I have supplied the committee with a note so I will speak to some overhead slides for now. The genesis of the review of the economic environment was the programme for Government commitment of June 2007 which stated that the entire economic regulatory environment would be reviewed. The programme included proposals for the establishment of this committee and the undertaking of an international benchmarking study. The study was put out to tender in December 2007 and by March 2008 we had awarded the contract to a consortium of the Economist Intelligence Unit and Compecon Ltd., which began work in May 2008. The study was completed in March 2009.
We wanted to have a look at the entire economic regulatory environment and chose four of the traditional economic regulators, and included the HSA and the Financial Regulator, as case studies so that a comprehensive range of economic regulators came within the scope of the review. The review was to compare each of these regulators with their counterparts in other relevant EU and OECD countries. Working with the consultants we developed criteria by which the review would be carried out, which included effectiveness, value for money, governance and accountability. We selected a range of countries based on their reputation, the size of their markets and their common law or EU legislative frameworks for the purpose of comparison. The detailed findings of the EIU report are set out in the paper I have presented to the committee.
I will summarise the main findings. The EIU report underlined the continued importance of regulation in the economy, arguing that regulation was required as it was not sufficient to simply allow competition policy to play out. It noted that, in some key areas such as energy and telecommunications, the regulatory regime had been pulling back from positions where effective competition had been established.
The report also suggested that independent sectoral regulators were the best model, as distinct from Government Departments, and these are an EU requirement in some instances. On the scope and mandate of regulators the report suggested it was better to have sectoral rather than industry regulators. For example, an energy regulator was better than an individual gas or electricity regulator. It considered the issue of a super-regulator but did not find any evidence favouring the formation of such an entity. However, it did propose some mergers of our domestic regulators. It suggested there was cause for concern over the cost of individual regulators, based on comparisons with international counterparts, but it was not entirely clear whether the costs were comparable in terms of the exact functions performed by our regulators or whether there was a linear relationship between the costs of regulation and the size of an economy.
The report suggested there be an increased focus on performance on the part of regulators and recommended the development of specific performance targets. It also stressed the need for clarity on regulatory mandates and suggested a five-yearly review of the fundamental rationale for each regulator. It also suggested stress-testing of regulatory structures so that where there were particular shocks in a market we could examine the robustness of the regulatory regime. ComReg currently enjoys simultaneous powers with the Competition Authority in the area of competition and the EIU was asked whether there should be any extension of those powers. However, it did not recommend such an extension. It favoured the model of multi-member commissions as opposed to single member commissions or regulators and recommended the establishment of a single appeals body to deal with regulatory judgments. It also recommended increased resourcing of Oireachtas committees to support the scrutiny role of the Houses and suggested the upskilling of Departments. Members will see the countries with whose regulators each of our individual regulators was compared. The full EIU report gives details of each of the regulators and countries concerned.
The Government received the EIU report in March 2009 and published its own statement in October 2009 responding to the key recommendations. In the area of governance and accountability the Government proposed to legislate for statements of strategy, integrated annual reports, output statements and public interest statements and for mandatory requirements for all regulators. It also proposed that Departments would work with individual regulators to agree annual performance indicators and establish an annual regulatory forum where the Taoiseach and key economic Ministers would meet with regulators to discuss key issues of importance for competitiveness in the economy.
The Government endorsed the proposal for the testing of regulatory frameworks against asymmetric shocks and the development of stronger capacity, both within the regulators and Government Departments, to deal with regulatory matters. The Government adopted a recommendation for multi-member commissions, and legislation dealing with individual regulators will ensure that, as individual employment contracts change and new commissioners are appointed, it will be to multiple regulators. The requirement for regulators to produce public interest statements, which is to be introduced by statute, was seen as a way of enhancing the potential for Oireachtas scrutiny of the activities of regulators.
The Government's statement encourages regulators to look for opportunities for shared services. The Government did not accept the EIU recommendation for the establishment of a single appeals body. Instead, and in light of the development of the Commercial Court and the sophistication and speed with which it deals with cases, it believed the case for a single standing body was not proven.
The final set of recommendations deals with the appropriateness of the regulatory structures and the mandates of regulators. The Government endorsed the proposal that it would provide in statute for five-yearly reviews of regulators. That obligation would rest on Ministers and their Departments. It was agreed that Government would not extend the concurrent powers in the competition area to the regulators, instead those powers still rest with the Competition Authority.
On the issue of scrutiny of budgets and levies, responding to the findings of the Economist Intelligence Unit that some of the domestic regulators were at least as costly and, on occasion under some comparisons, more costly than their international counterparts, the Government had recommended that by statute, Ministers and relevant consumer or industry panels would have a role in the approval and scrutiny of regulators' budgets. I mentioned cost levels. One factor to be considered in relation to cost is the issue of structure and potential amalgamation of regulators. While the EIU had suggested some areas for consideration for amalgamation, so too had Mr. McCarthy in the report of the special group on public service numbers and expenditure programmes, the Government decided in the first instance that the aviation regulator, part of the functions of the Irish Aviation Authority, IAA, should be amalgamated with the National Transport Authority, NTA, to form a single transport regulator.
In regard to consumer interests and consultation with the consumer, it was noted in the EIU report that in some instances regulators appoint their own consumer panels. It was felt it would be better to have relevant Ministers or the National Consumer Agency appointing consumer panels and these panels might be given a statutory function in the scrutiny of the annual budgets of regulators.
I have gone through the recommendations quickly and my colleagues and I are happy to take questions on both the EIU report and on the Government statement.
