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Derek Allen looks at the regulatory lessons which can be learned from the current financial crisis. The furore and anxiety that people and businesses are feeling from the global financial crisis has prompted many commentators to step back and consider how we got into this situation, what we can do about it, and what lessons need to be learned. LACORS is now exploring any shared learning from this crisis which applies across government, from regulation of the financial sector to council regulatory services. I have, on more than one occasion, written articles for The MJ about the important, but sometimes paradoxical, role of council regulatory services (CRS), and reflected that they are often ‘dammed if they do, and dammed if they don't'. The UK's financial services regulator, the Financial Services Authority, is very much feeling the wrath of this old saying. It took on board the message from the Treasury of a ‘light touch' approach to regulatory controls and sanctions, to impose minimum regulatory burdens or red tape, and to enable the financial sector – and UK Plc – to thrive. However, this light touch resulted in inadequate control of banks and other financial institutions, with the resulting collapse of the sub-prime market and the start of the economic recession. This message also landed firmly at the door of council regulators who, fortunately for the most part, ensured public protection remained their overriding concern, continuing to deliver tough action when needed, and effective support to good businesses. The Hampton review, chaired by Sir Philip Hampton – who at the time, was chairman of Sainsbury's and is now chairman of RBS – identified the main principles of better regulation. These were: * proportionate * targeted * intelligence-led * risk-based. No-one would argue with these principles, the challenge has been in the delivery of these, especially with increased pressure on income and resources. There are higher expectations on councils and their regulatory services to protect businesses and people. The challenge is to ensure these services focus their ever-tightening resources where they will have the greatest impact and effect. The argument for strong, effective enforcement is growing more salient. Central government has now, quite understandably, railed back from light-touch regulation, which has clearly and manifestly failed. It is essential that light touch gives way to ‘right touch'. Right touch should build on the principles laid out in the Hampton review to ensure good public protection, raise standards, improve customer services and create a level playing field. I remember, as a newly-qualified environmental health officer, cautioning a builder for building a large bonfire of wood, rubber and other waste material giving rise to smoke nuisance. He pointed at the two massive chimney stacks from the coal-fired power station next door and said: ‘I think you've got the wrong guy, mate.' He may have had a point. Too often though, it is the organisations and businesses already inside the tent, those which are generally compliant, that get the attention from the authorities and regulators. Councils must crack down on the serious and serial offenders who actively avoid detection and punishment, who often have criminal intentions to defraud people, including those most vulnerable in society. But, they must also help genuine businesses to comply with the important regulations and ‘nudge' those on the cusp of non-compliance. However, here is the nub of this strategy – unless our global partners take a similar approach to create the level playing field, then the system will only be as strong as its weakest link. And this applies with council regulatory services when enforcing national regulatory requirements at local level. Every council has a responsibility to ensure it delivers an effective, efficient regulatory service and regime. If you are in the business of delivering regulatory services, whether local, national or global, it needs to be right touch and not light touch. Derek Allen is executive director at LACORS

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WHITEHALL

Finding the right touch

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