Gaming the Refs: Watchdogs ‘Captured’ Amid Cuts and Political Pressure – as Lid is Lifted on UK’s ‘Lax’ Regulation Regime

A new report sounds the alarm on a failure by UK regulators to sanction companies that are flagrantly breaching rules on pollution, workers’ rights and other violations. 

‘Protecting All We Care About’, written by the non-profits Good Jobs First and Unchecked UK, examines the current state of the UK’s regulatory system, branding it in dire need of an overhaul in many areas following years of political pressure and cuts. 

It draws upon extensive data from the Violation Tracker UK database, documenting over 100,000 cases of corporate wrongdoing since 2010. Often the same companies come up time and time again, suggesting that they are not learning their lessons. 

At a launch conference on Thursday, speakers highlighted how Amazon ‘fulfilment centres’ or warehouses have had thousands of ambulance call-outs in recent years – but have had just three safety offences recorded against them.

The US consistently enforces regulations more strictly than the UK across all areas, attendees heard, while in the UK, deep funding and staffing cuts to regulatory budgets are having “immense effects on enforcement gaps”. 

For instance, there has been a nearly 90% decline in prosecutions by the Environment Agency since 2010. As of 2021, a farm in England – supposedly regulated by the EA – can expect a visit from an environmental officer only once every 236 years. 

It comes as the UK Finance industry is gearing up to push for further deregulation, even under a Labour Government, amid pleas from executives in the City of London.

Yet the use of bans or “prohibitions” barring City firm directors by the Financial Conduct Authority (FCA) has fallen by 62% since 2013, while the number of individual fines has also collapsed, the report finds. Many FCA investigations end in mere warnings, while over half of decisions don’t carry any monetary penalty. 

Ian Tyler, a non-executive director and former senior banker, told the conference that enforcement by the FCA is “highly selective”, with big firms often facing only fines, while smaller firms and their bosses face more severe consequences, such as criminal prosecution. 

Meanwhile, the Treasury Select Committee which is also meant to hold rogue bosses to account “lacks rigour and knowledge,” with staffers often being secondees from finance firms, he said. 

Other speakers pointed out that “regulatory capture” has worsened in the UK in recent years, with watchdogs sometimes receiving gifts from those they scrutinise, particularly in the water industry. Research by he Liberal Democrats earlier this year found that OfWat bosses have been treated to dinners from disgraced water firms despite public outrage over sewage scandals. 

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Officials there received lunches at shows and even an umbrella gifted by firms, seemingly attempting to keep the regulator on side.  

Some regulators in the UK are also expected to be cheerleaders for industry, unlike in the US. The FCA now has to deal with alleged conflicts of interest after the Government passed the 2023 Financial Services and Markets Bill, where ministers gave the FCA a new ‘growth duty’ – a demand for it to promote growth and competitiveness. In other words, to act as an industry cheerleader as well as its regulator. 

“This new obligation to promote market interests presents a conflict with FCA’s mission to ensure financial stability and protect consumers,” the Good Jobs First report suggests. 

Equally, the North Sea Transition Authority (NSTA) which regulates North Sea Oil firms, has a “conflicting” core mission to achieve the maximum recovery of UK petroleum. Environmentalists say that industry-promotion objective stands in “direct conflict” with the UK’s commitment to net zero.

Other issues like the ‘fragmentation’ of watchdogs, such as lack of a single enforcement body for labour rights, was also cited as a significant problem. 

Watchdogs or Lapdogs?

The report from Unchecked UK argues that the UK’s regulatory system is “not delivering” – pointing to a huge disconnect between workers, consumers and the environment being abused by firms – while prosecutions or fines for related offences are often non-existent. 

On workers’ rights, there have been 193 convictions for breaches and 349 licences revoked in the labour market since 2008 by the Gangmasters and Labour Abuse Authority, and there has been a steep decline in licences being revoked since 2021. Yet Anti-Slavery International estimates that over 130,000 people are trapped in slavery in the UK. 

The Low Pay Commission reports that 120,000 cases of minimum wage underpayment benefited from HMRC investigations into non-compliant employers in 2021/2022. Yet there are an estimated 760,000 workers paid less than the minimum wage. 

In housing, OpenDemocracy found that half of local authorities in England and Wales didn’t prosecute any private landlords or letting agents between 2019 and 2021, despite more than 314,000 complaints being made in that period. 

Generation Rent states that 250,000 landlords are renting out properties that do not meet the legal Minimum Energy Efficiency Standards as of 2022. But according to the National Audit Office, only 10 English landlords were barred from renting out property between 2016 and 2021.

On consumer rights, customers spent 1.5 billion hours in 2021/2022 dealing with “detriment” arising from disputes with traders, the Department for Business Energy & Industrial Strategy reports. 

The Violation Tracker database shows that the Food Standards Agency has prosecuted only eight meat and dairy producers since 2021, while The Guardian notes that hospital admissions for salmonella, e. coli, and campylobacter infections have reached record levels.

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Meanwhile, the Drinking Water Inspectorate (DWI) has prosecuted 17 cases since 2010, with an average fine of £63,000 for water safety compliance, according to Violation Tracker. The fines are likely to be seen as a cost of doing business. Last month, the BBC reported 26 confirmed cases of cryptosporidium due to faecal contamination of water in Brixham, Devon.

Violation Tracker also reveals that airlines have faced total fines of £165,000 for aviation safety violations and £15,000 for one licensing violation since 2010. Yet the Department for Business Energy & Industrial Strategy identifies aviation as the sector with the highest incidence of consumers being wronged. 

On domestic goods, the Office for Product Safety and Standards issued total penalties of £35,894 via the courts for just three cases between 2018 and 2021, according to Violation Tracker UK. 

Yet the Office for Product Safety and Standards has itself found that 63% of electrical products from online marketplaces were “non-compliant,” and nearly a quarter were unsafe.

The situation is even more stark when it comes to environmental offences.

Following major cuts under the coalition austerity years, enforcement action by the Environment Agency plunged by 88% between 2010 and 2023.

The Guardian and Point Source have also reported that no warnings or penalties for water pollution by industrial farming were issued between 2018 (when the law was introduced) and 2021. 

Violation Tracker UK also identifies 22 published cases of climate violations under the Greenhouse Gas Trading Scheme Regulations since its introduction in 2012, and 35 enforcement cases against oil and gas companies since 2010, resulting in £4.2 million in fines. 

There have been just nine published enforcement cases of illegal damage to habitats since 2010 against companies, one by National Resource Wales and 8 by Natural England, with only one case receiving a monetary fine. The sanction was a paltry £2,605, according to Violation Tracker UK. 

Helpfully for an incoming Labour Government, when it comes to issues like sewage and environmental pollution, much could be done to enforce laws currently on the statute book – without needing new legislation to be passed.

As Hannah Slaughter, Senior Economist at the Resolution Foundation, told the conference: “It’s often taken it for granted that if a law exists, that means that it’s happening…It’s become clear that this is not always the case.”

You can read the full report here. 

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