Ofcom and the FSA: the view from Parliament

As many of you know, I am completing my PhD thesis on Ofcom and the notion of evidence-based policy making (EBPM) this autumn / winter.  I thought I would begin to publicly share some of my findings and other observations (although by prior arrangement, my interview data will never be put on this blog).  The purpose:  I want feedback.  It’s really helpful if I receive critical feedback on these points.

The problems of legitimacy and accountability:

Let’s start with two of the biggest problems facing public regulatory organisations: accountability and legitimacy.  As non-majoritarian institutions, regulators such as the Financial Services Authority (FSA) and Ofcom often face the criticism that they possess insufficient legitimacy to enact policies that deal with important social matters.  Weak accountability mechanisms only make this worse.

The Communications White Paper that led to the creation of Ofcom, for example, does not even mention accountability.  The Act doesn’t do much better.  As a result, Ofcom have had to fashion an ad hoc public accountability relationship with two select committees of Parliament.  I’ve seen the result first hand:  It’s episodic, very limited to certain mail bag issues, and weak.  Now although Ofcom does not like to admit it because it regards itself as independent, Ofcom is also accountable to the government.  Ofcom’s budget is agreed with government; Ofcom acts as a government agent in many policy matters; and the government retains the power to direct Ofcom in a variety of policy contexts.  And finally, it cannot pass without mention:  the government controls Ofcom’s senior appointments.  Ofcom’s relationship with government is extremely opaque and has not been a focus of my research.

As I have written before EBPM and similar techniques really convey two benefits to the regulatory organisation.  First, and perhaps most importantly, they are deemed to contribute to better decision making.  I suggest, however, that an equally important facet of EBPM for a regulator such as Ofcom is its instrumental use in securing legitimacy.  Ofcom can say that its expertise and quasi-scientific deliberative methods are themselves sources of legitimacy.  Presumably, the public and regulated firms — when presented with mountains of evidence in support of a position — confer some degree of legitimacy on the decision maker.  Thus, the accountability problem is side-stepped for matters of policy.  It still surfaces with respect to matters such as the salaries of Ofcom’s top officials.

MP survey on Ofcom:

Part of my research attempts to circle around and determine whether Ofcom’s use of EBPM improves its legitimacy.  Thus, I have interviewed many people about Ofcom’s approach to policy making.  In association with ComRes, I also undertook a survey of MPs.  See the very bottom of this post for the survey limitations and methods.  The results are here (click to enlarge):

What can be made of these results?  I think a few things:

1.  Ofcom is not making huge impressions on MPs.  Levels of familiarity appear weak. When you look into the data a bit further, younger MPs show almost twice the level of familiarity with Ofcom as older MPs.

2.  Ofcom is not rated as a stellar performer by MPs.  A slight majority of 51 percent rate Ofcom as ineffective in its regulation of the media and communications sector.

3.  MPs appear not to really know enough about Ofcom to reliably rate its EBPM efforts.  When asked about whether Ofcom have implemented EBPM, a majority of MPs either disagree or do not know.  Encouragingly, 41 percent of MPs report that Ofcom is evidence-based.

4.  A plurality of MPs are sceptical about EBPM, either because they think regulators cannot be trusted, or because they think regulators have insufficient abilities.

Much of Ofcom’s enthusiasm for EBPM and its research-heavy approach to policy making simply does not filter out of the organisation to a sufficient degree where we can say it has made a significant impact on its legitimacy.  One important thing to keep in mind, however, is the fact that much of this is very issue-dependent.  Ofcom’s particular style of regulation may greatly help it in particular contexts.  Still, overall, it does not appear to have made a big dent in what politicians think of the regulatory state.

MP survey on the FSA:

As a control, I decided to survey (again with the assistance of ComRes) MPs concerning the FSA.  I wanted to make sure that I was measuring the right thing.  Was I measuring MPs opinions of regulators generally, or was I really understanding what MPs thought about Ofcom in particular?  Here are the FSA survey results, from October 2007:

The FSA survey in many ways shows Ofcom has not made any reputational breakthroughs with its use of EBPM or similar techniques.  In fact, it shows that the FSA’s reputation before Parliament is slightly better (although undoubtedly the recent financial crisis would lower those numbers of MPs who report that the FSA is effective).  To be fair, both Ofcom (Mar 07) and the FSA (Oct 07) were involved in industry related scandals or problems when the MP surveys took place.

Ofcom’s own MP survey:

Ofcom has also commissioned at least one survey of MPs.  Ofcom has to the best of my knowledge never published the results of its MP survey, but the document is here:

ipsos-mori-ofcom-mp-survey (a .pdf file)

Where there is overlap between questions, I thought the Ofcom survey generally corroborated my results.  Look a bit deeper and you will see that MPs found that Ofcom does a poor job at stakeholder communications (which is ironic) and reducing the burden of regulation.

Ofcom, of course, need to be more transparent with these MP surveys.  I had to submit an FOI Act request to obtain my copy.  I’m sure there are other, similar surveys commissioned by Ofcom, but the regulator appears to keep the details of its accountability relationships out of public reach.  Ofcom previously maintained documents related to its relationship with Parliament on this webpage, but removed them after I complained that they were several years out of date.  Nevertheless, Ofcom bizarrely claims in its publication scheme that it publishes ‘How Ofcom engages with Parliament and Ministers through correspondence and attendance at Parliamentary Committees’.

Ofcom still has some distance to go before they are fully transparent.

Methods / Limitations:

I won’t go into considerable detail here, but my overall caution is that one cannot read too much into these types of survey results.  Surveying MPs is difficult and very expensive.  The ComRes MP survey panel excludes MPs who are members of the government.  MPs are paid a small amount of money to participate in the quarterly survey.  MPs volunteer to become part of the survey panel.  Thus, there may be some form of respondent bias because of the self-selecting nature of the sample.  In order to get a better picture of Ofcom’s reputation before Parliament, I followed up these surveys with interviews with politicians and similar persons.