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Dawn of the super regulator, by Paul Gosling

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08 April 2005

Gordon Brown's Budget produced a shock with its commitment to create four merged inspectorates covering the public sector. But will this brave new world lead only to greater confusion and upheaval for those facing inspection? Paul Gosling reports

Permanent revolution did not die with Leon Trotsky. Instead, it lives on in the hearts of Chancellor Gordon Brown and Prime Minister Tony Blair. This will sound a strange proposition to a population who see New Labour as alien to class revolution, but it will sound true to staff at the Commission for Social Care Inspection.

Back in the distant past – the beginning of 2002, actually – social care regulation was the responsibility of local authorities. Then along came the National Care Standards Commission. It had 16 days grace to get on with its new job before it was announced it would be replaced by the Commission for Social Care Inspection in April 2004. And now in this year's Budget, the chancellor announced that from 2008 regulation of adult social care is to be shifted into the Healthcare Commission (which replaced the Commission for Health Improvement last year), while children's care will move to the education inspectorate, Ofsted.

In the context of such constant change, the response of CSCI's chair, Dame Denise Platt, seems understated. She says that her organisation must ensure that social services are modernised and improved, putting the customer at the centre. 'It will be very difficult for us to deliver this level of change without a period of stability,' she notes. You can see her point.

King's Fund chief executive Niall Dickson agrees. 'Chopping and changing organisations like this is an expensive and disruptive business and doesn't smack of sensible policy making,' he argues. 'What was needed here was a period of stability, and lessons will need to be learnt as we are likely to see further changes to the regulatory landscape, with more rationalisation. Reorganisations remain a clumsy reform tool that tend to produce a drop in performance, and it takes a new organisation at least two to three years to become established and start to perform as well as its predecessor.'

The British Association of Social Workers shares this view. Director Ian Johnston comments: 'We are very disappointed to see yet another change that doesn't make a lot of sense to us. We are concerned that social work might be marginalised to the interests of education. The [National] Care Standards Commission was wound up almost as soon as it opened its doors and now something very similar is happening with the CSCI. It's also a worry that it won't happen until 2008 and in the interim we will be regulated by something that has no future.'

The Association of Directors of Social Services is more restrained. 'There is a logic to what is being done,' says Tony Hunter, ADSS president. 'But we are particularly concerned that the contribution of social care to local strategic partnerships in delivering broad objectives of inclusion and wellbeing are not compromised by the shifts. It is essential that these are presented not as takeovers, but as merged functions.'

Although the overhaul of social care regulation and inspection seems dramatic, it is just one part of a large change taking place in the regulation of the public and private sectors, which represents one of the more substantial elements in this year's Budget. This embodies the principles behind recommendations from Philip Hampton, a leading City figure who is chair of the Sainsbury supermarket group. He used the approach to regulation suggested by Sir Peter Gershon in his efficiency review. Some 11 public sector regulators will be merged into four, while 31 private sector regulators will form seven new 'super regulators'.

Yet there are suggestions that Chancellor Brown failed to learn the lessons of previous rationalisations of regulators and quangos. 'The NHS did an earlier cull of arm's-length bodies,' points out Professor John Benington of Warwick Business School. 'What was learnt from that was that in any attempt to tidy things up, you end up with lots of additional costs and uncertainty, with staff not knowing who is going to employ them, with advertisements out for new chairs and chief executives.'

Voices of criticism inside the public sector are quieter. The regulatory bodies themselves – apart from the restrained protests of the CSCI – are not about to complain about the government. The Healthcare Commission, Ofsted and the Audit Commission welcomed the moves, saying they were an expression of confidence in their organisations. And most of the other regulators are currently within government departments, so are mute. Even the Local Government Association is saying little of substance, beyond welcoming the reduction in regulation.

In private, things are a bit different. While the sentiments expressed by the King's Fund and British Association of Social Workers are widely shared, bodies involved in negotiations with government, such as the LGA, feel constrained from expressing their thoughts out loud. One well placed player said that representative bodies were in no position to criticise the slimming down of the regulators that they had been loudly calling for, even if they didn't like the pattern the pieces fell into when they hit the ground. And, given the reality of a fait accompli, there is no point in damaging positive relationships with government.

It is now generally accepted that rationalisation was inevitable, because the inspectorate burden had become too great yet was not driving standards improvement at the rate the government demanded. 'Everyone predicted that, given the topsy-like growth of regulation, doing something about it would become a policy in its own right,' says Professor Tony Travers of the London School of Economics, himself a former Audit Commissioner. 'And lo and behold – it has! Now the government is behaving as if it has just taken office and is doing something about this problem.'

Professor Tony Bovaird of Bristol Business School, part of the University of the West of England, says that even the government is concerned by the consequences of over-regulation. 'They are control freaks and will not give the market its head. But if you let the market rip, you get ripped off. The dilemma is how you stand astride these two horses.'

Benington adds that: 'There is a growing recognition that the approach of the first two terms of office of measures – which I call the carrot and Semtex – is no longer appropriate.' He argues that although the strategy might have knocked the worst performing public bodies into shape and driven the very best into higher excellence, it has left untouched the large swathe of moderate performers in the middle ground.

Yet there is confusion as to what the reforms will amount to in practice. The chancellor's explanation in the Budget hardly helped. He said: 'We are today bringing forward proposals for a reduction in public sector inspectorates from 11 to four, with single inspectorates for criminal justice, for education and children's services, for social care and health, and for local services.' And that, regarding public sector regulation, was it.

The chancellor appears to have calculated that, electorally, all he needed to do was convey the messages of public sector cost-cutting and efficiency improvement. More significant politically is the favourable response of the national press and business organisations, such as the CBI and the Federation of Small Businesses, to the proposed new structure of commercial regulation.

These reforms also introduce important changes within local government. The Office of Fair Trading is to be split into two, with one half dealing with competition issues and the remainder forming a Consumer and Trading Standards Agency, providing guidance for local trading standards officers.

Yet Hampton failed to state whether trading standards officers would still be employed by local authorities. He cautioned that a factor undermining nationally consistent trading standards regulation was the varying allocation of resources by local authorities and the vastly different burden that each faced, according to how many major businesses were located within their jurisdictions. The Treasury has told the LGA that local authorities will continue to be the employer of trading standards officers. This still leaves some grey areas, as well as scope for conflict between councillors' priorities and those of the CTSA, but these will have to be resolved through the planned National Regulatory Forum.

'We would look at achieving a consistent approach,' says Trish O'Flynn, senior project officer at the LGA. 'It is too early to say how this will pan out. There will be a lot of work to do in the next few months, but this is building on work already going on. We don't feel threatened by this.' The Trading Standards Institute also welcomed the move and suggested it could lead to ring-fenced funding for priority initiatives.

With broad support for his regulatory reforms – and opinion polls showing widespread satisfaction with the Budget – the chancellor will feel, for the moment at least, that this has been a job well done. The hard work will come in implementing the changes after the election – whichever party wins.

PFapr2005

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