Role of regulators – objectives and powers
This briefing mainly considers regulation arising directly or indirectly from statute and where the powers and objectives of regulators are contained in legislation.
Legislation may use varying terminology eg 'objectives', 'functions', 'aims' or 'duties' and we use the term 'objectives' in a broad sense to cover all such terms.
The Principles of Good Regulation and UK’s Regulators’ Code require in-scope regulators to consider matters related to their objectives, and many regulators (identified in secondary legislation) are required by statute to 'have regard to the desirability of promoting economic growth in performing specified regulatory functions'. In-scope regulators include, for example, the Information Commissioner’s Office, the Charity Commission and the Financial Reporting Council.
However, there are no universally applicable objectives – it is necessary to consider the legislation for each regulator to know what its objective(s) may be and whether there are any tensions between multiple objectives that would require regulators to make judgments as to the balance between them.
There may be exceptional cases where statutory objectives are not set, or clear, as noted by John Kingman in his 2018 report to what is now the Department for Business and Trade on the Financial Reporting Council (FRC).
EXAMPLE: The FRC’s lack of a clear statutory base provided by Parliament is very unusual for a regulator. The FRC currently relies on a blend of statutory functions and limited delegated powers (mainly in relation to audit) and voluntary agreements (in particular regarding its oversight of the accounting and actuarial professions). Whilst the FRC undertakes some statutory functions in their execution, the FRC is not bound by any statutory duties.
A regulator’s powers may include the power to make rules or to enforce rules, or both. We cover these topics separately on the following pages. They may have other powers, for instance to provide non-binding guidance. A regulator will need to consider how best to exercise its powers in the round to best meet its underlying regulatory objectives (whether or not the Principles and Code apply to it).
Identifying the UK’s regulators
Parliament empowers bodies through statute to regulate in defined fields for a defined purpose.
We are not aware of any comprehensive list of all such regulators, and it is challenging to identify them all. For instance, the lists of regulators to whom the Regulators’ Code and economic growth duty (referred to under Role of Regulators above) apply are published separately, leaving readers to work out the extent to which they overlap. The National Audit Office (in 2017) said only that there are “more than 90 regulatory bodies in the UK”.
Oversight regulators
Some regulators have been empowered by Parliament to oversee regulation in certain sectors where there are disparate bodies (eg, professional bodies) having a regulatory function. Such bodies are referred to variously as 'oversight regulators' or 'regulators of regulators'.
EXAMPLE: ICAEW is subject to four oversight regulators in relation to its regulatory activities arising as a professional body, namely: the Insolvency service; the Financial Reporting Council; the Legal Services Board; and The Office for Professional Body Anti-Money Laundering Supervision.
Self-regulatory bodies
Bodies may be responsible for making or enforcing rules which are voluntarily accepted by participants in the body. For instance, members of a sports club agree to be bound by its rules and the club will enforce the rules (with disputes settled by the courts as a matter of contract law).
While such bodies are not 'regulators' with powers derived from Parliament, they may be regarded as regulators by their participants, particularly if the body has extensive sanctioning powers (as ICAEW does, for example). They may also be given regulatory functions through legislation and subject to oversight regulation (see above) and therefore play an important part in the UK’s regulatory regime.
Funding of regulators
There are a variety of funding models for UK regulation. For instance, funding may be provided through general taxation or charges imposed by the regulator (eg, on those it regulates) or a mixture of the two. Persons protected by or otherwise benefiting from regulation do not necessarily share directly in funding it. For instance, regulation designed to benefit the public is not always funded out of general taxation.
EXAMPLE: The Charity Commission is, in effect, funded by the taxpayer. They explain that “Our funding was largely via the HM Treasury Vote of £30.55m supplemented by additional funding from other government departments to cover the costs of ongoing projects delivered on their behalf.” However, the Fundraising Regulator is funded by an annual voluntary levy on charities spending £100,000 or more on fundraising and registration fees.
Legal form of UK’s regulators and independence from Government
Regulatory bodies can take one of several different forms, including governmental departments (eg, the Competition and Markets Authority) or agencies (eg, the Insolvency Service), private companies limited by guarantee (eg, the FCA and the Panel on Takeovers and Mergers), corporations sole, ie, an incorporated office occupied by a single person (eg the Information Commissioner’s Office - ICO). The government stated in 2021 that “A corporation sole model makes the ICO an outlier for a large regulator with a broad and important remit”.
Some bodies are included as part of government for certain purposes (eg, government accounts and accountability processes), but are designed (to varying degrees) to be independent of government.
EXAMPLE: The Charity Commission “is a non-ministerial government department and part of the Civil Service. The Charities Act states that: “In the exercise of its functions, the Commission shall not be subject to the direction or control of any Minister of the Crown or other government department.”