In its report, Who watches the watchdogs? Improving the performance, independence and accountability of UK regulators, the committee concluded that a fresh approach to overseeing UK regulation is required.
It has called for the creation of an ‘Office for Regulatory Performance’ to investigate and report on regulators’ performance and support Parliament in holding regulators to account.
In October 2023, the committee opened an inquiry looking into the relationship between regulators and the government, and encouraged individuals and organisations – including the Financial Conduct Authority (FCA) – to submit evidence.
‘The waters have been muddied’
Looking at the evidence, the committee found that some regulators are being overloaded with objectives, without clear guidance on how they should prioritise between them.
It also found that “the waters have been muddied between regulatory and political issues”, resulting in the government’s strategic guidance effectively ducking decisions upon which, the committee said, it should give a view.
Another point raised was that, while some regulators can raise their own revenues through levies and charges, others depend on the government for their funding, which inevitably influences their ability to carry out their functions independently.
Members of the committee also noted that there is a perception that some regulatory leaders have been appointed on account of their political loyalty rather than their experience and capability.
Lord Hollick, chair of the inquiry, said: “Our report raises concerns about the functioning of the three-way relationship between the regulators, the government, and Parliament, particularly the role and performance of regulators, their independence, and their accountability. We are especially concerned at cases where the government has failed to resolve political or distributional questions facing regulators, and instead interfered in their day-to-day workings.
“Independent regulators must have the confidence to tell the government and the public about the serious problems facing their sector and be able to set out proposals to meet them with clarity, efficiency and transparency.”
A spokesperson for the FCA – which has cracked down on a number of issues, including money laundering through the Post Office – said: “We thank the committee for its considered contribution and we will review the inquiry’s findings in depth. We believe accountability is vital, and have hugely benefitted from the regular and close scrutiny of parliamentary committees on our work.”
