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BRITISH PROFESSIONS TODAY:
THE STATE OF THE SECTOR
www.spada.co.uk
Table of contents >>
1 Introduction 1 References 36
1.1 What is a profession? 3
1.2 History of the professions 3
1.3 Declining public perceptions 5 Appendices 38
1. Lord Benson’s criteria for the 38
2 Changing regulatory structures 8 professions
2.1 Why regulate? 9 2. Personal interviews 39
2.2 Historical development 11
2.3 Regulated self-regulation 13 Tables, Lists and Charts
2.4 Case study: the legal professions 14 Percentage of total UK output 19
(real UK GDP) by sector
3 The professional economy 17 VAT registrations and deregistrations 20
3.1 Output 19 as a percentage of stock
3.2 Business creation 20 Output per employed job 21
3.3 Productivity 21 by sector (£000s, current prices)
3.4 Balance of payments and trade 22 2006 balance of payments, 22
3.5 Employment 23 other business services (£ million)
3.6 UK professions in Europe 23 2006 balance of payments, 22
trade in services (£ million)
4 Social and political contributions 24 Percentage of total UK employment 23
4.1 Social mobility 25 by sector
4.2 Political consultation 27 Professional influence in official 29
4.3 Case study: RICS and Home parliamentary proceedings
Information Packs (HIPs) 30
5 Conclusion 32
5.1 Summary of findings 33
5.2 Vision for the future 35
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Foreword >>
This research by Spada was prompted by the informal Hitherto, most professions have tended to think narrowly of
collaboration of a working group of professional membership their own discipline and their own individual roles in public life.
bodies, which gathered in the interest of the public good to Our research suggests that there may indeed be a place for a
encourage debate about the role of the professions in society. united, clear and powerful professional voice in our public life,
The group, which included the Law Society and the Royal but only if the professions can first recognise the extent of,
Institution of Chartered Surveyors (RICS), the Chartered and limits to, their own latent power in combination. In this
Institute of Management Accountants (CIMA), the Bar latter respect, we hope the research starts the process of
Council, and the Institute of Chartered Accountants in building up ‘self-knowledge’.
England and Wales, shared concerns about declining public
esteem for the professions, the associated disadvantage in the How do we sustain our prosperity and our competitiveness
recruitment of young talent, and the sometimes damaging lack as a nation? How do we achieve an appropriately skilled
of government consultation on issues of relevant technical workforce, and a more meritorious civil society? How can
expertise. As a way of grounding their discussions, and in politicians originate better policies and better legislation? Who
order to gain an overall snapshot of the professions in the will guarantee fair play in the market place? Who will set the
UK, the group commissioned Spada to research the history moral tone in business and society (so that we become more
of British professions and their current import to our national trust- and principles-based and less fettered by over-regulation
economy, political life and civil society. and legislation)? How can complex knowledge businesses
learn from one another? These are some of the fundamental
As we undertook this research, however, we found that the questions that the professions might be well placed to address
report occupied a unique place within the extant sociological, with a collective effort.
political, and economic literature on the professions.
Currently, no other document brings together a summary of Finally, the Spada team would like to take this opportunity to
the British professions’ history and structures, their various thank all those who have given so generously of their time to
roles and contributions to society, and a vision for the future. furnish many of the insights that have gone into this document.
Three of the group’s member bodies, The Law Society,
RICS, and CIMA, have decided to publish the findings as a
condensed report in order to provide a public forum for
further discussion of these issues. British Professions Today:
The State of the Sector thus represents a first attempt to Gavin Ingham Brooke
set forth a compact overview of the value and scope of Managing Director, Spada Limited
British professions.
Spada’s research is a limited reconnaissance of a vast and
complex subject. The picture of the professions
that emerges, at a juncture when many are undergoing Ana Catalano
transformation, is a fascinating one. Despite their obvious Research Consultant, Spada Limited
influence and involvement in almost every aspect of people’s
lives, at every level of the bodies politic and economic, and
their extraordinary economic contribution (as the research
documents), the professions do not represent a collective
force in the eyes of our policy makers and opinion-formers.
British Professions Today: The State of the Sector © Spada Limited 2009 i
Executive summary >>
Professionals in the UK form part of the backbone of the Key Facts
services-based economy, play key roles in the political process,
and, perhaps most importantly, provide vital services in our > Professional structures have evolved from the social clubs
day-to-day lives. Yet, the professions have come under attack and guilds of old to the institutions of today via a process
from dual fronts: from government, which often fails to of gradual establishment and by entering into regulatory
consider professional expertise in relevant policy areas; and bargain with the state.
from the general public, which has come to view professionals
suspiciously in an era of declining deference to authority. How > Whilst professions have gained societal importance with
has this ambivalent state of affairs come about, and why do the rise of the information age, they have simultaneously
the professions continue to matter, despite such criticisms, experienced some decline in public esteem.
now more than ever?
> The perceived self-interest of the professions has brought
British Professions Today: The State of the Sector about significant changes in regulatory structures as the
represents a first attempt to set forth a condensed overview traditional model of self-regulation is shifting to one of
of the value and scope of British professions – historical, ‘regulated self-regulation.’
regulatory, economic, social and political. The Law Society,
the Royal Institution of Chartered Surveyors (RICS), and the > Professions as a group are understudied: an industrial
Chartered Institute of Management Accountants (CIMA) category of analysis for the professional sector does not
have undertaken this research for the benefit of the public yet exist, and thus truly accurate and comprehensive
and publish the findings to provide an open forum for statistics on the economic contributions of professional
further discussion of these issues. occupations cannot be measured and compiled.
There is no single, agreed upon definition of ‘profession,’ > Professional services as represented in the category SIC 74
but for the purposes of this report we follow Sir Alan (see page 18 for an explanation) account for the largest
Langlands’ working definition: those occupations “where a single share of UK output (in UK real GDP), contributing
first degree followed by a period of further study or 8% of the total.
professional training is the normal entry route and where
there is a professional body overseeing standards of entry > Professional services continue to expand at an impressive
to the profession” (Langlands 2005). However, it should rate and have been forecast to grow 3.4% average
be recognised that entry to a professional qualification may annually from 2004 to 2014 compared to 2.4% average
initially be at a lower level than a first degree, although the annual growth forecast for the whole economy in the
final output will be commensurate with a period of further same period.
study and training beyond the level of a first degree.
> Professional services as represented by SIC 74 account for
Our data has been sourced from the Office of National £15,849 million of British trade in services, or over half of
Statistics (ONS) and the Sector Skills Development Agency the total £29,194 million (balance of accounts, as credits
(SSDA) as of July 2008. For a full explanation of data sources less debits), helping to offset the growing negative balance
and disclaimer please see page 18. of trade in goods.
ii
> The professions represent the largest single category Recommendations
of employment in the UK, with 11.5% of total UK
employment. > The legacy of British professions is formidable,
but should not be taken for granted in light of the
> UK professionals were the largest contributor to the threats posed by the evolution of consumerist
EU27’s professional sector in 2004, with EUR 203.5 billion values, instant gratification, declining client loyalty,
of value added, generating 27.5% of the EU27’s sectoral increasing media scrutiny, and increasing regulation.
value added and employing 19.5% of its workforce.
> New methodologies and metrics for analysing the
> The professions have played a big role in the development professions should be formulated, as well as
of meritocracy because of their emphasis on knowledge- greater transparency and consistency in reporting,
based skills rather than social class. in order for the full extent of professionals’
contributions to society to be brought to light.
> The professions are a potential source of ethical role
models via promulgation of professional standards, ethics > Significant benefit – for the public interest,
and morality in business, government, and civil society. government, and the professions themselves
– may come from the professions working
> Policy on sophisticated technical skills in the UK is often together and speaking with the authority of a
legislated without appropriate professional expertise (eg single voice to government and the general public.
the case of HIPs) to real consumer and public detriment.
> The problems in the banking sector exposed
> On average, top professional service firms (eg KPMG) by the financial crisis in 2008 illustrate all too
achieve far greater coverage in parliamentary debate clearly the need for professional standards specific
than their fee earners’ professional membership bodies to that sector, including rigorous qualifications,
(eg the ICAEW). high standards, continuous monitoring, and
appropriate disciplinary mechanisms.
> The findings set out in this initial report might spur
further debate in appropriate forums with key
stakeholders – government, business, education,
organised labour, professionals themselves, and
most importantly consumers and the general
public – on a range of issues including, but not
limited to, social mobility, skills, regulatory
structures, inter-professional collaboration and
the public interest.
Des Hudson
Chief Executive, The Law Society
Louis Armstrong
Chief Executive, RICS
Charles Tilley
Chief Executive, CIMA
British Professions Today: The State of the Sector © Spada Limited 2009 iii
About us >>
RICS is the world’s leading qualification The Law Society is the professional The Chartered Institute of Management
for professional standards in land, membership body which represents Accountants, founded in 1919, is the
property and construction. With solicitors in England and Wales. The world’s largest professional body of
over 100,000 property professionals Law Society was founded in 1825, management accountants, with 171,000
working in the major established and after several prominent attorneys members and students operating in
emerging economies across the met to call for the formation of a law 161 countries. CIMA is responsible
globe, RICS is the mark of property institution to raise the reputation of for the education and training of
professionalism worldwide. the profession by setting standards management accountants who work in
and ensuring good practice. industry, commerce, not-for-profit and
RICS is an independent professional public sector organisations.
body originally established in the Today, The Law Society counts as
UK by Royal Charter. Since 1868, its members nearly 135,000 solicitors Working closely with employers, CIMA
RICS has been committed to setting on the Roll and is a major player on offers a globally recognised management
and upholding the highest standards the international legal stage. The accounting qualification, sponsors
of excellence and integrity – providing Law Society aims to equip the whole leading-edge research, and supports its
impartial, authoritative advice on profession, from sole practitioners members through professional guidance
key issues affecting businesses to high street and City firms, to meet and development. CIMA is committed
and society. the challenges and opportunities ahead to upholding the highest ethical and
and provide the best possible services professional standards of members and
For more information please visit to the public. students, and to maintaining public
www.rics.org confidence in management accountancy.
For more information please visit
www.lawsociety.org.uk For more information please visit
www.cimaglobal.com
iv
Introduction >> 1
Introduction >>
All professions are conspiracies
against the laity.
George Bernard Shaw, The Doctor’s Dilemma, 1911
Professionals in the UK form part of the backbone of the Methodology
services-based economy, play key roles in the political process,
and, perhaps most importantly, provide vital services in our A number of methodologies were employed to
day-to-day lives. Professions are involved in every aspect prepare this report: desk research sourced from
of human life: birth, survival, physical and emotional health, secondary literature, web research, original
dispute resolution and law-based social order, finance and quantitative and qualitative research, and a series
credit information, educational attainment and socialisation, of in-depth interviews with key members of
physical constructs and the built environment, military professional bodies. Please see Appendix 2, p. 39,
engagement, peace-keeping and security, entertainment and for a list of the personal interviews that were
leisure, religion and our negotiations with the next world conducted for this research. All tables, charts and
(Olgiati et al. 1998). graphs have been originated at Spada.
Yet, the professions have come under attack from dual fronts: We would like to point out certain limitations of
from government, which often fails to consider professional the study and welcome comments and criticism.
expertise in relevant policy areas; and from the general public, If the study is to be taken seriously, it must lead
which has come to view professionals suspiciously in an era of to follow-up research and discussion. The first
declining deference to authority. How has this ambivalent state constraint on the research project is its vast scope.
of affairs come about, and why do the professions continue to The approach adopted favours a broad analysis
matter despite such criticisms, now more than ever? of trends across the professions in historical and
comparative context over a narrower, in-depth
The aim of British Professions Today: The State of the study of just one or two professions. Due to the
Sector is to establish a set of core statistics and key inevitable lack of completeness, particularly the
information about the role of professions in the UK, within absence of quantitative measures of analysis,
the context of the broader political, economic, social and this report cannot claim to be definitive. Instead,
technological landscape. It is our hope that this report will it offers a critical synthesis of the literature
provide the substance to develop an open forum of debate and statistics available to date, supplemented by
on the current roles and future of UK professions on original quantitative and qualitative research where
multiple levels, from the professional community through this has been possible.
to the wider public.
2
1.1 What is a profession? Indeed, it is the duty to serve the public interest which
distinguishes a profession from a representative body such
There is no single definition of ‘profession’. For the purposes as a trade union. This attribute encompasses independent
of this report, we follow Sir Alan Langlands’ working (eg self-employed barristers), organisational (eg accountants
definition from his Gateways to the Professions report: those working in firms), and public sector professions (eg health
occupations “where a first degree followed by a period of care professionals). Our research focuses on the private
further study or professional training is the normal entry route sector, “liberal” professions. Though the report approaches
and where there is a professional body overseeing standards the professions as a generic group of occupations, it does
of entry to the profession” (Langlands 2005). However, not not attempt to draw a hard and fast line, or even count the
all professions require an initial degree qualification, the number of professions in the UK.1 Labelling is less important
professional qualification itself providing at least an equivalent than acknowledging the shared, professional characteristics
level of achievement. of certain occupations. Following Everett C. Hughes (1963),
professionalism is a process as well as a structure: “…in my
A more comprehensive study of the term reveals various studies I passed from the false question ‘Is this occupation
connotations. Meanings range from the narrowly defined a profession’ to the more fundamental one ‘what are
traditional professions of doctor, lawyer, and accountant the circumstances in which people in an occupation
to the broadly defined usage as any occupation by which attempt to turn it into a profession and themselves into
someone earns a living. “Professional” now refers to professional people’?”
competency and efficiency in almost any field (eg the
professional footballer). The Oxford English Dictionary
(OED) defines professional occupation as, “an occupation 1.2 History of the professions
in which a professed knowledge of some subject, field, or
science is applied; a vocation or career, especially one that The professions can be considered an “articulation” of
involves prolonged training and a formal qualification.” In early the modern capitalist state (Johnson 1982), because the
use, the OED specifies that the word applied specifically to opportunity for professions to emerge and thrive is made
the professions of law, the Church, and medicine, sometimes possible by modern societies, where knowledge is a unified,
extending into the military profession. autonomous realm (Gellner 1988), and where free markets
in goods and services exist (Weber 1978). While some
One of the most thoughtful and comprehensive definitions professions, such as medicine and law, have long and rich
of “profession” is Lord Benson’s 1992 criteria for professional histories, in general the rise of the professions in Western
bodies. Lord Benson stated that to be a professional is to society is a relatively recent historical phenomenon. The
operate within certain principles, most of which ultimately roots of most modern-day professions may be traced to
pertain to the public interest, which he went on to detail in the nineteenth century or later, with most professions fully
nine points (see Appendix 1, p. 38). coalescing in the twentieth century (Jennings et al. 1987).
1 Incidentally, no official figure for the number of professions or professional
bodies in the UK exists. The Privy Council keeps a record of the number
of Chartered bodies (currently 750), but this figure includes other bodies
such as educational institutions. Moreover, certain professions are
represented by several Chartered bodies (eg accounting), and some
remain un-Chartered (eg barristers).
British Professions Today: The State of the Sector © Spada Limited 2009 3
Introduction continued >>
Knowledge has become more specialized and technology As a “mixed economy” Britain falls somewhere in between
more complex, resulting in greater power for established the extremes of the most capitalist or free-market oriented
professions as well as the growth of new professions. states, eg the United States, and the state-controlled,
Journalism, management consultancy, and public command economy of the former USSR (Perkin 1996).
administration are just a few of the many occupations
which have attained professional status in the twentieth In continental Europe, professions generally have been and
century (Ibid.). are mainly employed in the public sector, closely connected to
and controlled by state authorities (Torstendahl and Burrage
The origins of many modern professional bodies are to be 1990). The Anglo-American ‘ideal type,’ by contrast, stresses
found in social clubs, formed to provide a forum to exchange the freedom of self-employed practitioners to control working
ideas on a particular subject without any conscious intention conditions (Collins 1990). These differences are also reflected
of becoming a regulatory institution. For example, RICS in the types of professionalisation; the Anglo-American type
counts as its antecedents the Surveyors Club (1792), the Land focuses on “private government” within an occupation, whilst
Surveyors Club (1834), and the Surveyors’ Association (1864). the Continental type focuses on the political struggle for
By 1868 surveyors in these and other clubs saw enough control within an elite bureaucratic hierarchy (Ibid.).
identity of purpose to create the Institution of Surveyors, and
a Royal Charter was granted in 1881. The Law Society was So, the evolution of professional structures has not been a
founded in 1825, after several prominent lawyers met to call static or isolated series of events. Professions have been,
for the formation of a law institution to raise the reputation of and continue to function as, part of an important dialectical
the profession by setting standards and ensuring good practice movement within British society. Professionals play key roles
(Sugarman 1994). in reflecting and developing societal views, norms and
procedures. One of the most obvious manifestations of this
As professions became more established, with distinct sets process is the standardised procedure of ‘precedent’ in English
of interests, memberships, and bodies of knowledge, so they common law. Common law can be contrasted with the more
began to seek monopoly and privilege. To attain this, they had rigorous, code-based civil law systems of continental Europe,
to enter into a special relationship with the state so as to in which judicial precedents are considered persuasive as
achieve a monopoly, or at least licensure (MacDonald 1995). opposed to binding. Professions have matured and evolved
This agreement has come to be called the ‘regulative bargain’ whilst influencing the concurrent development of the British
with the state (Cooper et al. 1988). The political culture of a system of government and constitution.
society, which influences the style of this regulative bargain,
can be seen as crucial for the development of a profession.
4The unique role of trust in professional societies
Just as individuals have grown increasingly dependent on
“As the world has grown more
professionals, so society as a whole has also become reliant specialized, countless such experts
upon them. We depend on professionals to maintain our have made themselves similarly
health, handle our legal and financial affairs, protect our indispensable. Doctors, lawyers,
political interests, and manage businesses that provide us
with employment and consumer goods (Jennings et al.
contractors, stockbrokers, auto
1987). People rely on the ethical integrity of professionals mechanics, mortgage brokers, financial
in a way unprecedented in other occupations because the planners: they all enjoy a gigantic
services offered by a professional are characteristically
different from goods that are sold by a manufacturer,
informational advantage. And they
merchant or retailer. use that advantage to help you, the
person who hired them, get exactly
A professional provides intangible services, and the purchaser what you want for the best price.
has to take them on trust. It is in the nature of some of these
services that they are going to be unsuccessful: half of legal
advocates appearing before a court of law may lose their Right?
cases, and doctors will inevitably lose patients. Strong
educational background and qualifications are thus necessary,
but trust, measured by outward appearance and manner
It would be lovely to think so.
fitting the socially accepted standards of repute and But experts are human, and humans
respectability, is often just as important (MacDonald 1995). respond to incentives.”
Professional bodies accordingly have a twin function in
assuring quality services to the public, as well as representing (Levitt and Dubner 2005: 5)
their members in the regulative bargain with the state
(Cooper et al. 1988).
1.3 Declining public perceptions
Though the professions have gained power in numbers and
societal importance, equally they are criticised now more than
ever before as, what George Bernard Shaw originally dubbed,
“conspiracies against the laity.” It has become more and more
popular to question the motives, ethics and value of our
expert class. University of Chicago economist Steven Levitt
and New York Times journalist Stephen J. Dubner summarise
this view in the chart-topping book Freakonomics:
British Professions Today: The State of the Sector © Spada Limited 2009 5Introduction continued >>
Part of the decay in public perceptions of the professions may Opinion poll data confirm the professions’ gradual erosion in
have been inevitable. Post-industrial values are characterised the public opinion. Trends from the UK Ipsos MORI ‘Opinion
by declining deference to authority, and political and religious of Professions’ survey chart a slow but sure fall in the
institutions have also suffered in this respect (Inglehart and percentage of people who are very or fairly satisfied with
Baker 2000). The transition from an industrial society to a the way that accountants and lawyers do their jobs. Approval
knowledge society has brought about an unprecedented level of accountants fell from 61% in 1999 to 58% in 2004, while
of wealth, meaning that people can move beyond thinking approval of lawyers fell from 58% in 1999 to 54% in 2004
about survival to thinking about their subjective well-being. (Ipsos MORI 2006). Similarly, the US Harris Poll of Prestige
Values have shifted from an emphasis on physical and in Professions found that of the ten occupations at the
economic well-being to individual freedom and self-expression bottom of the American public’s regard, five of these come
(amongst others). from the professional world – journalists, bankers,
accountants, stockbrokers, and business executives.2 In the
This new focus on subjective well-being is combined past quarter of a century, the number of people who see
with unparalleled availability of information due to the lawyers as having “very great” prestige has fallen some 14
exponential growth of technology in the past quarter of a points, from 36 to 22 %. Scientists have fallen 12 points from
century. Consequently, even as professionals grow in political, 66% to 54%, doctors have fallen nine points from 61% to
economic and social significance, members of the public 52%, and bankers have fallen seven points from 17% to 10%
are able to put their claims of status and expertise under (The Harris Poll 77, 2007).
ever sharper scrutiny. Doctors face patients who must be
convinced of their diagnosis because WebMD.com may
offer a plausible alternative opinion. The internet revolution
threatens the information asymmetry that has always been
a key feature of the relationship between professionals
and clients.
2 Similar data measuring prestige of the UK liberal professions was not
available, though the Ipsos MORI ‘Trust in professions’ poll measures trust
in a range of other occupations such as doctor, policeman, civil servant
and teacher.
6Because the professions can only exist on the fiduciary The US business example provides compelling evidence that
principle (to the extent that they inspire public trust in their even more than the high-quality and reliable provision of
services), a real or perceived lack of ethical standards should services, professional ethics are paramount to maintaining the
be considered the most serious of threats. Nearly every public trust. In a speech to the Royal Society for the Arts’
profession has been vilified at one time or another for ‘Professional Values for the 21st Century’ project Professor
malpractice. Recently the corruption of corporate executives Harold Perkin commented: “Stripped of the deference due
from Enron and WorldCom caused a downward spiral in to their ethics and trustworthiness, they [professionals] are
public trust of professionals. Usually, such scandals are as vulnerable as redundant miners and steel workers”
perpetrated by the few, yet affect the reputations of many (Ibid. 2002). Certainly, British governments from Thatcher
more members within the profession, as well as the status to Brown have failed to see a professional distinction, often
of the profession as a whole. The Edelman Trust Barometer treating professions no differently from trade unions or
found that, after the 2002 US scandals, public trust in businesses: all as self-interested bodies competing in the
‘business’ (a category which includes several professions) free market (Craig 2007). For example, speaking about
fell to a low of 44% of those surveyed. Yet by 2007, trust professional services in supply and demand metaphors,
in business was back up to 53%, higher than media or Department of Constitutional Affairs Minister Bridget Prentice
government. This growth in public trust likely was inspired commented: “I don’t see why consumers should not be able
by strong economic growth, repercussions for executive to get legal services as easily as they can buy a tin of beans”
wrongdoing, and faith in the role businesses are playing in (quoted in The Telegraph, 18 October 2005).
solving societal and environmental problems (Deaver 2007).
More recent events, particularly the economic downturn, Professional services cannot be provided like a tin of beans
will undoubtedly alter this yet again. because of inherent information asymmetries between
professionals and clients. Clients are vulnerable because they
lack the expertise to judge whether the professional that they
have hired is doing a good job; they must rely on professional
ethics and competency above and beyond the pure choice of
market options (Friedman 2006). The next section addresses
how professional bodies are structured to protect their
reputations and the public interest simultaneously.
British Professions Today: The State of the Sector © Spada Limited 2009 7Changing regulatory structures 2
Changing regulatory structures >>
When a system of multiple controls
works properly, no one controls an
agency, but it is ‘under control’.
Terry Moe, American Professor of Political Science, 1987
The balance between regulation and 2.1 Why regulate?
representation is crucial to professional identity.
Organisational structure is a key prerequisite Correction of so-called ‘market failures’ emerges as the
to any definition of ‘profession’: “An obvious, most common answer to the question, “Why regulate?”
politically-based definition, albeit of little In economic terms market failures include: ‘information
normative value, would be to accept as asymmetry,’ ‘credence goods,’ and ‘externalities’:
professions whatever occupations have been
successful in achieving self-regulating status” > Information asymmetry refers to the disparity between
(Trebilcock 1976: 9). The traditional view holds the information held by the service provider versus the
that were it not for the self-regulatory role of information held by the consumer. Information
professional bodies, which forces them to set asymmetry could lead to market failure where the former
high standards and a degree of disinterestedness, has strong incentives to cut quality with a corresponding
a profession would be no different than a trade reduction in price.
union. Yet, we find evidence suggesting that
regulatory structures are changing, and that self- > Credence goods refers to the intangible nature of
regulation is now often measured in degrees. As professional services and the difficulty of ascertaining
society becomes more fragmented, a “decentred” quality before purchase. Consumers may not be able to
understanding of regulation, considering the wide gauge the quality of the service that they have bought,
range of different and often blurred regulatory both due to information asymmetry and the often
configurations diffused throughout society, may ambiguous relationship between the quality of the service
become necessary. provided and the outcome. The long time it takes for
some advice or services to register or bear fruit can also
be perplexing.
> Externalities refers to the impacts (beneficial or adverse)
on third parties which arise from decisions made by
professionals and their clients (OFT 2001).
Regulation aims to remove these market failures at a
reasonable cost in order to improve the efficiency of markets
where trust, transparency and information disclosure are
extremely important.
British Professions Today: The State of the Sector © Spada Limited 2009 9Changing regulatory structures continued >>
Forms of regulation In ex post regulation professionals are sanctioned for
Regulation of the professions can take many forms. Total breaching professional rules or service commitments. Ex post
reliance on self-regulation frequently attracts suspicions of foul regulation involves the proactive monitoring of quality
play in terms of monopoly, protectionism and administered services, handling consumer complaints, punishing miscreants
markets (Trebilcock 1976). As Lieberman contends: “at first and ensuring proper redress is available for inadequate
blush, the claim to self-regulation is strange. We don’t ask service. Because consumers may not be confident in the
non-playing members of football teams to referee games profession’s impartial handling of complaints (amongst other
involving their teams” (Lieberman 1976). Professionals have issues of perceived self-interest), ex post regulation might be
an incentive to impose restrictions upon themselves to further complemented by external regulation.
preserve quality standards, thus ensuring that the status and
reputation of their profession is upheld. However, it has often The role of an external regulator may take many forms: the
been noted (most famously by Adam Smith) that an apparent threat of external regulation may be used to condition the
concern for the public interest may disguise an opportunity to self-regulatory body’s behaviour; an external regulator may
increase incomes by limiting competition. set rules of how a self-regulatory body must function without
being directly involved; or, external and self-regulation may
Traditionally, a strong focus on ex ante self-regulation has work alongside each other so that there is a degree of
predominated, whereby the professional body itself sets competition between them. Increased regulation by an
prescriptive rules about entry, standards of behaviour and external body has the potential to improve the effectiveness
continuing education. This type of regulation is primarily of both ex ante and ex post self-regulation.
designed to prevent the risk of parties offering services which
they are not competent to carry out. Ex ante regulation can Extensive direct government regulation of the professions is
have the effect of damaging competition, particularly inhibiting equally open to scepticism both from the professions, who
the development of new forms of competition. This have a longstanding pride in their autonomy, and from the
argument holds that where professional interests diverge from public, who question the government’s ability to regulate
those of consumers, there is a risk that the professions will large-scale and highly technical institutions effectively (Ibid.).3
disguise an opportunity to create monopoly rents for their The benefits of external regulation should be weighed against
members by setting disproportionately stringent ex ante rules, those of self-regulation; namely, an understanding of the
claiming that such rules are in the public interest (Collins market, potential flexibility, lower costs and efficiency, and the
2006). If that were true, there might be a case for changing absence of political interference (Collins 2006). Given the
the regulatory balance for the professions, putting more unsatisfactory perceptions within both contexts of self-
emphasis on ex post regulation and external regulation. regulation and external regulation, it may be the case that
appropriately tempered forms of self-government hold the
competitive advantage.
3 For example, recent research conducted by the Chartered
Insurance Institute (CII) found that over 60% of the general public have
lost confidence in the government’s ability to control the banking system
(CII 2008).
102.2 Historical development In Britain and the United States the public sector professions
have often been seen as parasitic, a cost rather than a
The current structures and governance of professional contributor to society. The dichotomy between public and
bodies are largely a result of their historical development private sector professions in Anglo-American society has
and the impact of statutory regulation. The economic and grown up around the neo-classical economic work of the likes
technological advances of the Industrial Revolution, and of F.A. Hayek and Milton Friedman, who argue that industry
consequently the rise in living standards and the growth creates the wealth that government (especially welfare)
of governmental and corporate institutions, meant that squanders. Attacks have not been confined to the right; from
professional expertise was required more than ever before the left, the professions have been vilified as self-interested
(Perkin 2002). Professions in Great Britain and other countries elites who award themselves overly handsome perks (Titmuss
developed gradually from an unrestricted right to practise to 1960), or even create the problems they claim to solve (Illich
professional self-regulation in the public interest. In the early 1973). The Russian academic Ivan Illich (in)famously made
19th century virtually no controls existed to restrain those perhaps the most extreme attack on the professions: “Like
who called themselves a solicitor, a physician, or an Spanish Inquisitors they hold the mandate to hunt down those
accountant. Experience proved the need to establish certain whom they shall save… The new professionals gain legal
standards of expertise, and these, established by self- endorsement for creating the need that, by law, they alone
regulatory bodies, enhanced the quality of practitioners to the will be allowed to serve” (Ibid. 1977). However, the most
benefit of their clients, the public (Younger 1976). Even most significant backlash against the professions in modern times
critics of the professions agree that it is necessary to limit undoubtedly came from Margaret Thatcher.
admission to the professions by setting certain standards of
character and competence. Thatcher’s attacks on the professions
The three Thatcher governments are essential to
Backlash? understanding the modern evolution of the structure of
The perceived self-interest of the professions is at the root British professions. Thatcher’s governments were devastating
of its historical and (some might say) current crises. Criticisms for the professions – the first two terms for the public sector
of professional self-interest hinge on: the drive to monopoly, professions, eg medicine and teaching, and the third term for
contempt for the free market, setting of own fees or salaries the legal profession in particular (Burrage 2007). The
and conditions for service, the exclusivity of an “old boy” Thatcher governments challenged the legal monopolies of
network, and a fundamental conservatism that predicates the professions, arguing that the professions should be
unwillingness to reform (Perkin 2002; Burrage 2007). The required to justify any claims for immunity from legislation
National Audit Office (NAO) recently identified the public dealing with monopolies (whereas before, the onus of proof
concern that undeserving managers and shareholders, was reversed). Where past administrations had avoided
particularly in private sector professions, will take advantage confrontation with the professions, the Thatcher governments
of regulatory structures to enrich themselves to levels challenged them head on with proposals for ending restrictive
considered obscene by the public. This has been perfectly practices and strengthening the public regulation of
illustrated by the intense debate over whether bonuses should professional bodies (Klein and Day 1996).
be paid to bankers following the financial crisis in 2008.
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Thatcher’s crusade against professional self-regulation and The rise of the regulatory state
later cuts in funding for public sector professions, proved that The 1980s was characterized by the retreat of the state (Cook
despite being Conservative in name, her political programmes and Stevenson 1996) as privatisation changed corporate
were some of the most radical the country had ever seen markets and government-business relations in the UK (Harris
(Burrage 2007). Much of the intellectual theory behind 1999). A new style of politics has emerged, characterized by
Thatcher’s policies came from Milton Friedman, an advocate the steady rise of legislation and regulation in Western
not only of monetarism but also of breaking the legal societies (see, for example, Majone 1994). New issues take
monopoly of the medical and other professions. In his view, precedence on a legislative agenda moulded by regulating the
one should pursue the logic of the free market wherever it operations of businesses, rather than government involvement
may lead, regardless of what it might mean for established via direct ownership of parts of the economy (Ibid.). The
institutions (Klein and Day 1996). In Thatcher’s mind too, economic reforms ushered in by Thatcher, perhaps once
professionals should be competing for customers (rather than deemed radically Conservative are now taken as the rule. As
clients or patients) in the free market. Thatcher’s position held Peter Mandelson famously claimed: “we are all Thatcherites
that what the professions actually enjoyed was their high now” (10 June 2002, in an interview with The Times).5
status; their self-regulation and ethical standards were
nonsensical pretences (Burrage 2007). Shifts in professional regulatory structures have taken place
within the broader context of a general political shift from
Despite her success in breaking the trade unions, Thatcher’s interventionist to regulatory modes of governance within the
attacks did not result in changing the structure of professional European Union. The rise of the ‘regulatory state’ in Europe
bodies. She was, however, responsible for breaking the has followed two key trends: 1) the decline of ‘positive’ (or
traditional political deference to the professions. Her general Keynesian/Welfare) state tools of stabilisation and
tactic has not been changed in subsequent decades, despite redistribution (with the highly significant exception of the state
changes in government. In fact, most legislation affecting response to the global financial crisis 2008),6 and 2) the
professional structures of regulation has been passed in the European Commission’s expansionist role through the use of
past decade, under New Labour governments.4 policy content given the lack of budgetary tools7 (Majone 1997).
Because of the reduced role of the interventionist state, we
have seen a corresponding increase in the role of the regulatory
state; in short, ‘rule making is replacing taxing and spending’
(Ibid.). An apparent paradox emerges, as ‘deregulation’ – eg
privatisation and devolved powers – is characterised by
‘re-regulation’ – eg price regulation and competition law.
5 Mandelson’s full remark was: “Globalisation punishes hard any country
that tries to run its economy by ignoring the realities of the market or
prudent public finances. In this strictly narrow sense, and in the urgent
need to remove rigidities and incorporate flexibility in capital, product,
and labour markets, we are all Thatcherites now” (Ibid.). The current
economic downturn and part nationalisation of the banks has caused
4 Although, government action in the 1980s and 1990s did liberalise certain
some to revise this position: ‘we are all socialists now’.
professions, particularly the legal services: legislative changes ended
solicitors’ monopoly on the provision of conveyancing services with the 6 The social democratic consensus about the role of the positive
Administration of Justice Act 1985, permitted authorised practitioners to state began to crumble in the 1970s when the combination of
undertake certain conveyancing functions in relation to land transactions, unemployment and rising rates of inflation could not be explained within
and brought an end to barristers’ monopoly over advocacy in higher Keynesian models (Majone 1997).
courts and solicitors’ monopoly over litigation by allowing both existing
and new professional bodies to apply for such rights, both with The 7 Roughly one-fifth of regulation now comes from the EU, and one-third
Courts and Legal Services Act 1990 (Collins 2006). when national discretion is included (Healey 2006).
122.3 Regulated self-regulation The government was called to address those restrictions
originating in statute; eg to remove the exclusion of
Regulatory structures are becoming more and more professional rules from the Chapter I prohibition which
blurred in today’s global, fragmented society. In the past existed at the time. The majority of restrictions, however,
concrete self-regulation has been a defining characteristic were found to originate with self-regulatory organisations
of a profession; now regulation is referred to in “layers” (SROs), who were called upon to either remove or justify
and degrees (Kaye 2006). One speaks of a “regulatory them.8 Professional bodies were given twelve months to do
landscape” involving not only actors such as state institutions so, with the OFT threatening to use competition enforcement
(eg ministries, departments, agencies, supra-national bodies powers if rules appearing to infringe UK competition law were
such as the EU, international bodies such as the WTO) not addressed.
and non-state institutions (eg firms, committees, associations,
and networks) but also economic (eg the market) and social Many of the OFT’s identified restrictions were addressed
conditions (eg norms, cognitive frames, technologies). by professional bodies, such as restrictions on comparative
advertising and restrictions on direct access to the
Regulation can take many forms and can be done via various professional. The OFT also found the professions’ arguments
instruments and techniques, including but not limited to rules on behalf of certain other restrictions persuasive. However,
(national or international), monitoring, sanctioning, trust, the some significant restrictions remained unaddressed. This was
interaction of rational actors in the market, or the structuring the key motivation for the government’s independent reviews
of social forces (Black 2002). These new processes of of regulatory reform in specific professions (for example, the
regulation have been termed “regulated self-regulation” Smith Reports 2002-2005 for the medical profession, the
(Kaye 2006), or “meta-regulation” (Scott 2004), both of Clementi Report 2004 for legal professionals, and the Morris
which refer to the “decentred” understanding of regulation Report 2005 for actuaries), as well as professions taking action
deemed necessary in the 21st century (Black 2002). themselves to pre-empt similar reviews (such as the Carsberg
Report 2005 for surveyors). As Phillip Collins, Chairman of
How has this process developed in Britain? Particularly in the OFT, explains:
the past decade, the paradigm of professional self-regulation
has been called into question with significant reforming “The OFT’s experience has been that
pressures. The main impetus for British government’s recent
reforms has been the Office of Fair Trading’s (OFT) 2001
the professions, when confronted with
report, Competition in the Professions. The basis of the well articulated arguments, have often
report was a consultation exercise that allowed 93 responded to the plausible threat of
professional bodies across a whole sector to identify possible
restrictions on competition. The report identified restrictions
enforcement by amending their rules
arising from law, professional rules, or other sources, and as requested.”
challenged those responsible to remove the restrictions
(Collins 2006, footnote 31 corresponding to section 4.7).
unless they could be clearly identified as benefiting customers.
8 “Where restrictions on competition exist, or are proposed, in
relation to a profession, the onus should be on the defenders or
the proponents (eg the Government in the case of some new
form of regulation) to show why the restrictions are essential
and proportionate to achieve their principal purpose, such as
the protection of the consumers, while not unduly restricting competition.
Where the professions maintain self-regulatory powers, competition
agencies can seek to ensure that such powers are subject to independent
oversight by influencing Government decisions on the regulatory
framework” (Collins 2006; 8.5).
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Perhaps the most visible of the British reforms are the 2.4 Case study: the legal professions
government-imposed new regulatory models of “front-line
regulators.” Front-line regulators are accountable to a new tier The legal professions are an interesting case study with regards
of sectoral “meso-regulators” across key professional to regulation for two reasons: 1) the review of legal services’
industries such as law, accounting, and healthcare (Kaye 2006). regulatory structures has affected multiple professional bodies,
These “meso-regulators,” eg the Council for Healthcare and these entities have responded differently; and 2) law and
Regulatory Excellence (CHRE), the Financial Reporting regulation have a complex relationship, being intimately bound up
Council (FRC), and the Legal Services Board (LSB), answer to with one another. As Scott states, “If regulation can be conceived
the government rather than to the regulated profession. They of as the processes through which conduct is sought to be
are charged with providing the sustained oversight to the controlled through systematic oversight by reference to rules then,
front-line regulators which central government agencies lack with many regimes, law supplies both the substantive rules and
the specialization to offer. Such bodies have been designed the procedural rules governing monitoring and enforcement”
expressly to address concerns about traditional regulators, (Ibid. 2004).
namely that self-regulatory bodies have been more responsive
to practitioners’ concerns than those of the general public. The legal professions have been under increased scrutiny since
The specific regulatory functions of the new tier of “meso- the Thatcher governments, with enquiries coming to a head in a
regulators” remain ambiguous. One of the most important government-sponsored independent review in 2004. The review,
powers to emerge has been the ability to question front-line led by Sir David Clementi, considered what regulatory framework
regulators’ disciplinary decisions (Kaye 2006). would best promote competition, innovation and the public and
consumer interest in legal services.
The legal professions were considered by many to be one of
the last bastions of professional self-regulation (Kaye 2005).
Leading up to the Clementi review, the Department for
Constitutional Affairs (DCA) argued that the sector was
“one of the last examples of a self-regulatory system in which
primary accountability is to the regulated providers through
their trade associations rather than the public” (“Government
Conclusions…” 2003).
14The Clementi review concluded that the legal professions’ In response to the Clementi review, and in anticipation of the
regulatory systems were flawed as a result of: the governance changes required, both the Law Society and the Bar Council have
structures of the main front-line bodies being inappropriate for ring-fenced their regulatory and representative functions. In 2006,
the regulatory task they faced; the over-complex and inconsistent the Bar Council separated its regulatory function with the creation
system of oversight regulatory arrangements for existing front-line of the Bar Standards Board (BSB). This Board has entirely
regulatory bodies; there being no clear objectives and principles separate membership from the Bar Council, and a lay chair.
which underlie this regulatory system; and, the system not having The BSB has final say on all changes to the Code of Conduct and
sufficient regard to consumers (Collins 2006). other regulatory processes, including consumer complaints, which
are handled by the Complaints Committee and overseen by the
The main recommendations of the report were accepted by the independent Complaints Commissioner.
government and set forth in the Legal Services Bill, which received
Royal Assent on 30 October 2007. The Legal Services Act (LSA) The Law Society also separated its regulatory function after
provides for a single external oversight regulator in legal services Clementi, establishing the independent Solicitors Regulation
called the Legal Services Board (LSB) to provide consistent Authority (SRA) in January 2007 (previously called the Law Society
regulation of professional bodies such as the Law Society and the Regulation Board). The SRA is composed of all non-Council
Bar Council. The LSB may be considered a meso-regulator, along members, with eight solicitor and seven lay members, and a
the lines of the FRC or the CHRE. solicitor Chair. The SRA handles all regulatory functions, including
setting the standards for qualifying as a solicitor, drafting rules of
The Act also requires professional bodies to make governance professional conduct, administering the roll of solicitors, and
arrangements separating their regulatory and representative investigating (non-consumer) concerns about solicitors’ standards
functions. The ring-fenced regulatory bodies will retain day-to-day of practice.
regulatory functions, but consumer complaints will be delegated
to a single independent body, to be called the Office for Legal
Complaints (OLC). Finally, the LSA lifts restrictions on alternative
business structures that could allow different types of lawyers
and non-lawyers managing and owning legal practices in order to
enable them to adapt business structures to meet consumer needs
(Collins 2006).
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