Traditional regulatory agencies struggle to balance their prevention role with the limitations of their capability (resources, legal powers, etc). Poor decision-making has been central to exposing such limitations. The default has been making decisions on what is known…usually based on the data that is held. Even massive expenditure on data and data analytics can make only marginal differences if the answers are only partly in the data. Hence, contemporary regulators are investing in professional intelligence capability to not only make better use of their data, but also exploit other sources and provide improved situational awareness and support futures thinking. The COVID regulatory responses again show how failure rapidly follows reliance on data modelling…but that is for the next piece…
Most people would not be aware of the extent to which their lives are regulated. It is a layer of control that is expected but not necessarily obvious. It is a key element of our humanity – the evangelical desire to make others compliant to norms we espouse. Hence, the great struggle in socialist tendencies to be skeptical of individual choices and the capitalist tendencies to prefer freedom of action. Idealist models inevitably fail when a small group decides what is better for the whole, as this has always led to decisions that actually benefit the small group. Democracies manage this tension in the exercise of public control through checks and balances, transparency and the public interest test. But the same tension plays out in professional associations, in workplace codes of conduct, what words can be used, choice of identity, and in setting the education agenda for our kids.
There are moments in daily life when one has to renew a license or fill out some forms for some obscure government department. Maybe this is a simple experience, or maybe it is painful. Most would, if they stopped to think about it, assume regulation is important…but not necessarily from their own perspective. Regulation is re
quired to prevent ‘others’ doing the wrong thing. To stop ‘others’ speeding or avoiding tax.
There are very few actions and interactions we have as individuals that are not subject to normative or legislative rules. The intent is to enable fairness and equity, while reducing harm to business and individual safety (Quarmby, p2).
Contemporary regulators seek to ensure they achieve public value by balancing a number of operating principles. These are normally binding concepts and include: transparency, fairness/equity, proportionality, targeted, and flexibility. While
regulatory failure occurs, in the Western World the impact of better regulation has led to lower death rates from preventable workplace incidents, reduced the mistreatment of consumers, greater protections for economies, sustainable environments and industry, and sustainable services such as health and welfare. Our roads are made safer by licensing drivers and regulating car manufacturing safety standards.
A plethora of Royal Commissions and Statutory Reviews into the failure of regulation have consistent findings about failings against these principles. Regulators collect significant amounts of data and have to balance individual privacy with regulatory expediency to best benefit the public interest. However, common in the failure of regulation is an over-reliance on meaningless or historic data. There is an absence in many regulators of risk-led decision-support mechanisms like the intelligence capability in place in Defence and Law Enforcement. Investment beyond data to intelligence capability “involves the systematic collection, identification and analysis of behaviour, important hazards, risks, or patterns of non-compliance for regulatory decisions such as: risk management, response prioritisation, resource allocation, the development of an organisational capacity, problem-solving, enforcement action, and/or the development of complian ce strategies” (Quarmby, p.vi). Repeated audits, reviews, and Royal Commissions into failed regulators find the absence of ‘risk-led’ or ‘intelligence-led’ decisions.
A core public value offering of regulators relates to their harm prevention role. While a public commitment enshrined in many of the objects of the law administered by regulators, the prevention task can be highly political. If the core outcome is prevention, how does the regulator record success? For some regulators it is much easier to record the level of noncompliance detected as a measure of this prevention outcome. However, detecting noncompliance and preventing harm are two constructs of regulation not particularly connected. This is especially evident in the SARS2 (COVID19) lockdowns which are politically deemed to have ‘saved peoples’ lives’. Yet, where not targeted to localized harm levels, general lockdowns appear to have done more harm than good to those outside the localized at-risk area. Hence there is a doctrine in regulation ‘do no further harm than the harm being minimised’. Who is harmed? How does harm manifest and through what threat? These become the fundamental intelligence questions behind any regulatory response; yet many regulators remain ill-equipped in intelligence capability to be situationally aware and therefore be able to present a clear and unbiased picture for the public they serve.
I raise a number of casestudies in my book (Quarmby, Part2, pp.66-100). Since publishing, many more have arisen in the public domain.
· Operational failure. For example, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry found regulatory failure in not focusing on the culture and behaviour in the banking system and rather being overly concerned with statistical performance. (Hane, p.2 and p.37)
· Artificial constructs sometimes don’t make sense. In some cases, noncompliant behaviours are created by policy choice in ways that may not make sense to some of the public. The lack of water supply in Australia has always been a critical issue. The policy choice is to create/store more water or keep the same levels but minimize water use through regulating behaviour. Successive governments have relied upon new regulatory laws and capability to control and curb the use of existing water. This has led to putting a price on water and an artificial market that needs to be regulated. Similar design faults have occurred in liquor abolition in the past, and in the privatization of energy and the heavy subsidies for highly inefficient and expensive energy sources.
· Failure in non-regulated sectors. A State Government Auditor-General’s report into contracting of non-government organisations found that in the absence of regulation over homelessness services, the administering Department relied on contracting that did not collect adequate performance data to ensure safe and quality services are being provided. (NSW Auditor-General, 2019)
There are many types and designs of regulatory responses to potential public harm and inequity. Hence, there are many types of failure. Failure in not having regulation in place, failure in the wrong design, or failure in operational decision-making in the regulator itself. Interestingly, there is no clear account as to why some aspects of harm are heavily regulated (like tax and banks), while others (like disadvantaged care) are not.
Kenneth M Hane, Final Report Vol 1. Commonwealth of Australia 1 Feb 2019. https://financialservices.royalcommission.gov.au/Pages/reports.aspx#final
Neil Quarmby, Intelligence in Regulation, The Federation Press, 2018.
NSW Auditor-General, Contracting of Non-Government Organisations, NSW Auditors Office, 26 June 2019.