When stakeholders seem too close... - It is not only Regulators that can be criticised for being too close to some of their consultees

Last week’s Radio Four programme File on Four was called ‘Taxing questions’ and looked critically at HMRC’s recent activities in engaging openly with key stakeholders.

Two current situations were dealt with in detail. One is what’s called the Patent Box – a new tax regime, announced in last year’s Budget and designed to improve the UK’s business competitiveness by providing incentives for innovative Companies and practices. The other was the new set of rules being drafted for CFC’s or Controlled Foreign Companies. In both cases, the reporter questioned whether it was right for the HMRC to be influenced by the very Companies that may stand to gain from its decisions.

So here’s the problem. If you need to hold a dialogue on technical matters, it is often likely to be of greatest relevance and make most sense to specific groups of organisations or individuals, and it is perfectly natural that they may figure prominently in any list of potential consultees. In these cases, HMRC has set up Working Groups to study different aspects and invited Companies with known interest in the subjects to join them. Not unexpectedly, critics of the new policies cry foul and accuse these same Companies of seeking to feather their own commercial nest rather than further the public or national interest. Why, they claim can HMRC not also listen to independent academics, consumer groups or other less prejudiced voices?

Almost all Regulators face similar allegations at some time or another, but the problem of organisations being perceived as getting ‘too close’ to certain stakeholders is much wider and is a potential pitfall for all public bodies.

There are three major points to be made about this. 1. The new Cabinet Office Principles quite clearly signal a shift away from consulting everybody about everything (i.e. public consultation) and towards a greater emphasis on stakeholder engagement. This is seen very much as reflecting ‘proportionality’ in consultation and recognising that the great British public is pretty apathetic about many issues that excite interest only among a small minority. 2. It, therefore, follows that for those members of the public who take (albeit a minority) interest in very specific issues will feel themselves marginalised as we see a drift away from publishing formal consultations and their replacement with structured forms of stakeholder dialogues. 3. Many of these dialogues will take place pre-consultation, and will focus on issue definition and option development. Where legislation follows, or where there is to be a public consultation anyway, eyes are bound to focus on exactly who was in the room when its scope was considered.

Many Regulators are constantly in the public eye; others periodically hit the headlines. But as Government has delegated more and more functions to arms-length bodies, accountability rests with some organisations that have little experience of modern engagement methods. Others face media, legal or political challenges to their decisions, and need to be able to show how they have conscientiously listened to significant stakeholder views. Public bodies can reasonably point out that they are damned if they do and damned if they don’t. If they make a determined effort to get close to those most seriously affected by their plans, they face criticism for paying too much attention to their needs and neglecting other interests. If they avoid this by keeping a safe distance – and throwing a wide net in the search for views and opinions, key stakeholders complain that there isn’t a good enough attempt to understand them! Local authority planners know all about such dilemmas. How close should they get to developers, for example?

But, back to the taxman. Clearly for the likes of Amazon, Starbucks or Google to be offering their views sticks in the throat of campaigners against tax avoidance. The same critics dislike the influence of the major consultancy firms – the very ones that advise their clients on ways to minimise their tax. No doubt HMRC obtains valuable and valid insight from consulting these Companies. But unless it also seeks alternative perspectives, it fails the test of common sense – the need for transparent consideration of all relevant viewpoints.

Ultimately, consultation has to be seen to be inclusive, and not a private process for a privileged few. All our Regulators must remember this.

Trigger Points

• These issues will be considered in the special Roundtable for Regulators in London
• The Radio Four programme which inspired this Topic is “File on Four” first broadcast on 29th January.
• The Cabinet Office Consultation Principles were published last July, but note that the House of Lords Secondary Legislation Scrutiny Committee has urged an immediate independent Review of them (See tCI Briefing Note 7)
• The Treasury and HMRC has adopted a Tax Consultation Framework with some commendable provisions, some of which touch upon issues in this Topic.

This is the 229th Tuesday Topic; a full list of subjects covered is available for Institute members and is a valuable resource covering so many aspects of consultation and engagement