see all regulators behave in that way. Some kind of duty to
consult, if it does not effectively exist at the moment, would
be desirable. I even in my time considered whether I would hold
public hearings. I had a little earlier in my career worked for
an American organisation, an accounting standard setter, which
was required under its constitution to have public hearings, so
I had some experience of them and thought they were very effective.
On the whole, I was persuaded after discussing it with a number
of people that probably one would not learn a great deal more
from public hearings over and above what one learned from written
consultation and the extra costs and scope for delays and so on
might argue against it. I think I would still take that view on
balance but consultation in general is very important.
165. In paragraph 11 you say, "I think
that, in practice, regulators do behave independently of Government.
Dependence on Government for reappointment is the main threat
to independence." I see you were the director general of
telecommunications from 1984 to 1992. Did that involve reappointment?
(Sir Bryan Carsberg) Yes, it did.
166. Did you feel the heavy breath of dependence
on government prior to your reappointment?
(Sir Bryan Carsberg) No.
167. You say it is a potential threat. I am
sure you behaved perfectly in every way, obviously, but do you
think people are sitting there thinking, "I want to be reappointed
so I had better . . ."?
(Sir Bryan Carsberg) No. I could not
give you any examples where I thought that had been a material
problem and I believe that I did what I thought was right all
along. Ministers behaved excellently in their relationship with
me and I never felt any wish on their part to put pressure on
me. I think they respected the desirability of having independent
regulation and indeed in many ways it is congenial to ministers
to have independent regulation. That was perhaps a factor in it
too. It was a theoretical thought. If you ask what the pressures
are, you can see that if the regulator was at loggerheads with
ministers on an issue of policy that might affect a reappointment
168. In that case, were there term limits, could
you have gone on being reappointed for ever and ever?
(Sir Bryan Carsberg) I could have.
169. In your case it would be an excellent plan
but in principle is it a good plan? I say that as a life peer
who trusts he is going to be here for life.
(Sir Bryan Carsberg) One thinks also
of the position of judges and so on. It is interesting. I know
one or two regulators and I believe I am right in saying that
the present director general of fair trading indicated on appointment
that he would take only one term. Perhaps he had in mind that
that was a demonstration of his independence. That seems quite
a healthy thing, does it not? Perhaps on the whole it would be
regrettable if people went on and on and on, though it is perhaps
a bit tight to say that five years should be an absolute limit
in all cases.
170. Perhaps a two term system?
(Sir Bryan Carsberg) Yes, I would have
thought two terms ought to be sufficient.
Lord MacGregor of Pulham Market
171. John Swift, the former rail regulator,
said to us in a memorandum last week, "Regulators with much
power and little accountability can do grievous harm to the body
politic and to the industries they are regulating. The motive
of consumer protection is excellent in any organisation but its
pursuit as a single minded goal can, unless handled with considerable
care, upset the apple cart and deprive the regulated bodies of
the kind of protection which they themselves need when they shoulder
the burden of securing investment in necessary goods and services."
I imagine that is a dilemma that you recognise and I wonder how,
in your experience, regulators set about avoiding that problem?
(Sir Bryan Carsberg) Wide consultation
is certainly important and one listens with great care to the
views put forward by the regulatees, by the industry. It is true
also that the establishment of boards is helpful. There was a
difficult trade-off there, as you will remember. I was a single
regulator. I had personally the responsibilities that might have
been exercised by a commission. I was a kind of one man commission,
as I think I said in my note to the Committee. That had the advantage
that you could be clearer about policy, about the concepts and
so on. Often committees have to fudge those things because of
differences of opinion. Also, one could act rather quickly and
that was particularly desirable in the early stages of regulation.
Subsequently, as it becomes a more mature system, the advantages
of having boards are very strong. In my time too it was the case
that there were a lot of decisions which were effectively made
by the regulator in implementing the licence and there was no
effective appeal to them except that there was the judicial review
system. Judicial review is a very blunt instrument because it
is much more about process than it is about reasons. The reasoning
has to be outrageously bad for the courts to interfere on those
grounds. One might feel that judicial review is an insufficient
safeguard in that situation. I would tend to the view that now
we have boards rather than single regulators the balance has been
changed. The trouble with establishing a routine appeal system
for everything is that it tends to be used all the time and regulatory
decisions take a long time. If one looks at American experience,
decisions can be in play for a very long time. That can be very
damaging for the industry too because they never quite know where
they are and industry sometimes needs decisions and the ability
to get on and act within them. Maybe with the establishment of
boards the balance is about right.
172. In the early days too, I imagine, when
it was very largely concerned with moving out of state monopolies
into privatised industries, I assumewe have certainly had
evidence to this effectthat moving to consumer choice,
to competition among providers, was a major motivation and therefore
a lot of the regulation was designed to deal with that. Some of
the regulatory issues now are a bit more complex.
(Sir Bryan Carsberg) Yes, although some
of the most difficult decisions in telecoms are still about promoting
competition and the question of access to the systems of other
operators and the pricing system for that creates great difficulty.
In my day, we had a duopoly as you will remember and a lot of
my major decisions were concerned with enabling competition to
take place effectively in those terms; but competition did not
bite for some time and a lot of what I had to address in the incentive
regulation approach, giving the main provider the incentive to
perform effectively for customers, was a part of a lot of decisions.
Quality of service and some element of compensation for customers
for bad service was a very important regulatory development that
I introduced in telecoms. One had to think of those weapons as
being very important in the early years particularly.
173. Now one of the issues for some regulators
is the fear of being criticised for not acting strongly enough
to protect consumers or whatever in some cases. You said in your
paper to us, "There is a `natural danger' for regulators
to over-regulate and try to solve all apparent problems without
giving sufficient weight to the direct and indirect costs."
I think that is a real danger and I wonder how you feel the public
or the industries can be protected from that danger of over-regulation.
Is it a matter for the judgment of the regulators themselves?
(Sir Bryan Carsberg) There are certain
safeguards. In my time, ministers used to talk of regulation with
a light rein, which was the expression in those days, and yet
there was nothing in the Act about that. It was understandable
enough. One has to learn as one goes along with these things,
but I was given certain duties and it was said that if representations
were made to me I had to investigate them unless they were frivolous,
for example. People were making representations all the time and
generally they were not frivolous and one wanted to do things
to help. There were all sorts of things like junk faxes and selling
telephone calls, where you wondered perhaps how far regulation
should go and yet, as a regulator, you feel you want to solve
problems and do things. The new Communications Bill has in it
certain duties relating to what is now called regulation with
a light touch and that is helpful. It certainly strengthens a
regulator's position if he or she can point to something in the
Act that says, "I am required to take account of the regulatory
costs", and so on. When I said one might go further, I had
in mind that regulators might be required to give some assessment
of the costs imposed by particular regulations and reasons why
they think the benefits of the regulation outweigh those costs.
I am not suggesting it can be a very precise accounting kind of
thing, but at least qualitatively. I suggested in my note that
perhaps parliamentary committees could play a stronger role and
this is an area where some tough questioning by parliamentary
committees might help. It is a matter of altering the focus a
174. As a regulator, if one of those was in
as a duty in the Act setting up the regulator, or a revising Act
or whatever, that is something that the regulator really does
pay attention to.
(Sir Bryan Carsberg) It is something
I paid very close attention to. I could more or less recite the
duties in the Act. The duties were not completely clear. I said
in my note, as a practical matter, if you think about it you realise
this must be about making things better for consumers. That is
the common sense of what it is about and you try to achieve that.
My duties, for example, referred to the need to make telecommunications
services available to meet all reasonable demands. What is a reasonable
demand, one wonders? Presumably, the idea was people ready to
pay an economic price but that also contains certain difficulties.
I had a duty to promote the interests of consumers as regards
price, quality and variety of service. Then it said something
about I had a duty to do that for elderly and disabled people.
It was very difficult to know what that meant. The implication
was that elderly and disabled people should have some special
treatment because why else mention them separately but how much
special treatment and what kind of special treatment was very
hard to know. It seems that perhaps the thought was that there
might be some degree of cross-subsidisation of those consumers
by others. If that was the idea, one feels that that is perhaps
an area which is more for ministers than for regulators because
ministers have the legitimacy of having got there through elections,
whereas regulators are appointed officials.
Baroness Gould of Potternewton
175. Perhaps because you were the regulator
for Oftel I should declare an interest because I am a member of
ICSTIS (the Independent Committee for the Supervision of Standards
of Telephone Information Services), the independent regulatory
body which obviously has a relationship with Oftel. How do you
feel about having independent regulators who are responsible at
least economically to you in some ways? A number of regulators
have parallel consumer bodies allied to them. Do you think that
is a good thing or a bad thing, as opposed to quite distinct,
outside consumer bodies working with them?
(Sir Bryan Carsberg) ICSTIS I found
very helpful. The formation of ICSTIS arose out of the problem
of recorded messages, chat lines and things like that, where some
unfortunate customers found very large bills were run up on their
telephones by a person who was not responsible for paying the
bill. A lot of complaints were made to me about it because of
the pornographic element in the messages. I certainly did not
feel that I was appointed to be a judge of pornography. My concern
was to give the customer control. One of the cases that particularly
caught my attention was where a rather hard up couple had a bill
of £6,000 for a quarter's telephone because they were both
out at work and their teenage son was at home, unemployed, using
the telephone to telephone these services. There was no mechanism
available to them at that time for stopping it. I would have liked
a regulation which said that those services are not permitted
until the telephone company provides customers with a way of blocking
access to them, which of course is feasible under modern technology
but in those days it would have meant the services would have
had to stop because the technology was not capable of providing
the blocking. In the end, the formation of ICSTIS was helpful
in that regard. You ask generally how one feels about the establishment
of regulatory bodies with subsidiary roles like that. In particular
circumstances they can be very helpful but you have to take each
case on its merits. What was the other point you were asking about?
176. Some of the regulatory bodies have parallel
roles, like electricity consumer bodies. Are those a good or a
(Sir Bryan Carsberg) Consumer bodies
are most useful if they are independent. In my time, I had close
communications with both general consumer bodies, the Consumers'
Association, the National Consumer Council and bodies like that,
and with industry specialists, but still independent bodies. I
learned a lot from them. Some of them were very professional in
their approach and gave one very stimulating and challenging ideas.
I did also have some committees established under the statute
to advise me from an inside perspective. I did not appoint them;
they were appointed by ministers. They were very helpful and I
certainly had no difficulty with them. There is independent and
independent. In a sense, they are independent because their continuing
in office does not depend on the regulator and yet the independent
bodies that are formed themselves and have the resources to do
independent research and challenge ideas have a particularly useful
177. You mentioned in reply to Lord MacGregor
the question of over-regulation. I wonder if you could give some
examples of what you would identify as possible over-regulation?
(Sir Bryan Carsberg) I think there could
be cases linked with certain aspects of consumer service. I think
technology is helping. I wondered, looking back, whether I was
right to worry as much as I did about junk faxes. Do not misunderstand
me. It was not something I slept on every night but nevertheless
I did do one or two things about it and I feel, looking back,
that maybe that is the sort of thing one should leave life to
sort out. There is also a danger currently in terms of promoting
competition. There is a lot of regulation, much of it now coming
out of Brussels, with very good intention to enable new competitors
to operate in the market place by having rights to connect to
the systems of particularly BT but it could be other operators
so that they just have to provide a small bit of network and have
the thing carried the rest of the way by somebody else. There
are quite significant costs involved in that and it is possible
to carry that kind of requirement to the point where the costs
outweigh the benefits. One has to have a view of how much competition
is sustainable. I am a great believer in having some competition.
I think that has transformed the industry, but if you look at
the situation today you do have to ask the question whether there
has been too much competition and perhaps whether it has grown
to the point where it has been uneconomic and whether regulation
has played a role in that.
178. On the question about consumer bodies that
a regulator may draw on, especially those that are specific to
the industry, presumably there are two essential criteria they
need. One is independence, which you stress, and the other is
being representative of the consumer. I wonder how you ensure
that the bodies that advise the regulator are representative.
Did you feel that you could be sure in your own mind that these
bodies spoke for consumers as a whole rather than a particular
group of consumers?
(Sir Bryan Carsberg) No. It is difficult
to put your hand on your heart and say you are sure of that. What
a regulator tries to do in practice is to make sure that a good
variety of sources of evidence are available. I used to hear about
consumers' problems from all sorts of sources. I used to see a
large number of complaints from individuals, often that came through
the officers and Members of Parliament and so on. If you combine
that and your meetings with people, you get statistical evidence
about the quality of service and that way you get a good balance
of the picture and can use that to test the views of particular
bodies. It would be very difficult to establish a consumerist
body that you could be sure was really strictly representative.
179. You were drawing on several sources of
intelligence for your purposes?
(Sir Bryan Carsberg) Yes.