As the banking royal commission finishes, the aged care royal commission begins investigating the mistreatment of old people by – taking a wild guess – mainly the for-profit providers. Surely it won’t be long before the politicians, responding to the public’s shock and outrage, are swearing to really toughen up the regulation of aged care facilities.
It’s not hard to see we’ve passed the point of “peak deregulation” and governments will now be busy responding to the electorate’s demands for tighter regulation of an ever-growing list of industries found to have abused the trust of economic reformers past.
But having gone for several decades under-regulating many industries and employers, there’s a high risk we’ll now swing to the opposite extreme of over-regulation. That could happen if politicians simply respond to populist pressures to wield the big stick against greedy business people.
It could happen if politicians yield to one of the great temptations of our spin-doctoring age: caring more about being seen to be acting decisively than whether those actions actually do much good.
And it could happen if our econocrats refuse to admit the shortcomings of their earlier advocacy of deregulation – including their naive confidence that the power of market forces would ensure businesses treated their customers well – and go into a sulk, washing their hands of responsibility for what happens next.
But against all those risks that, in seeking to correct the failures of the previous regime we introduce something that’s just as bad only different, there’s one cause for optimism: as the first cab off the re-regulatory rank, Commissioner Kenneth Hayne’s guiding principles for turning things around. (To be fair, those principles seem to have been influenced by Treasury’s submission to the commission.)
His first principle is that, since almost all the misconduct he uncovered was already unlawful, there’s no need for a raft of legislation to make them doubly illegal. The problem is more getting people to obey the existing law.
Blindingly obvious? Not to a politician who wants to be seen by an angry but uncomprehending public to be acting immediately and decisively. On the rare occasions when Australia is touched by a terrorist act, we see Parliament recalled to pass urgent legislation making terrorism quintuplely illegal.
Hayne’s second principle is that compliance will be increased by making the law simpler, rather than more complex, so no one can be in any doubt about what’s required of them.
The more complex and voluminous you make the law, the more scope you give well-resourced offenders to pay lawyers to find loopholes and argue the toss and string out court proceedings. In the process, increasing the cost to taxpayers of bringing them to justice, increasing the likelihood of them getting off and increasing the reluctance of the regulators to take them on in the first place.
Hayne says the whole body of law needs to be rewritten to simplify and clarify the legislators’ intentions. In the meantime, however, some changes should be made more quickly.
One is to get rid of exceptions, carve-outs and qualifications. Examples are the “grandfathering” (leaving existing arrangements unaffected by new rules) of certain commissions, and the exclusion of funeral insurance from rules affecting other insurance.
As two law professors from the University of Melbourne have pointed out, the rule of law requires like cases to be treated alike. To make exceptions you need powerful arguments – which haven’t been made.
“Instead,” they say, “exceptions and carve-outs reflect the lobbying of powerful industry groups concerned to preserve their own self-interest.” True. There’s no principle of deregulation that says it’s OK to look after your mates.
In highlighting the shortcomings of existing legislation, Hayne stressed that “where possible, conflicts of interest and conflicts between duty and interest [such as not acting in the best interests of your client] should be removed”.
But his final guiding principle is that existing laws must be enforced. “Too often, financial services entities that broke the law were not properly held to account. Misconduct will be deterred only if entities believe that misconduct will be detected, denounced and justly punished,” he said.
Just so. And it raises a mode of response to the electorate’s wider discontents, as governments set out on the path of “re-regulating” industries other than financial services: regulations may need improving, but we don’t need a lot more of them.
No, what we need a lot more of is regulators doing – and being seen to be doing – their job of enforcing existing regulations with vigour and effectiveness, and governments being unstinting in providing them with resources.
