The death of light touch regulation?

The current global financial crisis unavoidably raises questions about the general rush towards "Light touch" regulation that has been a feature not only in financial regulation in the UK but also in the general UK approach to regulation.

The move towards light touch regulation may not have started in the Blair years but Tony Blair made clear during his premiership that his concern was to ensure that regulation did not get in the way of business. Indeed regulation was seen almost as an obstacle to the efficient functioning of business.

This agenda was, of course, driven in part by the self interests of the business lobby, many of whom saw regulation not as the legitimate exercise of control by society on their conduct but as an impediment in their pursuit of "efficiency".

We have now seen the consequences when regulation becomes so light touch that it fails to adequately grapple with the risks arising in a regulated sector. The consequences for us all following the clear failure of financial regulation will be serious and long lasting.

This pressure for light touch regulation has been all too apparent in the care sector with care provider representatives often pressing for a significant reduction in regulation and painting it solely as a burden.

In the care sector a significant failure of regulation might not have national economic consequences but it may have profound consequences for the lives of people who are being supported by care services. In the worst case scenario people may die because of inadeqaute checks of safety critical systems. They may suffer abuse through inadequate management control, training or recruitment of staff. They may suffer long term blight on their lives through the drip drip corrosive effect of care which is sub-standard.

While we should no more accept inadequate regulation of care services than we should of financial markets this is not a call for highly bearaucratic regulation. That is the opposite extreme and would be as equally destructive of good quality care as a lack of regulation.

What is need is risk based and proportionate regualtion. This is not the same as light touch regulation. Light touch regulation implies that the regulation system aims to touch lightly on all providers alike. This may not always be what is desired but this is too often where talk of light touch regulation takes us.

In contrast to this, a risk based and proportionate regulation system will be focussed on assessing the risks in the regulated sector and distinguishing and intervening in those areas where the risk is highest. It means reducing the regulatory "footprint" on services which are demonstrably of good quality - but increasing it in where risk oor poor performance is apparent.

A move away from "cyclical" inspection has been apparent recently, for example as recommended by the crerar review in Scotland. There is little doubt that standard cyclical inspection can often safely be reduced but great care must be taken in moving in this direction.

If regulation is to be calculated on the basis of risk and be proportionate this can only be on the basis of intelligence. It is vital that some of this intelligence is collected first hand so that the regulator does not have to rely excusively for extended periods on information provided by those who are regulated. This has serious implications for the extent to which frequency of inspection can be reduced in the care sector and regulators must ensure that frequency does not reduce to the extent that they may no longer have reliable information on which to make risk assessments.