Smart regulation, shifting architectures and changes in governance

AuthorTimothy Eccles
PositionSchool of Architecture Design and the Built Environment, Nottingham Trent University, Nottingham, UK
1 Introduction

The professions and many businesses refer to, generally accept the need for, and may even promote regulation. The key issues are: who regulates, who pays and to what purpose? Self-regulation has the official support of the UK Government in the form of the better regulation executive (BRE), an arm of the department for business, innovation and skills (BIS), whose brief is to lead the regulatory reform agenda across government as a whole. This apparatus could be seen as the swansong of a labour government profoundly discredited by the failure of regulatory institutions to regulate the financial sector effectively, so contributing to the “crunch” of 2008. But its roots go back to the 1990s and in some respects even earlier. Having survived a change of government, there would appear to be cross-party consensus supporting both the rhetoric and the institutions of “better regulation”. Indeed, the UK's current Coalition Government have proved worthy zealots of the cause. Better regulation has been at the top of the agenda, all-pervading and intended to reach all organs of society. This is clear from the BIS web site, which carves out the tasks of the BRE to include the transformation of government, no less. Besides the aim of reducing the “regulatory burden to business and civil society organisations”, the coalition strategy is designed to “bring about a steady change of culture across government so that regulation is seen as the last resort and alternatives to regulation are first considered” ( BIS, 2011 ).

The alternatives government has in mind involve some form of self-regulation and a retreat from state control. Self-regulation is generally seen as providing an alternative to direct regulation by a regulator. It is closely linked to “smart regulation” which provides the focus to this paper. Smart regulation has its origins in the broader principles of deregulation, risk analysis and no-cost regulation – a process that has been exhaustively examined by a number of writers over the years ( Fisher, 2007 ). It is a somewhat broad concept:

[…] used to refer to an emerging form of wide-angled regulation that seeks to harness not just governments but also business and third parties to provide policy alternatives that include, but also go beyond, direct regulation ( Gunningham, 2009, p. 200 ).

These are very broad and ambitious aims, imbued perhaps with a large dose of rhetoric. Smart regulation was originally developed in the context of environmental regulation in developed economies, in part as a response to the failure of state agencies to regulate pollution effectively, or to prevent exporting the collateral damage of industrial pollution to developing economies ( Black, 2007 ). Its “smart” characteristics are rooted in its flexibility and diversity as distinct from “single instrument or single party approaches” ( Gunningham, 2009, p. 200 ). The overall purpose, then, is for smart regulation to:

[…] allow the implementation of complementary combinations of instruments and participants tailored to meet the imperatives of specific environmental issues, and will result in a more flexible, efficient and effective approach to environmental regulation than has so far been adopted in most circumstances ( Gunningham, 2009, p. 200 ).

The problem with attributing such broad aims and general applications to smart regulation is that whilst it becomes attractive, flexible and all-embracing, concomitantly the result is all rather vague. Still, one advantage is that it provides a way of stepping back from the detail to examine the underlying structures of regulation. Gunningham's analysis of shifting regulatory “architectures” is grounded in changes to environmental regulation over time. It provides a useful way for understanding processes across national and regional boundaries as well as for evaluating changes in policy; but it also has a wider application for analysing changes within occupational and business structures. Thus, the modernising thrust of smart environmental regulation is to:

[…] embed environmental values and processes within corporate culture in such a way that it becomes self-regulating, relying on oversight from local communities and perhaps third-party auditors, to supplement or even replace direct regulation ( Gunningham, 2009, p. 202 ).

Another problem with this analysis is that it presumes the existence of a corporate culture imbued with high levels of trust and ethical standards as well as consensus over the core values. This jars against the reality of corporate governance over the last five years or so. This would suggest that there has been a widespread lack of trust and confidence in the probity of institutions, particularly financial institutions. Scepticism regarding the competence of governments and state regulators to put in place effective systems of control seems all pervasive1. Giddens's (1991) concept of Late (high) Modernity, in which trust in authority is lost, chimes with these realities.

Rather than acting as a spur to innovation and increased regulatory effectiveness, recent deep cuts in local government resources across the UK may have induced a retreat from regulating local businesses. So regulatory weakness may be seen as running alongside the policy objective of wishing to put into place the more supervisory and professional role that Gunningham envisages. The overall picture is highly complex and it is very difficult to identify precisely what may emerge in the long term as structural features to regulation. The paper adopts Late Modernity as its conceptual device to represent this uncertainty.

In this paper we will examine building control, as an early example of professional regulation and analyse the Primary Authority scheme, which illustrates changes in the enforcement of regulatory law by local authorities that is also linked to responsive self-regulation by businesses. These case studies are illustrative rather than empirically representative of changes in regulatory architectures.

Our first case study concerns the deregulation of building control. Building control was one of the first areas of professional work to be privatised in the 1980s. Traditionally, local authorities exercised control through a monopoly of the service in order to guarantee quality. Its removal from state control to that of private businesses endorsed professional self-regulation, since professional associations were identified as a priori competent in the legislation. Thus, regulation of building control was to be carried out by co-operation between a statutory authority and a professional association with the emphasis on the latter's self-regulation guarantees.

The second case study is concerned with the promotion of the Primary Authority scheme by central government through the setting up of the Local Better Regulation Office (LBRO) and its successor: the Better Regulation Delivery Office (BRDO). The essential objectives of the Primary Authority scheme are to reduce the costs of regulation by local authorities, whilst enabling businesses to operate in a simpler and less intrusive regulatory climate and bearing an increasing proportion of the costs of regulation themselves. The more effective self-regulation becomes, the less the need for intrusive and expensive regulation. Consumers will be better protected because of the willingness and capability of businesses to self-regulate. As a consequence of the bringing together of these “win-win” artefacts, local authority regulators can adopt a more removed, supervisory approach to regulating businesses. Competently run businesses having outlets in several or many locations, by adopting better regulation policies will thus be in a position to be regulated at arms' length by a single, Primary Authority rather than by different local authorities depending on where each outlet is located.

The emergence of the Primary Authority scheme during a period of serious economic recession is not fortuitous. Local authority budgets have been cut back severely and this has meant that changes in the ways services are delivered have become a high priority. Over the past five years, 220 local authorities have come to some sort of shared service agreement with neighbouring authorities and 50 environmental health departments have merged some of their services to procure savings and increase efficiency ( Spear, 2012a ). In this climate, direct and intrusive forms of regulation become, or are perceived to be, unaffordable, so cheaper alternatives have force majeure.

A common factor linking these examples – deregulation of building control and the Primary Authority scheme – is their promotion of regulatory competence and placing faith in regulation by non-state agencies such as professions and businesses. Smart regulation needs to be based on trust between the various stakeholders and to operate transparently. Such factors have all but entirely been lacking in institutions controlling the banking sector, so can these other sectors do better? Building up trust, confidence and ethical standards goes to the heart of corporate culture, and any effective system of smart regulation needs them in high degrees. These elements bear close affiliation with other drivers of corporate culture: with corporate social responsibility ( McBarnet, 2007 ), raising ethical standards in post-welfare state, capitalist economies ( Braithwaite, 2008 ), and with enhancing transparency: a move towards the “audit society” with its rituals of verification ( Power, 1999 ).

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