That this House takes note of the Report from the Industry and Regulators Committee Who watches the watchdogs? Improving the performance, independence and accountability of UK Regulators (2nd Report, Session 2023–24, HL Paper 56).
My Lords, I am pleased to introduce this debate on the Industry and Regulators Committee report. I thank our committee members and staff for their valuable contribution to the committee’s work, particularly my noble friend Lady Taylor, who has taken over from me as chair of the committee. Over the last three years, the committee examined the regulators of energy, water, higher education, and financial services. This report drew on our findings in those inquiries and built on them by hearing from a wide range of other witnesses, whom we thank.
Our report focused on how power is delegated to regulators and how they are held accountable for the use of that power. The 90 or so regulators in the UK usually have oversight of particular sectors, such as Ofgem, for the energy sector, or particular issues across the economy, such as the Competition and Markets Authority. Regulators are set up to act independently from government, with the aim of providing long-term stability and instilling confidence that enforcement decisions against citizens and organisations are not affected by political considerations or lobbying. They wield significant power and influence over our economy and our everyday life; that unelected bodies wield such power is unusual, and for this reason it is important that Parliament holds regulators to account for how this power is used.
Primarily, this is done through Select Committees. However, we found that the scrutiny of regulators by committees tends to be piecemeal and reactive. There is little routine scrutiny that focuses specifically on whether each regulator is carrying out its duty effectively in line with its remit. We recommend that a regular review is needed to provide an assurance that regulators are carrying out their duties as required and to identify problems before they occur—I hope—rather than examine the debris after the fact. The Industry and Regulators Committee has been filling some of this gap, and so will the new Financial Services Regulation Committee, which I now sit on, but they are not able regularly to scrutinise all the UK’s regulators. In the absence of a regular review of regulatory performance, each inquiry has to start from scratch. This contrasts starkly with the practice of the European Parliament, which can call on European regulators and examine their performance and hold them to account, well informed by the knowledge and evidence prepared by a substantial permanent group of officials.
We have important bodies to aid scrutiny. The National Audit Office does sterling work in supporting the Public Accounts Committee, including, on occasion, by assessing the value for money that regulators provide. However, it does not have the resources to cover all regulators on a routine basis, and neither does the PAC have the time to do so. The National Infrastructure Commission has an important role to report on the delivery of UK infrastructure where regulators such as Ofgem, Ofcom, Ofwat and the environment agencies hold some responsibility. Given the importance of investing in infrastructure and securing growth—the key aspiration of the new Government—we recommend that the National Infrastructure Commission be put on a statutory footing, giving it the freedom of independence to speak truth to power and to inform the public about what is going on, or often not going on, with large-scale investments into our public realm. For instance, we were disappointed to find that the NIC did not have the power to investigate proactively catastrophic underinvestment in the water infrastructure over many years, which led to widespread sewage discharges. Why is that? Because it is not allowed to investigate areas of settled government policy.
My Lords, I first draw attention to my entry in the register of interests; in particular, as chair of the financial services division of DAC Beachcroft. I welcome the opportunity to follow the noble Lord, Lord Hollick, not only to congratulate him on an important speech but to thank him and his colleagues for making such an important contribution to this debate.
This report excels particularly in its shrewd and practical analysis of the eternal tension between independence and accountability. As it states in paragraph 171:
“Regulators should be held to account for aspects of their performance by their sponsoring departments within government. Given the importance of regulatory independence, accountability cannot be left to the Government alone, and Parliament must play a critical role”.
Experience tells us that regulators have their ups and downs. In the unlikely but possible event of one going rogue—acting outwith its statutory remit, demonstrably underperforming or even failing completely—there must be some mechanism for dealing with that. Sometimes we joke that the sign of a successful regulator is to be equally unpopular with producers and consumers, and with Governments and Oppositions.
Financial regulation—the very foundation of our economic system—failed disastrously, resulting in the crash of 2008. Thereafter, the debate seemed to be between rules-based versus principles-based regulation. I say that we need proportionate, flexible and targeted regulation. There is always a risk of regulating to prevent the last catastrophe, rather than creating a system that can prevent the next one.
In May, the previous Government produced a very good White Paper, Smarter Regulation, which included the observation that
“regulation should only be used where strictly necessary, with a high bar for introducing it and laser-like focus on how it will be implemented and felt”.
My Lords, it is a pleasure to follow the noble Lord, Lord Hunt, and a particular pleasure to follow so closely the comprehensive introduction by our excellent former chair, the noble Lord, Lord Hollick.
As the noble Lord alluded to, the Grenfell report and today’s Statement have been an extremely sobering reminder of the importance of effective regulation and the effective oversight of regulators. The principal job of regulation is to ensure societal safety and benefit—in essence, mitigating risk. In that context, the performance of the UK regulators, as well as the nature of regulation, is crucial.
In the early part of this year, the spotlight was on regulation and the effectiveness of our regulators. Our report was followed by a major contribution to the debate from the Institute for Government. We then had the Government’s own White Paper,Smarter Regulation, which seemed designed principally to take the growth duty established in 2015 even further with a more permissive approach to risk and a “service mindset”, and risked creating less clarity with yet another set of regulatory principles going beyond those in the Better Regulation Framework and the Regulators’ Code.
Our report was, however, described as excellent by the Minister for Investment and Regulatory Reform in the Department for Business and Trade under the previous Government, the noble Lord, Lord Johnson of Lainston, whom I am pleased to see taking part in the debate today. I hope that the new Government will agree with that assessment and take our recommendations further forward.
Both we and the Institute for Government identified a worrying lack of scrutiny of our regulators—indeed, a worrying lack of even identifying who our regulators are. The NAO puts the number of regulators at around 90 and the Institute for Government at 116, but some believe that there are as many as 200 that we need to take account of. So it is welcome that the previous Government’s response said that a register of regulators, detailing all UK regulators, their roles, duties and sponsor departments, was in the offing. Is this ready to be launched?
My Lords, I have the honour of serving on the committee that produced this report, which was chaired superbly by the noble Lord, Lord Hollick, and is now chaired by the noble Baroness, Lady Taylor—both of whom we will hear from today. We were very fortunate in our staff, who achieved the almost impossible against excruciating timelines.
To illustrate the points that I will make with one example, I will reprise the committee’s experience with the water industry. The initial objective given by the Government to the regulator and thence to the water companies was the production of clean, cheap water—and that happened. Privatisation raised some finance but the investors’ objective was to deliver profits to their own stakeholders; that happened too, through financial engineering that its regulators did not understand or question. So long as the initial objective—cheap, clean and plentiful water—was being met, the water companies were largely left to go their own way. The result? Investment for the long term was ducked, sewage discharge facilities were abused and monitoring was inadequate until environmental objectives gained prominence and a combination of civil society, the media and the committee’s inquiry revealed that Ofwat, the Environment Agency and Defra had been both diffident and outplayed in their dealings with the water companies. Thereupon, water companies’ directors were lambasted for taking bonuses while polluting rivers and their investors were criticised for sharp practice. The regulators, exposed as complacent, imposed swingeing fines on water companies—costs that will ultimately fall on the consumer, as will the many billions for overdue investment in a catch-up that will probably take a quarter of a century or more.
Meanwhile, investors have taken fright, some water companies face bankruptcy and there is uncertainty as to whether the water companies and their regulators are even up to the job of delivering the projects needed. All this reflects a combination of poor and shifting objectives from government while complacent departments and underskilled, under-resourced regulators were outsmarted by the very businesses they were supposed to be regulating.
My Lords, I congratulate my noble friend Lord Hollick on securing this debate and his outstanding introduction. This report, Who Watches the Watchdogs?, is the crowning glory of his term as the inaugural chair of the Industry and Regulators Committee, to whose establishment he did much to contribute. The standing of the committee, which is recognised by the Institute for Government, as I shall refer to later, owes much to his term as chair. Like the noble Lords, Lord Clement-Jones and Lord Cromwell, I was proud to be a member of the committee at the time of this inquiry, and continue to be a member under the excellent chairmanship of my noble friend Lady Taylor of Bolton.
Who among us has not felt frustration at the burden or impact of regulation, whether as consumers or in our business or professional lives? That, I suggest, is the result of bad regulation, not the principle of regulation, and the purpose of the committee’s inquiry was to identify ways in which regulation could be made consistently better. Further, like the noble Lord, Lord Clement-Jones, I believe that good regulation is a key determinant of the success of a dynamic social market economy. One of the most striking pieces of evidence that the committee heard was from Virginia Acha of the pharmaceutical group MSD. She argued that, if you look around the world, there is no country in which there is a thriving life sciences industry that does not have a strong pharmaceutical regulator.
What is true for life sciences is true for other industries and sectors, even or particularly those that are complex and/or fast changing. For that reason, I disagreed with the previous Conservative Government’s policy of delaying overarching regulation of AI and look forward to the Labour Government introducing legislation as soon as possible, drawing where appropriate, I hope, on the Private Member’s Bill introduced in the previous Parliament by the noble Lord, Lord Holmes of Richmond.
My Lords, I congratulate the noble Lord, Lord Hollick, on the work of his committee in producing such a comprehensive and insightful report. It has brought into focus an important issue that has a huge impact on the wider public. Many years ago, I worked at the Financial Services Authority at its foundation.
A common refrain from commentators, frustrated with democratic politics, is, “Things would be so much better if only experts were in charge”. However, I suggest that the proliferation of regulators throughout the United Kingdom has tested that theory, and the committee’s report provides ample evidence of the trade-offs inherent in delegating matters to regulators.
As many in this House will know, decision-making in government consists of an endless flow of problems. These problems, almost without exception, involve distributional trade-offs between competing voices in society, each of whom has a legitimate claim on public resources. Every decision creates winners and losers: those who stand to gain or suffer from the effects of public policy. That is why I welcome the committee’s recommendation that, where decisions necessarily involve distributional trade-offs, there should be some facility for regulators to seek guidance from the Government as to how to proceed. There is a good case for making that facility more formal.
The only plausible qualification for taking distributional decisions is democratic consent. Accountability to the electorate is the only effective deterrent for decision-makers to resist the temptation to serve factional interests over wider public interests. Since 2008, the Bank of England has engaged in almost £1 trillion-worth of quantitative easing. In evidence to the Economic Affairs Committee of this House, Bank officials stated that they “hope”—their word—that the effect of this stimulus would be to inflate existing asset prices, making asset-holders richer and thus prompting them to spend more money. That is a distributional decision, the consequences of which impact on us all, and one which Parliament played no role in authorising. I therefore also welcome the committee’s recommendation that the accountability of regulators to Parliament must be strengthened, although I doubt whether the committee’s recommendation for yet another statutory body will enhance that accountability.
My Lords, it gives me great pleasure to take part in this debate and to congratulate my noble friend Lord Hollick and his committee on a most excellent report. I was not a member of the committee, but sometimes I felt I was a lone wolf in challenging HS2 and other things over their costs over the past 10 years because there was no regulator. What struck me was that, on page 5 of the report, near the bottom, there is an interesting paragraph which says:
“Ministers and Departments responsible for specific regulators should be subject to scrutiny … the Committee was disappointed by the Department for Business and Trade’s limited engagement”.
I think that is probably putting it mildly. It probably did not turn up at all. The same applies to the Department for Transport in my fights with it. I have come to the conclusion that there may be a difference between the way that regulators can regulate commercial companies and the way that they try, sometimes successfully, to regulate government departments.
In the time available, I shall concentrate on the Department for Transport. It has sat back and seen the capital cost of HS2 go up from £37 billion to £180 billion. That is quite a jump over 10 years. When you try to challenge it, it all gets very difficult. I tried the PAC and the National Audit Office, and they were busy, as one might expect. So, I wrote to the Cabinet Secretary to ask him to investigate whether Ministers had complied with paragraph 1.3 of the Ministerial Code by failing to give an accurate and truthful account to Parliament, knowingly misleading Parliament and failing to be as open as possible with Parliament and the public. The answer to all of those was no. Simon Case, the then Cabinet Secretary, instead of doing what I asked him to do, asked the Permanent Secretary of the Department for Transport to respond. Unsurprisingly, she said everything was fine—but she would because was it her department I was challenging.
My Lords, it is a pleasure to take part in this debate. I congratulate the noble Lord, Lord Hollick, on his excellent introduction to the debate and thank him and the committee for an excellent report that covers so much ground in such clarity and detail. “Who watches the watchdogs?” has been the cry over centuries of human societies, and it is never more applicable than today with the proliferation of regulators covering all aspects of our economy and society. Performance, independence and accountability are exactly the three points on any tripod to get into the issues surrounding how in the UK we regulate in the 21st century. The recommendations are clear, achievable and relevant, and I agree with all of them.
The themes running through the report are equally clear. There is a sense that it is as good as pointless—worse, harmful—simply to add more statutory objectives to regulators in the belief that this would impact performance and produce a better result for the market or consumers. Similarly, some regulators are able to fund themselves through levies and fees, and others have to go with their hand out to government. That financial structure must impact on the way that they operate, through no fault of their own.
The cry I hear running through the whole report is for clarity, consistency and coherence across the regulatory landscape. I agree entirely. This is never clearer than when we come to artificial intelligence where, currently, there is no regulator. The previous Government had the inadequate approach of writing a letter to all regulators to ask them what they intended to do when it comes to artificial intelligence. Will the Minister say what this Government’s approach will be to get the right regulatory framework for AI? I would certainly like to see an AI authority to review many of the provisions in my AI Private Member’s Bill, and I thank the noble Viscount, Lord Chandos, for his kind words about it.
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We recommend a more effective approach to improve parliamentary oversight of regulators, and a new independent statutory body, the office for regulatory performance, should be created to advise Parliament and its committees to hold regulators to account on a more thorough and systematic basis and provide an annual report card on each regulator’s performance. The resources to fund its work would be well spent to ensure that regulators are delivering what they are asked to by Parliament. We recommend that the Government consider provisions for the office for regulatory performance as part of their forthcoming creation of the regulatory innovation office.
Imposing multiple statutory responsibilities on regulators can muddle them and their accountability. Some regulators have been given too many objectives and matters to have regard to without any clear guidance on priority. This makes it difficult for a regulator to achieve its objectives and for Parliament to assess its performance. Take the case of Ofwat, which prioritised keeping consumer costs down instead of increasing essential investment in the water infrastructure to meet population growth and replace its failing century-old system. Where there is a lack of clarity in the job role given to regulators, they often reach for the most cautious solution and avoid raising bills, even where this might be necessary. This lack of clarity undermines the independence of regulators; Parliament and the Government need to be clearer when setting and prioritising objectives and not remain mute on the issue.
The recent introduction of the competitiveness and growth objectives for regulators brings a welcome focus on growth and improving the performance of regulators, but it also brings a challenge for regulators to balance the new growth objective with their overriding responsibility to sustain the integrity and enforcement of effective regulation in their sector and, particularly, the protection of customers.
Noble Lords will recall the enthusiastic embrace of the coalition Government for a bonfire of red tape. Earlier this afternoon, we were reminded of the dangers of thoughtless implementation of that approach when the Grenfell fire report cited lax regulation as a key contributory factor to the devastating fire. The objectives of growth and competitiveness must sit side by side with a strengthening of public protection and an improvement in the clarity and speed of response and remediation provided by regulators to the public and business alike.
Regulators can have a significant impact on growth. In the Industry and Regulators Committee’s 2023 letter to the London insurance market, we noted how the introduction of rules to allow the advent of securitisation and captive insurance was widely applauded and adopted in many jurisdictions, and opened attractive growth opportunities for London. In Singapore, where the regulator promoted the virtues of these same UK rules, they rapidly authorised several companies to open for business. UK regulators were far too slow off the mark and introduced a very long process of authorisation, which prevented London taking advantage of being the primary rule setter.
When the CEO of the London Market Group appeared before the Lords Financial Services Regulation Committee last week, she reported that there had been no improvement in London’s regulatory process since our earlier report. In the same meeting, the head of Marsh McLennan told us that the cost of compliance in the UK was estimated to be six times greater than in the nearest major competitor jurisdiction. These examples appear to be a result of our regulators’ passion for process rather than effective outcomes. This results in great frustration for customers and businesses; it adds costs and undermines growth.
That regulator passion for process is in part born of an understandable need to minimise the danger of getting something wrong and missing key information. Perhaps the advent of AI software, which itself presents some interesting regulatory challenges, can transform that process by collecting all the data, verifying it for an available, possibly centralised database, and identifying those cases and authorisations that require further inquiry and judgment to resolve. The regulators can then focus their resources and well-honed skills on resolution rather than procrastination. Innovation like that can improve regulatory performance and protection, and promote growth.
The Government’s announcement to legislate to set up a regulatory innovation office provides an important opportunity to consider how AI and other innovations can be harnessed and regulated to improve protection, competitiveness and growth. Will the Minister please confirm that there will be a pre-legislative consultation, when the recommendations of our committee and others can be considered? When do the Government expect to set up this new body and are they supporting the previous Government’s May 2024 White Paper, Smarter Regulation, ensuring that regulators play their part in supporting growth?
Regulators protect citizens and the environment against those who, by design or otherwise, wish them ill. By providing a clear and efficiently managed set of rules, regulators provide the predictability, stability and competitiveness that help businesses to attract domestic and overseas investments, which can help them flourish and boost growth. Regulators need a clear remit, independence from political interference, and the necessary funding and resources to do their job.
Regulators have the responsibility to operate in a transparent manner, to explain the reasons for making their decisions, and to speak candidly to Parliament and the public if there are significant issues that need to be addressed and resolved, however discomfiting the Government of the day might find them. Parliament, for its part, must adopt the reforms proposed to strengthen its oversight of the regulators and to fulfil its role watching the watchdogs. I beg to move.
Labour’s manifesto said:
“Labour will ensure economic regulation supports growth and investment, promotes competition, works for consumers, and enables innovation”.
I hope that the new Government’s policy on regulation will continue to have its roots in their oft-stated intention to promote growth. For any consensus about the future of regulation to be truly sustainable, it should be across parties and not just within them. I hope to hear from the Minister a repeated echo of the spirit of practical common sense that so characterises this report.
Adam Smith, who I suppose is the father of free market economics, famously wrote:
“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”.
There, in a proverbial nutshell, is the case for regulation: a totally free market might well unleash countless instances of honest entrepreneurship and public benefit, but it would also facilitate all kinds of mischiefs.
As Secretary of State for Wales in the early 1990s, much of my effort was directed towards securing inward investment. When considering where to invest, major international companies, especially those in financial services, will naturally take account of taxation rates and regimes, but they will also subject regulatory systems to formidable scrutiny—and, believe me, they really do their homework.
What attracts much-needed inward investment is a regulatory system that is stable, predictable and proportionate, not one that wastes everyone’s time and resource with pointless box-ticking and form-filling. I very much hope that we can all agree on that.
The crux of our report was to address performance, strategic independence and oversight of UK regulators. In exploring existing oversight, accountability measures and the effectiveness of parliamentary oversight, it was clear that we needed to improve self-reporting by regulators. However, a growth duty performance framework, as proposed in the White Paper, does not fit the bill.
Regulators should also be subject to regular performance evaluations, as we recommended; these reviews should be made public to ensure transparency and accountability. To ensure that these are effective, we recommended, as the noble Lord, Lord Hollick mentioned, establishing a new office for regulatory performance—an independent statutory body analogous to the National Audit Office—to undertake regular performance reviews of regulators and to report to Parliament. It was good to see that, similar to our proposal, the Institute for Government called for a regulatory oversight support unit in its subsequent report,Parliament and Regulators.
As regards independence, we had concerns about the potential politicisation of regulatory appointments. Appointment processes for regulators should be transparent and merit-based, with greater parliamentary scrutiny to avoid politicisation. Although strategic guidance from the Government is necessary, it should not compromise the operational independence of regulators.
What is the new Government’s approach to this? Labour’s general election manifesto emphasised fostering innovation and improving regulation to support economic growth, with a key proposal to establish a regulatory innovation office in order to streamline regulatory processes for new technologies and set targets for tech regulators. I hope that that does not take us down the same trajectory as the previous Government. Regulation is not the enemy of innovation, or indeed growth, but can in fact, by providing certainty of standards, be the platform for it.
At the time of our report, the IfG rightly said:
“It would be a mistake for the committee to consider its work complete … new members can build on its agenda in their future work, including by fleshing out its proposals for how ‘Ofreg’ would work in practice”.
We should take that to heart. There is still a great deal of work to do to make sure that our regulators are clearly independent of government, are able to work effectively, and are properly resourced and scrutinised. I hope that the new Government will engage closely with the committee in their work.
This brings me to my two points. First, the inherent tensions between independent regulators, the Government, consumers and delivery organisations—often with sophisticated investors—are characterised by divergent stakeholder objectives that alter over time and are not clearly prioritised. Regulators must work robustly with stakeholders while remaining independent, vigilant and inquisitive, but they also need skills ranging across both technical and financial areas. Despite the concerns that have been raised over the executive pay at regulators, the report highlights that skills gaps and resourcing at competitive financial levels are serious issues in some of them. It would therefore be helpful to hear from the Minister what plans the Government have to ensure that regulators can access a full range of skills, possibly shared between regulators—for example, in private equity financial engineering.
Before I touch on my second point, which covers regulatory accountability to Parliament, let me say that I support the report’s finding that such examination should systematically include relevant government departments whose guidance and interaction with regulators are vital determinants of their effectiveness. They should be automatically and fully in scope, rather than seeking to brush aside the inquiries from our committee.
Returning to the regulators, the question is, “Who watches the watchdogs?” The answer is, “We do”. However, with 90 regulatory bodies—perhaps considerably more—there is a simple capacity issue. In theory, every regulator should come before Parliament at least to present its annual report, be examined on it and have agreed actions followed up, but that just does not happen. Consequently, as the noble Lord, Lord Hollick, pointed out, interaction between Parliament and the regulators is typically reactive—that is, not preventing problems but seeking who is culpable afterwards. It is not systematic: the examination of those who do get called in is useful, but inquiries then hasten on to the next pressing matter and follow-up is far too limited.
A key recommendation of the report is to create an independent office for regulatory performance, as has been touched on, in order to spread the load and move towards a systematic approach rather than a reactive one. Before the election, the Labour Party said, as others have mentioned, that it would create a new regulatory innovation office with an emphasis on removing delays in regulators’ approvals of business proposals, along with strengthening the Regulatory Horizons Council.
Getting to grips with performance means constant vigilance, not complacency, and—I underline this—access to the necessary skills to get right down in the weeds on a whole range of technical and commercial areas. If such a body can both speak hard truths to government about its continuous responsibilities for clear prioritisation of objectives and bring practical help to parliamentary committees in systematically holding regulators to account, I would welcome it. It would therefore be very helpful to have a detailed update on the Government’s plans when the Minister comes to wind up.
The most significant of the many good recommendations in the committee’s report is the establishment of an office for regulatory performance to improve Parliament’s ability to oversee regulators and hold them to account. As my noble friend Lord Hollick also noted, two months after the report was published, the Institute for Government published its own valuable report on the specific issue of the parliamentary scrutiny of regulators. It proposed a regulatory oversight support unit as its solution to the same challenges that the committee set out to address through the office for regulatory performance, as well as suggesting that the committee should seek to involve members of the House of Commons in its proceedings on a regular basis. This last suggestion feels to me to be way beyond my pay grade, although I would welcome it.
On the difference between the committee’s advocacy of the office for regulatory performance and the Institute for Government’s recommendation of a regulatory oversight support unit, I am torn between a loyalty towards the committee of which I am a member and feeling that the pride of co-authorship should not be allowed to get in the way of achieving, as soon as possible, a practicable and cost-effective solution. Can my noble friend the Minister say whether the Government will, alongside the proposed establishment of the office for regulatory performance, also explore, with both Houses of Parliament, the best way to strengthen Parliament’s scrutiny and holding to account of regulators, drawing on the work of both the Industry and Regulators Committee and the Institute for Government?
The power of regulators is supposedly curtailed by their having clearly defined statutory duties that limit their freedom of manoeuvre. I fully agree with the committee’s finding that many regulators today suffer from a proliferation of conflicting statutory duties that read more like shopping lists than legal direction. However, when a regulator catastrophically fails to exercise its statutory duties, there are seldom any consequences. The 2008 financial crisis was unambiguous evidence of the failure of the institutions responsible for supervising the financial services sector, yet the central culprit of that failure—the Financial Services Authority—was simply rebranded, with some of its responsibilities moved down the street to the central bank. The bulk of its personnel did not change, nor did their working practices. The very culture that gave rise to such failure was left to fester, and the FCA can often seem to take a greater interest in the diversity of the board members of those it regulates than it does in the macroeconomic risks arising in the financial services sector.
The report also makes a number of recommendations about the appointments to regulators’ boards, including the timeliness of such appointments. This is an entirely fair criticism, but, having had some experience of such appointments inside government, I highlight that the data about these important appointments is often woeful. In the then BIS department, it took officials almost six months to pull together the data on upcoming appointments. This is important in the appointments to regulators’ boards, since those who are most qualified to undertake these roles will almost certainly have conflicts of interest and will need to be approached in good time and, often, persuaded to apply. They are not the sort of people who will check the public appointments website, so it is vital that the departments give such appointments the attention that they deserve, with officials of appropriate seniority in charge.
I close by emphasising that regulators, with few exceptions, seem to have fallen prey to the temptation of governing not in the wider public interest but in the factional interest of those they apparently exist to regulate. A different incantation of statutory words cannot resolve this. The only answer, as the noble Lord, Lord Hollick emphasised, is for our democratic decision-makers to play a more meaningful role in the regulation of the British economy.
Then I was told by the Cabinet Secretary that he could do nothing unless the Prime Minister agreed. The Prime Minister at that stage was Boris Johnson, who liked HS2, so there was a circle of nobody doing anything at all and just letting this thing flounder until, finally, the Treasury was persuaded that my costs were likely to be closer to what was going to happen than those the Department for Transport was producing, and the Prime Minister then cancelled most of HS2.
Whether we think that is a good thing or bad thing does not really matter, but it demonstrates that there does not seem to be any way of challenging the Department for Transport unless it is through Parliament. As the noble Lord, Lord Cromwell, said, that might be a good idea, but you have got to get Parliament to do it, and that is quite hard work. My preference would be for the House of Lords to be able to do it as well as the House of Commons because we have a bit more time.
This is a good report. I think there are many other bits of regulation that one could talk about—for example, nuclear power stations, the Office of Rail and Road, which does not look at road safety, and many things like that. I think an office of regulatory performance would be a very good start, and I hope that when my noble friend responds she will give it an amber, if not a green, light.
When I say an AI authority, I do not mean a behemothic regulator covering all aspects of AI; I mean a right-sized, agile, nimble and, crucially, horizontally-focused regulator to look across all the existing regulators to assess their competence, address the issues, challenges and opportunities of AI and identify the gaps where currently there is no recourse. For example, in recruitment, if you find yourself on the wrong end of a recruitment decision, often without even knowing that AI was in the mix, there is currently nowhere in the regulatory landscape to seek redress. Similarly, we need an AI authority to be the custodian of the principles we want to see, not just for the right-size regulation of AI, but going further than that with an ability to transform the way we regulate across the whole of our economy and society and to look at all legislation to address its competence to address the challenges and opportunities of AI.
Will the Minister say where the Government currently are with the regulatory innovation office? What will be the scope? How will it be funded? What will be its first tasks? Does she agree that it is high time that we had an AI authority if we are to gain all the economic, social and psychological advantages and benefits of AI while being wholly conscious and competent to address all the risks and challenges? I suggest that if we had such an AI authority, it would have not just a positive impact on how we go about regulating AI but could improve how we go about regulation and regulators across the piece, not just positively impacting AI, not just asking the question “Who watches the watchdog?”, but enabling those watchdogs to be more, enabling them to be guard dogs and to be guide dogs, and, crucially, if the guard dog and the guide dog fail, empowering them to show their teeth.
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