Are Regulators Now Too Large?

The Gordon Brown/Treasury-controlled 2005 Hampton Review recommended the consolidation of 31 national regulators into seven thematic bodies. These were in due course to include the Equality and Human Rights Commission and the Care Quality Commission. But this was in practice just one further step along the Big is Beautiful road which had begun with the creation of bodies such as the Financial Services Authority and Ofcom. It was nevertheless probably inevitable that some or all of the super-regulators would in due course be accused of being one or more of over-large, over-bearing, out of touch, over-expensive and employing front-line staff who are unfamiliar with the full breadth of the organisation's regulatory remit. The main difficulty is that there is no way that the Boards, Chairs or Chief Executives of these large organisations (most of whom are excellent individuals) can sensibly lead such complex and diverse institutions where there are negligible economies of scale and arguably severe diseconomies.

The Chairs and Chief Executives of super-regulators do not, in particular, have sufficient time to offer the strong, politically aware but risk-averse leadership that is needed within regulatory institutions - nor can they sensible monitor the detailed implementation of their strategies even though a principal characteristic of regulation is that 'the devil is in the detail'. Ofgem (itself the result of a merger of the previously independent gas and electricity regulators) is still a relative minnow (at c.300 staff) compared with some other regulators but it alone published 17 documents and had 8 live consultations in one week in late 2009 just before this web page was first published. There was no way that their Board could have been taking a serious interest in this activity. Imagine, then, the difficulty of managing the Financial Services Authority (2600 staff), Ofsted (2300 staff), the Care Quality Commission (2000 staff) or even the Commission for Human Rights and Equality (EHRC - 500 staff).

It is also relevant that politicians regularly heap additional duties on the larger regulators. The following chart has been prepared by the Centre for Competition Policy at the University of East Anglia and brilliantly shows how the energy industry regulator Ofgem now has a tottering edifice of Principal Objectives, Primary Duties, Secondary Duties and Tertiary Duties in respect of the gas industry - and it has another quite separate set of objectives etc. for its regulation of the electricity industry. (Click on the chart to view it as a large scale poster.)

A smaller but telling example of politician-inspired regulatory creep was Select Committee Chair Nicky Morgan who in 2019 criticised the Financial Conduct Authority for refusing to start overseeing financial institutions' compliance with the 2010 Equality Act.  The regulator politely pointed out that "ensuring compliance with the Equality Act is generally beyond out expertise as a financial services regulator".

It follows my comments, below, about individual regulatory bodies are in no way a criticism of their Board Members or their staff. But it was not at all surprising that:

Shared Services

Changing the subject slightly, it is worth noting that Ministers often encourage government departments and agencies to share their back office services such as IT and HR. The aim is to reap economies of scale. But Thomas Elston of the Blavatnik School of Government in Oxford University has pointed out that there are a number of reasons why such initiatives might be counterproductive, such as:

I would add that, as a Chief Executive, I personally hated sharing my IT and HR etc services with other organisations, mainly because I could no longer control, including quality control, these key parts of my organisation. (You don't find private sector companies sharing services.) I strongly suspected that those colleagues who were happy to share such services with other agencies were not actually very interested in management, and rather glad to delegate the control of these non-policy functions to others.


It is well established that if a building contains more than 150 people they are less likely to work together as a team. 150 is known as the Dunbar Number after the person who first researched and publicised this rule of thumb.

Martin Stanley


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