Comments from ACCA to the Department for Business Innovation and Skills (BIS)
In order for the Champions to have a sustainable positive impact on how non-economic regulators develop to meet the needs of small business, there needs to be an underlying aim to cultivate ownership and longevity to the role; if not continued through the mechanism of using Champions then some other mechanism must exist.
The Champions cannot be seen to be a stop-gap or temporary solution to address systemic problems being faced by small business in appeals and complaints processes. Looking to the long-term, the Champions’ role should also evolve alongside the appeals and complaints processes as they develop to meet the needs of small business. This role also needs to be visible externally, not only for businesses but also for their representatives and support bodies which the Champions should be engaging with to understand the concerns of business.
The Public Administration Select Committee’s (PASC) inquiry on ‘Complaints: do they make a difference?’ and its subsequent report ‘More Complaints Please!’, although focused on the consumer experience and complaints, provides rich sources of transferable learning and broad recommendations which the Champions could draw upon, at least from a best practice standpoint. In particular, as a way of supporting a sustainable impact within the regulators, learning and expertise from the Champions should overtime be embedded across the regulator’s operations so that the need for the Champions role lessens, perhaps evolving from producing a set of recommendations for improvement to preparing a report which acts more akin to a narrative appraisal.
The report ‘More Complaints Please’ reveals a similar need “for complaints to be an integral part of service provision: While good complaint handling can have a range of benefits in service provision, this can only be realised if it is properly integrated into service provision. This will include ensuring that all staff learn from complaints and view them as an insight into the consumer's voice and an important tool in service improvement”.
Indeed, while the Champion’s specific role falls within the appeals and complaints stage, the Champion should keep an eye on opportunities which will reduce the volume of appeals or complaints in the first place. The Champion should not only restrict their recommendations to the appeals and complaints process if what has been discovered can and should be applied elsewhere in the regulator’s operations - for example, in how it communicates or develops policies – addressing a problem as it occurs in its earliest manifestation rather than leaving it to flow through to the appeals and complaints stage.
It is vitally important that the Champions are performing their duties effectively and that they are trusted by the businesses they seek to support. This is particularly important with regards to the evidence-seeking activities, with relevant businesses and their representative bodies, the Champions are expected to undertake in order to compile their reports. As The Government does not believe that statutory provisions are necessary to require Champions to seek such evidence, it is crucial that the Better Regulation Executive (BRE) is able to assess this as part of its duty to report on the success of the policy and the overall performance of Champions and their impact.
We agree that legislation is necessary to establish Small Business Appeals Champions, and to set out their basic powers and duties. The Champions ability to carry out their duties and their authority to exercise their basic powers unhindered must also be paramount in order to maximise the benefit that can be achieved. Therefore, to questions on whether responsibilities should be embedded in legislation or guidance – for example, that to comply or explain with regards to the recommendations - we feel that the former is necessary in order to achieve the Champions objectives.
With regards to support for the Champions, the different natures and approaches of both the regulators and Champions means that, as much as possible, a case-by-case assessment should be adopted to determine the level and type of support required. This is also true in terms of determining the appropriate amount of time that needs to be committed by each Champion. Ensuring that the support required is sufficient and fairly balanced, according to need, across all the Champions should also be the responsibility for the Better Regulation Executive (BRE) within BIS. This also means that the BRE needs to be equipped with enough resources and capacity to provide the support required.
Question 1: Do you agree that the creation of Small Business Appeals Champions for non-economic regulators will lead to improvements in businesses’ access to, and experience of, effective appeals and complaints mechanisms?
As a concept the creation of Small Business Appeals Champions is sound. The champion’s role should be seen as a lightning rod for matters pertaining to improving small business access to, and experience of, effective appeals and complaints mechanisms. To be effective the Champion’s role must be clearly visible and externally communicated to the respective small business communities that the regulators serve.
ACCA is however concerned that there could be a real risk of the roles becoming little more than a symbolic sinecure if appropriate transparency and accountability measures are not introduced as part of the overall mechanism. With some 58 regulators affected by the creation of the new role, it will be crucial to the public perception of the roles that they are seen to deliver effective and proportionate input into the regulators’ activities, while the individual appointees must inspire the confidence of small business and the respect of the regulators.
The mere creation of the role is by no means guaranteed to generate any improvements in anything, and if handled badly and implemented poorly may serve simply to leave SMEs disillusioned and discouraged about the genuine commitment of BIS and government to improving the UK regulatory environment. Champions must carefully and appropriately selected, and where appropriate should (as discussed in more detail below) represent SME issues to more than one regulator. The number and variety of regulators affected by the initiative will require a flexible approach to the overall programme, but if handled with the appropriate discretion can of course contribute appropriately to the creation of a healthy regulatory landscape in the UK.
The House of Commons Public Administration Select Committee Twelfth Report of Session 2013-14, “More Complaints Please” identifies a number of issues which arise in a consumer context in relation to complaints to government bodies. While not every conclusion will be relevant in a business context, it is nevertheless still likely to be the case that “All too frequently, complaints are greeted by a management who are defensive, even legalistic, and who see complaints as a hostile criticism, rather than as an opportunity to learn from failure.” There is a clear and obvious risk that the introduction of SME Champions could be seen as nothing more than paying lip-service to the concept of responsive administration, and (given their inability to respond to individual complaints) window-dressing to disguise a continued failure to engage properly with service users. Indeed, if poorly structured and communicated the initiative could be seen as little more than a ‘jobs for the boys’ adornment of the existing bureaucracy which aggravates current issues.
Improvements in access and experience will come about only if the role of the Champions is clearly defined, tailored to the individual regulator, and overseen centrally to ensure a consistent and coherent approach to learning the lessons from each regulator and then applying them to others. Transparency and accountability will be key to the success of the Champions.
Question 2: Do you agree that legislation is necessary to establish Small Business Appeals Champions, and to set out their basic powers and duties?
Champions must be (and be seen to be) independent and effective. Statutory authority for the role and activities is necessary to establish Small Business Appeals Champions. Such statutory backing will also give the Champions’ role real teeth to ensure that their recommendations are taken seriously by both government and the regulators. Legislation should always be proportionate to the level of need and secondary legislation should be appropriate in this case.
While it is necessary to ensure that the Champion’s role is robust and independent, there is a question missing around how the Champions will be governed. Although the Champions model is designed to accommodate the varied and broad range of appeal and complaints processes there does need to be an overarching set of principles governing how the Champion operates. These principles or ‘template’ of process is necessary to ensure there is consistency across all the champions’ actions. For example, if a small business or regulator wants to question how a recommendation was formed they should be able to refer to an operating set of principles to see what steps the Champion had taken in order to arrive to that conclusion. The BRE’s coordination role should encompass this responsibility to develop such an overarching framework and make it publically available. It is worth noting that the Independent Appeals Process established in 2011 to scrutinise and suggest improvements to the banks’ appeals processes is a centralised function in order to ensure there is consistency across the banking sector.
Question 3: Is the proposed statutory objective appropriate? If not, how should it be modified?
Yes, subject to some clarification.
The width of the parameters should include the scope for the Champion to identify and report upon ways to reduce the level of complaints or appeals in the first place. If the nature of appeals makes it clear that the underlying issue is a lack of transparency or consistency in applying regulatory criteria, then the preferred solution should be to revise the regulator’s approach to its primary activity rather than just enhance the efficiency of the appeals process. Any such reporting role would of course be reactive, rather than proactive, and the Champion’s suggestions would not necessarily impose the same statutory obligations upon the regulator as might be the case for directly complain/appeal process related points. Nevertheless, if the Champions are working on the behalf of SMEs, rather than some ideal of perfection in process, then they must view the complaints and appeals process as part of the users’ whole experience of the regulator, not simply a divisible process.
Question 4: Is the range of areas described at points (i) to (vi) adequate? If not, what do you think should be added or not included?
The six areas offer sufficient breadth to cover the range of key issues identified in the evidence. Points (ii) and (iv) are perhaps not specific to SMEs as an area of particular concern to the same extent as the other points, but the mere fact that benefits might accrue to all businesses from the Champions’ activities is no reason to circumscribe them.
One underlying theme to all the areas is the cost to business of engaging with the Regulator. Costs of regulatory compliance are particularly relevant to SMEs not simply because of the proportionate impact of the fixed administrative costs, but also because of the opportunity cost to SMEs of engaging with regulators. Time spent on resolving regulatory mistakes, which are by definition unnecessary as is therefore their cost burden, is time diverted from creating profits and growing the business. Such time cannot be recovered, and where in a larger business it will be incurred principally by less commercially valuable administrative staff, SMEs will not have the luxury of employing such a bureaucracy. Every aspect of business management and administration will fall to the business management or productive staff, however routine and trivial the process may be.
It is a truism that it is better to have a functional system than it is to have an effective complaints and appeals mechanism. But if mistakes are to be made then it is even more important not to compound them by imposing upon those businesses least able to bear it an additional burden of bureaucratic inefficiency. The Champions should be charged with an overall task of ensuring that the complaints process requires as little as possible from business in the way of contact and information consistent with effective and efficient resolution of issues. For example, forms should be designed so as to elicit all the necessary information and no unnecessary information. Those appealing or complaining should have a single point of contact, and be offered the most effective means of communication (email, telephone or letter as the case may be) as their circumstances dictate.
Question 5: Do you agree with the proposals in respect of the Champion’s report?
Yes, but only to an extent.
We broadly agree with the proposals. In particular, we agree that public explanation should be provided in the event that a Champion’s recommendations are not implemented. However, we would question the effectiveness of stating such a requirement only in guidance and not to be made necessary in law. If public explanation is not provided because the regulator is not formally obliged to do so then this will significantly reduce the value of the report and undermine the role of the Champion to improve policies and practice for small business.
If the Government believes that such public explanation should be provided then it stands to reason that they should not leave room for regulators to not provide it. The principle of “comply or explain” holds as true for Regulators as it should in the corporate governance arena, and without the mechanisms of shareholder accountability to ensure compliance then legislation will be the key mechanism for ensuring accountability.
While ACCA recognises the motivation behind the proposal that ‘Champions’ recommendations should not consider or influence individual decisions’ there is nevertheless a concern that this might be an unrealistic ideal. The Champions should of course not become proxy ombudsmen. Nevertheless in cases where a particular concern emerges from a single individual decision but which highlights a fundamental problem that needs to be raised it may be impractical to address the underlying issues without reference to the individual actors in the relevant incident. Further, it may not be possible to fully appreciate the concern without referring to the context from which it emerged.
Question 6: Do you consider it necessary to enshrine the duty to report in law?
As the report is the principal output of the Champions’ work we feel it is necessary to enshrine the duty to report in law. Knowing that the Champion must report upon the performance of the Regulator will serve to focus the attention of both sides upon the content of that report. Moreover, the risk of pressure being brought to bear upon a Champion not to report, or the perception of ‘regulatory capture’ in cases where a Champion did not report must be countered. The clearest way to ensure that the Champion’s role is, and is seen to be, independent, is for the remit to be set by legislation.
Question 7: Do you agree that regulators should be under a duty to provide relevant information when requested by a Champion?
Again, it would seem pointless to go to such lengths as to establish the role of Champions and ask them to produce an annual report – which is the key tool to communicate findings and recommendations to Government – if regulators are then able to refuse relevant information when requested. Where there are good reasons for not sharing the information itself then those reasons should be shared with the Champion and appropriate disclosure shared in the Champion’s report.
Question 8: Do you anticipate any potential conflict of this requirement with any statutory restrictions on disclosing this information or other obligations of confidence? Are these avoided altogether by the fact that the Champion is appointed for the regulator?
The precise requirements of each Champion, and each regulator, will be subject to differing underlying statutory regimes and requirements. Confirmation of the legal position should be sought from the Information Commissioner’s Office.
Question 9: Do you agree that this “comply or explain” approach is appropriate, and that it should be set out in guidance rather than legislation?
We agree that this “comply or explain” approach is appropriate, however, to ensure that this is an effective approach that produces results it should be set out in legislation rather than guidance.
Question 10: Do you agree that to do the job effectively the Champion should normally be at the equivalent of Board level?
We agree that in order to reinforce the importance of the Champions’ role, it is essential that the Champion should be at the equivalent of Board level.
Question 11: Do you agree that the Champion should have a background in the type of business predominantly regulated?
We agree that the Champion should have a background in the type of business predominantly regulated as this is essential to establish credibility for the Champion and, in turn, their recommendations. Further, having a background in the relevant sector would enable the Champion to hit the ground running in order to maximise the capacity, time and resources available as opposed to spending time familiarising him or herself, especially as the Government expects their roles to be part-time.
However, of equal importance to having a relevant background in terms of sector knowledge, the Champion should possess the relevant experience to understand how appeals and complaints process work. Crucially, they need the technical expertise necessary to analyse such processes and mechanisms in order to identify problems and suggest improvements. Although not directly comparable as a role, management consultants or auditors are often not contracted based on their in-depth sector knowledge (although this certainly helps) but on their ability perform the function necessary.
Question 12: Do you agree that Champions will be able to operate effectively as part-time appointments?
Not sure, it depends.
In principle, we have not come across anything which suggests that Champions will not be able to operate effectively as part-time appointments. Whether this will be effective in practice will likely vary for each Champion and their respective regulator. In relation to this, it will also depend on how much, and the type of, support available to each Champion and whether this meets their respective needs.
As the consultation suggests, in terms of time commitment required and therefore whether part-time appointments will be effective, this should be considered on a case-by-case basis as opposed to an assumption from the outset that it will.
However, it seems likely that the time commitment required will change as the role becomes more established within each regulator. The time commitment required at the beginning of the role, where the Champion needs to familiarise themselves with the regulator and the relevant business communities, will be higher. As the Champions set up the mechanisms by which they go about their work – for example, evidence gathering and monitoring and evaluating – it may become a more streamlined process that requires less time commitment.
We note that the Government does not propose to legislate in respect of the time commitment expected of Champions, which we do not necessarily disagree with. However, it would be valuable to see what other proxies would be appropriate to use to check that the Champions are performing their duty, as part of a wider need to ensure that the Champions can be held to account. We note that this role will be undertaken by the BRE within BIS.
Question 13: Do you agree that the support which Champions are likely to require from regulators’ staff will be limited?
Not sure, it depends.
Following the same logic in our response to Question 12, the level of support which Champions are likely to require from regulator’s staff is likely to vary from Champion to Champion. While from the outset it may seem likely that support will be limited in the way that the consultation suggests, in practice, without knowing how similar or different regulators operate, administratively and otherwise, it would be difficult to support such an assumption.
Similarly then to our response to Questions 12, the level of support which Champions are likely to require from regulator’s staff should be assessed on a case-by-case basis.
Question 14: Do you agree that in some cases it would be sensible for one Champion to cover more than one regulator? Do you know of any groups of regulators where this approach might be worth considering?
We agree that this would be sensible in some cases where the level of time required to perform the necessary work with a regulator is such that the Champion has enough capacity (relative to other Champions) to cover another regulator. Where a regulator’s SME exposure is so limited that the Champions work is itself limited in scope, there are many benefits to sharing the Champion with another regulator. Good practice will flow more rapidly between shared regulators. The cost of familiarisation with the role will be to some extent shared between regulators.
The process of sharing information between Champions will be easier if there are fewer Champions overall. Dissemination of learning experiences (good and bad) will be impractical among a body of over 50 Champions. While the range of different regulators is such that the largest and most complex will probably have little to learn from the smallest, and vice versa, there is nevertheless a continuum of experience between regulators. However, as explained in our response to Question 11 it is important that the Champion has a background in the relevant sector, this still needs to be the case if a Champion is covering more than one regulator.
Some regulators already embrace the principles of coordinated working, and the sharing of a champion would further enhance the benefits. For example, the pension Regulator and the FCA share responsibility for the regulation of workplace DC pensions schemes, and have already issued joint guidance designed to ensure that trustees, pension providers and advisers receive a consistent approach from the regulators. Extending these benefits (to the extent that they engage with the regulators in that capacity) to the SME employers who will be brought into the field as a consequence of auto-enrolment should help to mitigate some of the inevitable costs associated with the new provisions.
Question 15: Are there any cases where sharing regulators would be inappropriate? Why?
Question 16: Do you agree that in order to ensure genuine independence, appointments should normally be made by whoever appoints the regulator (typically the relevant Secretary of State)?
Of equal importance to the appointment being genuinely independent is the accountability of the appointment, its performance and its outcomes. We note that the Government proposes that the annual report produced by the Champion will be laid before Parliament by the Secretary of State – how Parliament engages with this report needs to be such so that business and the wider public are assured that the scrutiny applied was both robust and independent.
Question 17: Do you agree that the role should normally be added to an existing office-holder or employee’s responsibilities?
Not sure, it depends.
To ensure that the Champions are truly independent of their regulator, in cases where the role is added to an existing office-holder this position will need to be that of a Non-Executive Director (NED). This is also important to ensure the Champion’s role has the necessary level of seniority to command confidence from business and the regulators’ leadership teams. Adding the Champion’s role to an existing office-holder may be particularly appropriate in cases where the relevant business background necessary is very niche and it is difficult to identify appropriate persons outside the regulator.
It would not be appropriate that the Champion’s role is added to an existing administrative or managerial employee’s responsibilities as this would not provide the independence or seniority required.
Question 18: Do you agree that Champions’ contracts should normally be based on existing arrangements for appointments in respect of a particular regulator? Are there any regulators for which this will not be possible?
Not sure, it depends.
In cases where the role of Champion will be grafted to an existing post then the position will of course differ from those where the Champion is appointed as a separate individual. While the practical and administrative aspects of each appointment will vary from case to case, Champions should nevertheless operate within a set framework of role specific objectives which are common to all.
Question 19: Are you aware of any non-economic regulators where the appointment of a Champion would not be legally or practically possible? If so, what alternatives do you suggest?
Question 20: Do you agree that any familiarisation costs for business associated with the appointment of Small Business Appeals Champions are likely to be very low?
The familiarisation costs for business will likely depend on whether, and to what extent, the Champions and regulators make an effort to communicate the role externally and engage with business with regard to the role.
The effectiveness of the Champions will depend entirely upon their being able to effectively represent the SME on whose behalf they have been appointed. However good the background knowledge of the individual Champion in each field, they will nevertheless need to have access to up to date information about the practical realities of dealing with the Regulator. This will be available only from the SMEs subject to regulation, and accordingly there must be businesses who ‘familiarise themselves with the role of the Champion’ and communicate with the Champion accordingly if the exercise is not to be at risk of underperformance. In evaluating any such costs it must be borne in mind that for SMEs the ‘cost’ of any measure will go beyond the simple monetary cost of engaging expertise to undertake the required tasks. In most cases, time will need to be diverted to the relevant task by the owners/managers of the business, and that will incur an opportunity cost of time which could have been spent directly on the profitable activities of the business.
Question 21: Can you suggest how much time a typical business might need for such familiarisation?
It is not possible to draw upon a ‘typical business’ which would be typical across all regulators. This is compounded by the likely different approaches adopted by each Champion to consult and engage with the relevant businesses and representative associations. Any response provided would be too much of a generalisation and serve no value.
In any event, it seems likely that the true cost to SMEs will not be in the familiarisation with the role of the Champion, which should in most cases take only a few minutes, but rather in the detailed work involved in communicating with the Champion where concerns arise. The Champion role is of course not that of a proxy ombudsman, but must be based upon detailed information provided by those who have identified shortcomings (and where appropriate, excellence) in the service offered by the Regulator.
At BIS we carry out our research on many different topics and consultations. As your views are valuable to us, would it be okay if we were to contact you again from time to time either for research or to send through consultation documents?
 PASC launched two inquiries on complaints on 26 March 2013.This inquiry, entitled Complaints: do they make a difference?, looked at whether current complaints systems deliver fairness, redress, and justice for people who complain, and how departments and agencies use complaints as a source of information and challenge, to improve the delivery of public services.