BRITISH PROFESSIONS TODAY:
THE STATE OF THE SECTOR
www.spada.co.uk
Table of contents >>
1 Introduction
1.1 What is a profession?
1.2 History of the professions
1.3 Declining public perceptions
1
3
3
5
2 Changing regulatory structures
2.1 Why regulate?
2.2 Historical development
2.3 Regulated self-regulation
2.4 Case study: the legal professions
8
9
11
13
14
3 The professional economy
3.1 Output
3.2 Business creation
3.3 Productivity
3.4 Balance of payments and trade
3.5 Employment
3.6 UK professions in Europe
17
19
20
21
22
23
23
4 Social and political contributions
4.1 Social mobility
4.2 Political consultation
4.3 Case study: RICS and Home
Information Packs (HIPs)
24
25
27
5 Conclusion
5.1 Summary of findings
5.2 Vision for the future
32
33
35
References
36
Appendices
1. Lord Benson’s criteria for the
professions
2. Personal interviews
38
38
Tables, Lists and Charts
Percentage of total UK output
(real UK GDP) by sector
VAT registrations and deregistrations
as a percentage of stock
Output per employed job
by sector (£000s, current prices)
2006 balance of payments,
other business services (£ million)
2006 balance of payments,
trade in services (£ million)
Percentage of total UK employment
by sector
Professional influence in official
parliamentary proceedings
39
19
20
21
22
22
23
29
30
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Foreword >>
This research by Spada was prompted by the informal
collaboration of a working group of professional membership
bodies, which gathered in the interest of the public good to
encourage debate about the role of the professions in society.
The group, which included the Law Society and the Royal
Institution of Chartered Surveyors (RICS), the Chartered
Institute of Management Accountants (CIMA), the Bar
Council, and the Institute of Chartered Accountants in
England and Wales, shared concerns about declining public
esteem for the professions, the associated disadvantage in the
recruitment of young talent, and the sometimes damaging lack
of government consultation on issues of relevant technical
expertise. As a way of grounding their discussions, and in
order to gain an overall snapshot of the professions in the
UK, the group commissioned Spada to research the history
of British professions and their current import to our national
economy, political life and civil society.
As we undertook this research, however, we found that the
report occupied a unique place within the extant sociological,
political, and economic literature on the professions.
Currently, no other document brings together a summary of
the British professions’ history and structures, their various
roles and contributions to society, and a vision for the future.
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
set forth a compact overview of the value and scope of
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
transformation, is a fascinating one. Despite their obvious
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
Hitherto, most professions have tended to think narrowly of
their own discipline and their own individual roles in public life.
Our research suggests that there may indeed be a place for a
united, clear and powerful professional voice in our public life,
but only if the professions can first recognise the extent of,
and limits to, their own latent power in combination. In this
latter respect, we hope the research starts the process of
building up ‘self-knowledge’.
How do we sustain our prosperity and our competitiveness
as a nation? How do we achieve an appropriately skilled
workforce, and a more meritorious civil society? How can
politicians originate better policies and better legislation? Who
will guarantee fair play in the market place? Who will set the
moral tone in business and society (so that we become more
trust- and principles-based and less fettered by over-regulation
and legislation)? How can complex knowledge businesses
learn from one another? These are some of the fundamental
questions that the professions might be well placed to address
with a collective effort.
Finally, the Spada team would like to take this opportunity to
thank all those who have given so generously of their time to
furnish many of the insights that have gone into this document.
Gavin Ingham Brooke
Managing Director, Spada Limited
Ana Catalano
Research Consultant, Spada Limited
i
Executive summary >>
Professionals in the UK form part of the backbone of the
services-based economy, play key roles in the political process,
and, perhaps most importantly, provide vital services in our
day-to-day lives. Yet, the professions have come under attack
from dual fronts: from government, which often fails to
consider professional expertise in relevant policy areas; and
from the general public, which has come to view professionals
suspiciously in an era of declining deference to authority. How
has this ambivalent state of affairs come about, and why do
the professions continue to matter, despite such criticisms,
now more than ever?
British Professions Today: The State of the Sector
represents a first attempt to set forth a condensed overview
of the value and scope of British professions – historical,
regulatory, economic, social and political. The Law Society,
the Royal Institution of Chartered Surveyors (RICS), and the
Chartered Institute of Management Accountants (CIMA)
have undertaken this research for the benefit of the public
and publish the findings to provide an open forum for
further discussion of these issues.
There is no single, agreed upon definition of ‘profession,’
but for the purposes of this report we follow Sir Alan
Langlands’ working definition: those occupations “where a
first degree followed by a period of further study or
professional training is the normal entry route and where
there is a professional body overseeing standards of entry
to the profession” (Langlands 2005). However, it should
be recognised that entry to a professional qualification may
initially be at a lower level than a first degree, although the
final output will be commensurate with a period of further
study and training beyond the level of a first degree.
Our data has been sourced from the Office of National
Statistics (ONS) and the Sector Skills Development Agency
(SSDA) as of July 2008. For a full explanation of data sources
and disclaimer please see page 18.
ii
Key Facts
> Professional structures have evolved from the social clubs
and guilds of old to the institutions of today via a process
of gradual establishment and by entering into regulatory
bargain with the state.
> Whilst professions have gained societal importance with
the rise of the information age, they have simultaneously
experienced some decline in public esteem.
> The perceived self-interest of the professions has brought
about significant changes in regulatory structures as the
traditional model of self-regulation is shifting to one of
‘regulated self-regulation.’
> Professions as a group are understudied: an industrial
category of analysis for the professional sector does not
yet exist, and thus truly accurate and comprehensive
statistics on the economic contributions of professional
occupations cannot be measured and compiled.
> Professional services as represented in the category SIC 74
(see page 18 for an explanation) account for the largest
single share of UK output (in UK real GDP), contributing
8% of the total.
> Professional services continue to expand at an impressive
rate and have been forecast to grow 3.4% average
annually from 2004 to 2014 compared to 2.4% average
annual growth forecast for the whole economy in the
same period.
> Professional services as represented by SIC 74 account for
£15,849 million of British trade in services, or over half of
the total £29,194 million (balance of accounts, as credits
less debits), helping to offset the growing negative balance
of trade in goods.
> The professions represent the largest single category
of employment in the UK, with 11.5% of total UK
employment.
> UK professionals were the largest contributor to the
EU27’s professional sector in 2004, with EUR 203.5 billion
of value added, generating 27.5% of the EU27’s sectoral
value added and employing 19.5% of its workforce.
> The professions have played a big role in the development
of meritocracy because of their emphasis on knowledgebased skills rather than social class.
> The professions are a potential source of ethical role
models via promulgation of professional standards, ethics
and morality in business, government, and civil society.
> Policy on sophisticated technical skills in the UK is often
legislated without appropriate professional expertise (eg
the case of HIPs) to real consumer and public detriment.
> On average, top professional service firms (eg KPMG)
achieve far greater coverage in parliamentary debate
than their fee earners’ professional membership bodies
(eg the ICAEW).
Recommendations
> The legacy of British professions is formidable,
but should not be taken for granted in light of the
threats posed by the evolution of consumerist
values, instant gratification, declining client loyalty,
increasing media scrutiny, and increasing regulation.
> New methodologies and metrics for analysing the
professions should be formulated, as well as
greater transparency and consistency in reporting,
in order for the full extent of professionals’
contributions to society to be brought to light.
> Significant benefit – for the public interest,
government, and the professions themselves
– may come from the professions working
together and speaking with the authority of a
single voice to government and the general public.
> The problems in the banking sector exposed
by the financial crisis in 2008 illustrate all too
clearly the need for professional standards specific
to that sector, including rigorous qualifications,
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
for professional standards in land,
property and construction. With
over 100,000 property professionals
working in the major established and
emerging economies across the
globe, RICS is the mark of property
professionalism worldwide.
RICS is an independent professional
body originally established in the
UK by Royal Charter. Since 1868,
RICS has been committed to setting
and upholding the highest standards
of excellence and integrity – providing
impartial, authoritative advice on
key issues affecting businesses
and society.
For more information please visit
www.rics.org
The Law Society is the professional
membership body which represents
solicitors in England and Wales. The
Law Society was founded in 1825,
after several prominent attorneys
met to call for the formation of a law
institution to raise the reputation of
the profession by setting standards
and ensuring good practice.
Today, The Law Society counts as
its members nearly 135,000 solicitors
on the Roll and is a major player on
the international legal stage. The
Law Society aims to equip the whole
profession, from sole practitioners
to high street and City firms, to meet
the challenges and opportunities ahead
and provide the best possible services
to the public.
For more information please visit
www.lawsociety.org.uk
iv
The Chartered Institute of Management
Accountants, founded in 1919, is the
world’s largest professional body of
management accountants, with 171,000
members and students operating in
161 countries. CIMA is responsible
for the education and training of
management accountants who work in
industry, commerce, not-for-profit and
public sector organisations.
Working closely with employers, CIMA
offers a globally recognised management
accounting qualification, sponsors
leading-edge research, and supports its
members through professional guidance
and development. CIMA is committed
to upholding the highest ethical and
professional standards of members and
students, and to maintaining public
confidence in management accountancy.
For more information please visit
www.cimaglobal.com
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
services-based economy, play key roles in the political process,
and, perhaps most importantly, provide vital services in our
day-to-day lives. Professions are involved in every aspect
of human life: birth, survival, physical and emotional health,
dispute resolution and law-based social order, finance and
credit information, educational attainment and socialisation,
physical constructs and the built environment, military
engagement, peace-keeping and security, entertainment and
leisure, religion and our negotiations with the next world
(Olgiati et al. 1998).
Methodology
Yet, the professions have come under attack from dual fronts:
from government, which often fails to consider professional
expertise in relevant policy areas; and from the general public,
which has come to view professionals suspiciously in an era of
declining deference to authority. How has this ambivalent state
of affairs come about, and why do the professions continue to
matter despite such criticisms, now more than ever?
We would like to point out certain limitations of
the study and welcome comments and criticism.
If the study is to be taken seriously, it must lead
to follow-up research and discussion. The first
constraint on the research project is its vast scope.
The approach adopted favours a broad analysis
of trends across the professions in historical and
comparative context over a narrower, in-depth
study of just one or two professions. Due to the
inevitable lack of completeness, particularly the
absence of quantitative measures of analysis,
this report cannot claim to be definitive. Instead,
it offers a critical synthesis of the literature
and statistics available to date, supplemented by
original quantitative and qualitative research where
this has been possible.
The aim of British Professions Today: The State of the
Sector is to establish a set of core statistics and key
information about the role of professions in the UK, within
the context of the broader political, economic, social and
technological landscape. It is our hope that this report will
provide the substance to develop an open forum of debate
on the current roles and future of UK professions on
multiple levels, from the professional community through
to the wider public.
2
A number of methodologies were employed to
prepare this report: desk research sourced from
secondary literature, web research, original
quantitative and qualitative research, and a series
of in-depth interviews with key members of
professional bodies. Please see Appendix 2, p. 39,
for a list of the personal interviews that were
conducted for this research. All tables, charts and
graphs have been originated at Spada.
1.1 What is a profession?
There is no single definition of ‘profession’. For the purposes
of this report, we follow Sir Alan Langlands’ working
definition from his Gateways to the Professions report: those
occupations “where a first degree followed by a period of
further study or professional training is the normal entry route
and where there is a professional body overseeing standards
of entry to the profession” (Langlands 2005). However, not
all professions require an initial degree qualification, the
professional qualification itself providing at least an equivalent
level of achievement.
A more comprehensive study of the term reveals various
connotations. Meanings range from the narrowly defined
traditional professions of doctor, lawyer, and accountant
to the broadly defined usage as any occupation by which
someone earns a living. “Professional” now refers to
competency and efficiency in almost any field (eg the
professional footballer). The Oxford English Dictionary
(OED) defines professional occupation as, “an occupation
in which a professed knowledge of some subject, field, or
science is applied; a vocation or career, especially one that
involves prolonged training and a formal qualification.” In early
use, the OED specifies that the word applied specifically to
the professions of law, the Church, and medicine, sometimes
extending into the military profession.
One of the most thoughtful and comprehensive definitions
of “profession” is Lord Benson’s 1992 criteria for professional
bodies. Lord Benson stated that to be a professional is to
operate within certain principles, most of which ultimately
pertain to the public interest, which he went on to detail in
nine points (see Appendix 1, p. 38).
Indeed, it is the duty to serve the public interest which
distinguishes a profession from a representative body such
as a trade union. This attribute encompasses independent
(eg self-employed barristers), organisational (eg accountants
working in firms), and public sector professions (eg health
care professionals). Our research focuses on the private
sector, “liberal” professions. Though the report approaches
the professions as a generic group of occupations, it does
not attempt to draw a hard and fast line, or even count the
number of professions in the UK.1 Labelling is less important
than acknowledging the shared, professional characteristics
of certain occupations. Following Everett C. Hughes (1963),
professionalism is a process as well as a structure: “…in my
studies I passed from the false question ‘Is this occupation
a profession’ to the more fundamental one ‘what are
the circumstances in which people in an occupation
attempt to turn it into a profession and themselves into
professional people’?”
1.2 History of the professions
The professions can be considered an “articulation” of
the modern capitalist state (Johnson 1982), because the
opportunity for professions to emerge and thrive is made
possible by modern societies, where knowledge is a unified,
autonomous realm (Gellner 1988), and where free markets
in goods and services exist (Weber 1978). While some
professions, such as medicine and law, have long and rich
histories, in general the rise of the professions in Western
society is a relatively recent historical phenomenon. The
roots of most modern-day professions may be traced to
the nineteenth century or later, with most professions fully
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
more complex, resulting in greater power for established
professions as well as the growth of new professions.
Journalism, management consultancy, and public
administration are just a few of the many occupations
which have attained professional status in the twentieth
century (Ibid.).
The origins of many modern professional bodies are to be
found in social clubs, formed to provide a forum to exchange
ideas on a particular subject without any conscious intention
of becoming a regulatory institution. For example, RICS
counts as its antecedents the Surveyors Club (1792), the Land
Surveyors Club (1834), and the Surveyors’ Association (1864).
By 1868 surveyors in these and other clubs saw enough
identity of purpose to create the Institution of Surveyors, and
a Royal Charter was granted in 1881. The Law Society was
founded in 1825, after several prominent lawyers met to call
for the formation of a law institution to raise the reputation of
the profession by setting standards and ensuring good practice
(Sugarman 1994).
As professions became more established, with distinct sets
of interests, memberships, and bodies of knowledge, so they
began to seek monopoly and privilege. To attain this, they had
to enter into a special relationship with the state so as to
achieve a monopoly, or at least licensure (MacDonald 1995).
This agreement has come to be called the ‘regulative bargain’
with the state (Cooper et al. 1988). The political culture of a
society, which influences the style of this regulative bargain,
can be seen as crucial for the development of a profession.
4
As a “mixed economy” Britain falls somewhere in between
the extremes of the most capitalist or free-market oriented
states, eg the United States, and the state-controlled,
command economy of the former USSR (Perkin 1996).
In continental Europe, professions generally have been and
are mainly employed in the public sector, closely connected to
and controlled by state authorities (Torstendahl and Burrage
1990). The Anglo-American ‘ideal type,’ by contrast, stresses
the freedom of self-employed practitioners to control working
conditions (Collins 1990). These differences are also reflected
in the types of professionalisation; the Anglo-American type
focuses on “private government” within an occupation, whilst
the Continental type focuses on the political struggle for
control within an elite bureaucratic hierarchy (Ibid.).
So, the evolution of professional structures has not been a
static or isolated series of events. Professions have been,
and continue to function as, part of an important dialectical
movement within British society. Professionals play key roles
in reflecting and developing societal views, norms and
procedures. One of the most obvious manifestations of this
process is the standardised procedure of ‘precedent’ in English
common law. Common law can be contrasted with the more
rigorous, code-based civil law systems of continental Europe,
in which judicial precedents are considered persuasive as
opposed to binding. Professions have matured and evolved
whilst influencing the concurrent development of the British
system of government and constitution.
The unique role of trust in professional societies
Just as individuals have grown increasingly dependent on
professionals, so society as a whole has also become reliant
upon them. We depend on professionals to maintain our
health, handle our legal and financial affairs, protect our
political interests, and manage businesses that provide us
with employment and consumer goods (Jennings et al.
1987). People rely on the ethical integrity of professionals
in a way unprecedented in other occupations because the
services offered by a professional are characteristically
different from goods that are sold by a manufacturer,
merchant or retailer.
A professional provides intangible services, and the purchaser
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
cases, and doctors will inevitably lose patients. Strong
educational background and qualifications are thus necessary,
but trust, measured by outward appearance and manner
fitting the socially accepted standards of repute and
respectability, is often just as important (MacDonald 1995).
Professional bodies accordingly have a twin function in
assuring quality services to the public, as well as representing
their members in the regulative bargain with the state
(Cooper et al. 1988).
“As the world has grown more
specialized, countless such experts
have made themselves similarly
indispensable. Doctors, lawyers,
contractors, stockbrokers, auto
mechanics, mortgage brokers, financial
planners: they all enjoy a gigantic
informational advantage. And they
use that advantage to help you, the
person who hired them, get exactly
what you want for the best price.
Right?
It would be lovely to think so.
But experts are human, and humans
respond to incentives.”
(Levitt and Dubner 2005: 5)
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
5
Introduction continued >>
Part of the decay in public perceptions of the professions may
have been inevitable. Post-industrial values are characterised
by declining deference to authority, and political and religious
institutions have also suffered in this respect (Inglehart and
Baker 2000). The transition from an industrial society to a
knowledge society has brought about an unprecedented level
of wealth, meaning that people can move beyond thinking
about survival to thinking about their subjective well-being.
Values have shifted from an emphasis on physical and
economic well-being to individual freedom and self-expression
(amongst others).
This new focus on subjective well-being is combined
with unparalleled availability of information due to the
exponential growth of technology in the past quarter of a
century. Consequently, even as professionals grow in political,
economic and social significance, members of the public
are able to put their claims of status and expertise under
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.
Opinion poll data confirm the professions’ gradual erosion in
the public opinion. Trends from the UK Ipsos MORI ‘Opinion
of Professions’ survey chart a slow but sure fall in the
percentage of people who are very or fairly satisfied with
the way that accountants and lawyers do their jobs. Approval
of accountants fell from 61% in 1999 to 58% in 2004, while
approval of lawyers fell from 58% in 1999 to 54% in 2004
(Ipsos MORI 2006). Similarly, the US Harris Poll of Prestige
in Professions found that of the ten occupations at the
bottom of the American public’s regard, five of these come
from the professional world – journalists, bankers,
accountants, stockbrokers, and business executives.2 In the
past quarter of a century, the number of people who see
lawyers as having “very great” prestige has fallen some 14
points, from 36 to 22 %. Scientists have fallen 12 points from
66% to 54%, doctors have fallen nine points from 61% to
52%, and bankers have fallen seven points from 17% to 10%
(The Harris Poll 77, 2007).
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.
6
Because the professions can only exist on the fiduciary
principle (to the extent that they inspire public trust in their
services), a real or perceived lack of ethical standards should
be considered the most serious of threats. Nearly every
profession has been vilified at one time or another for
malpractice. Recently the corruption of corporate executives
from Enron and WorldCom caused a downward spiral in
public trust of professionals. Usually, such scandals are
perpetrated by the few, yet affect the reputations of many
more members within the profession, as well as the status
of the profession as a whole. The Edelman Trust Barometer
found that, after the 2002 US scandals, public trust in
‘business’ (a category which includes several professions)
fell to a low of 44% of those surveyed. Yet by 2007, trust
in business was back up to 53%, higher than media or
government. This growth in public trust likely was inspired
by strong economic growth, repercussions for executive
wrongdoing, and faith in the role businesses are playing in
solving societal and environmental problems (Deaver 2007).
More recent events, particularly the economic downturn,
will undoubtedly alter this yet again.
British Professions Today: The State of the Sector © Spada Limited 2009
The US business example provides compelling evidence that
even more than the high-quality and reliable provision of
services, professional ethics are paramount to maintaining the
public trust. In a speech to the Royal Society for the Arts’
‘Professional Values for the 21st Century’ project Professor
Harold Perkin commented: “Stripped of the deference due
to their ethics and trustworthiness, they [professionals] are
as vulnerable as redundant miners and steel workers”
(Ibid. 2002). Certainly, British governments from Thatcher
to Brown have failed to see a professional distinction, often
treating professions no differently from trade unions or
businesses: all as self-interested bodies competing in the
free market (Craig 2007). For example, speaking about
professional services in supply and demand metaphors,
Department of Constitutional Affairs Minister Bridget Prentice
commented: “I don’t see why consumers should not be able
to get legal services as easily as they can buy a tin of beans”
(quoted in The Telegraph, 18 October 2005).
Professional services cannot be provided like a tin of beans
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.
7
Changing 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
representation is crucial to professional identity.
Organisational structure is a key prerequisite
to any definition of ‘profession’: “An obvious,
politically-based definition, albeit of little
normative value, would be to accept as
professions whatever occupations have been
successful in achieving self-regulating status”
(Trebilcock 1976: 9). The traditional view holds
that were it not for the self-regulatory role of
professional bodies, which forces them to set
high standards and a degree of disinterestedness,
a profession would be no different than a trade
union. Yet, we find evidence suggesting that
regulatory structures are changing, and that selfregulation is now often measured in degrees. As
society becomes more fragmented, a “decentred”
understanding of regulation, considering the wide
range of different and often blurred regulatory
configurations diffused throughout society, may
become necessary.
2.1 Why regulate?
Correction of so-called ‘market failures’ emerges as the
most common answer to the question, “Why regulate?”
In economic terms market failures include: ‘information
asymmetry,’ ‘credence goods,’ and ‘externalities’:
> Information asymmetry refers to the disparity between
the information held by the service provider versus the
information held by the consumer. Information
asymmetry could lead to market failure where the former
has strong incentives to cut quality with a corresponding
reduction in price.
> Credence goods refers to the intangible nature of
professional services and the difficulty of ascertaining
quality before purchase. Consumers may not be able to
gauge the quality of the service that they have bought,
both due to information asymmetry and the often
ambiguous relationship between the quality of the service
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
9
Changing regulatory structures continued >>
Forms of regulation
Regulation of the professions can take many forms. Total
reliance on self-regulation frequently attracts suspicions of foul
play in terms of monopoly, protectionism and administered
markets (Trebilcock 1976). As Lieberman contends: “at first
blush, the claim to self-regulation is strange. We don’t ask
non-playing members of football teams to referee games
involving their teams” (Lieberman 1976). Professionals have
an incentive to impose restrictions upon themselves to
preserve quality standards, thus ensuring that the status and
reputation of their profession is upheld. However, it has often
been noted (most famously by Adam Smith) that an apparent
concern for the public interest may disguise an opportunity to
increase incomes by limiting competition.
Traditionally, a strong focus on ex ante self-regulation has
predominated, whereby the professional body itself sets
prescriptive rules about entry, standards of behaviour and
continuing education. This type of regulation is primarily
designed to prevent the risk of parties offering services which
they are not competent to carry out. Ex ante regulation can
have the effect of damaging competition, particularly inhibiting
the development of new forms of competition. This
argument holds that where professional interests diverge from
those of consumers, there is a risk that the professions will
disguise an opportunity to create monopoly rents for their
members by setting disproportionately stringent ex ante rules,
claiming that such rules are in the public interest (Collins
2006). If that were true, there might be a case for changing
the regulatory balance for the professions, putting more
emphasis on ex post regulation and external regulation.
In ex post regulation professionals are sanctioned for
breaching professional rules or service commitments. Ex post
regulation involves the proactive monitoring of quality
services, handling consumer complaints, punishing miscreants
and ensuring proper redress is available for inadequate
service. Because consumers may not be confident in the
profession’s impartial handling of complaints (amongst other
issues of perceived self-interest), ex post regulation might be
further complemented by external regulation.
The role of an external regulator may take many forms: the
threat of external regulation may be used to condition the
self-regulatory body’s behaviour; an external regulator may
set rules of how a self-regulatory body must function without
being directly involved; or, external and self-regulation may
work alongside each other so that there is a degree of
competition between them. Increased regulation by an
external body has the potential to improve the effectiveness
of both ex ante and ex post self-regulation.
Extensive direct government regulation of the professions is
equally open to scepticism both from the professions, who
have a longstanding pride in their autonomy, and from the
public, who question the government’s ability to regulate
large-scale and highly technical institutions effectively (Ibid.).3
The benefits of external regulation should be weighed against
those of self-regulation; namely, an understanding of the
market, potential flexibility, lower costs and efficiency, and the
absence of political interference (Collins 2006). Given the
unsatisfactory perceptions within both contexts of selfregulation 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).
10
2.2 Historical development
The current structures and governance of professional
bodies are largely a result of their historical development
and the impact of statutory regulation. The economic and
technological advances of the Industrial Revolution, and
consequently the rise in living standards and the growth
of governmental and corporate institutions, meant that
professional expertise was required more than ever before
(Perkin 2002). Professions in Great Britain and other countries
developed gradually from an unrestricted right to practise to
professional self-regulation in the public interest. In the early
19th century virtually no controls existed to restrain those
who called themselves a solicitor, a physician, or an
accountant. Experience proved the need to establish certain
standards of expertise, and these, established by selfregulatory bodies, enhanced the quality of practitioners to the
benefit of their clients, the public (Younger 1976). Even most
critics of the professions agree that it is necessary to limit
admission to the professions by setting certain standards of
character and competence.
Backlash?
The perceived self-interest of the professions is at the root
of its historical and (some might say) current crises. Criticisms
of professional self-interest hinge on: the drive to monopoly,
contempt for the free market, setting of own fees or salaries
and conditions for service, the exclusivity of an “old boy”
network, and a fundamental conservatism that predicates
unwillingness to reform (Perkin 2002; Burrage 2007). The
National Audit Office (NAO) recently identified the public
concern that undeserving managers and shareholders,
particularly in private sector professions, will take advantage
of regulatory structures to enrich themselves to levels
considered obscene by the public. This has been perfectly
illustrated by the intense debate over whether bonuses should
be paid to bankers following the financial crisis in 2008.
British Professions Today: The State of the Sector © Spada Limited 2009
In Britain and the United States the public sector professions
have often been seen as parasitic, a cost rather than a
contributor to society. The dichotomy between public and
private sector professions in Anglo-American society has
grown up around the neo-classical economic work of the likes
of F.A. Hayek and Milton Friedman, who argue that industry
creates the wealth that government (especially welfare)
squanders. Attacks have not been confined to the right; from
the left, the professions have been vilified as self-interested
elites who award themselves overly handsome perks (Titmuss
1960), or even create the problems they claim to solve (Illich
1973). The Russian academic Ivan Illich (in)famously made
perhaps the most extreme attack on the professions: “Like
Spanish Inquisitors they hold the mandate to hunt down those
whom they shall save… The new professionals gain legal
endorsement for creating the need that, by law, they alone
will be allowed to serve” (Ibid. 1977). However, the most
significant backlash against the professions in modern times
undoubtedly came from Margaret Thatcher.
Thatcher’s attacks on the professions
The three Thatcher governments are essential to
understanding the modern evolution of the structure of
British professions. Thatcher’s governments were devastating
for the professions – the first two terms for the public sector
professions, eg medicine and teaching, and the third term for
the legal profession in particular (Burrage 2007). The
Thatcher governments challenged the legal monopolies of
the professions, arguing that the professions should be
required to justify any claims for immunity from legislation
dealing with monopolies (whereas before, the onus of proof
was reversed). Where past administrations had avoided
confrontation with the professions, the Thatcher governments
challenged them head on with proposals for ending restrictive
practices and strengthening the public regulation of
professional bodies (Klein and Day 1996).
11
Changing regulatory structures continued >>
Thatcher’s crusade against professional self-regulation and
later cuts in funding for public sector professions, proved that
despite being Conservative in name, her political programmes
were some of the most radical the country had ever seen
(Burrage 2007). Much of the intellectual theory behind
Thatcher’s policies came from Milton Friedman, an advocate
not only of monetarism but also of breaking the legal
monopoly of the medical and other professions. In his view,
one should pursue the logic of the free market wherever it
may lead, regardless of what it might mean for established
institutions (Klein and Day 1996). In Thatcher’s mind too,
professionals should be competing for customers (rather than
clients or patients) in the free market. Thatcher’s position held
that what the professions actually enjoyed was their high
status; their self-regulation and ethical standards were
nonsensical pretences (Burrage 2007).
Despite her success in breaking the trade unions, Thatcher’s
attacks did not result in changing the structure of professional
bodies. She was, however, responsible for breaking the
traditional political deference to the professions. Her general
tactic has not been changed in subsequent decades, despite
changes in government. In fact, most legislation affecting
professional structures of regulation has been passed in the
past decade, under New Labour governments.4
4 Although, government action in the 1980s and 1990s did liberalise certain
professions, particularly the legal services: legislative changes ended
solicitors’ monopoly on the provision of conveyancing services with the
Administration of Justice Act 1985, permitted authorised practitioners to
undertake certain conveyancing functions in relation to land transactions,
and brought an end to barristers’ monopoly over advocacy in higher
courts and solicitors’ monopoly over litigation by allowing both existing
and new professional bodies to apply for such rights, both with The
Courts and Legal Services Act 1990 (Collins 2006).
12
The rise of the regulatory state
The 1980s was characterized by the retreat of the state (Cook
and Stevenson 1996) as privatisation changed corporate
markets and government-business relations in the UK (Harris
1999). A new style of politics has emerged, characterized by
the steady rise of legislation and regulation in Western
societies (see, for example, Majone 1994). New issues take
precedence on a legislative agenda moulded by regulating the
operations of businesses, rather than government involvement
via direct ownership of parts of the economy (Ibid.). The
economic reforms ushered in by Thatcher, perhaps once
deemed radically Conservative are now taken as the rule. As
Peter Mandelson famously claimed: “we are all Thatcherites
now” (10 June 2002, in an interview with The Times).5
Shifts in professional regulatory structures have taken place
within the broader context of a general political shift from
interventionist to regulatory modes of governance within the
European Union. The rise of the ‘regulatory state’ in Europe
has followed two key trends: 1) the decline of ‘positive’ (or
Keynesian/Welfare) state tools of stabilisation and
redistribution (with the highly significant exception of the state
response to the global financial crisis 2008),6 and 2) the
European Commission’s expansionist role through the use of
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
some to revise this position: ‘we are all socialists now’.
6 The social democratic consensus about the role of the positive
state began to crumble in the 1970s when the combination of
unemployment and rising rates of inflation could not be explained within
Keynesian models (Majone 1997).
7 Roughly one-fifth of regulation now comes from the EU, and one-third
when national discretion is included (Healey 2006).
2.3 Regulated self-regulation
Regulatory structures are becoming more and more
blurred in today’s global, fragmented society. In the past
concrete self-regulation has been a defining characteristic
of a profession; now regulation is referred to in “layers”
and degrees (Kaye 2006). One speaks of a “regulatory
landscape” involving not only actors such as state institutions
(eg ministries, departments, agencies, supra-national bodies
such as the EU, international bodies such as the WTO)
and non-state institutions (eg firms, committees, associations,
and networks) but also economic (eg the market) and social
conditions (eg norms, cognitive frames, technologies).
Regulation can take many forms and can be done via various
instruments and techniques, including but not limited to rules
(national or international), monitoring, sanctioning, trust, the
interaction of rational actors in the market, or the structuring
of social forces (Black 2002). These new processes of
regulation have been termed “regulated self-regulation”
(Kaye 2006), or “meta-regulation” (Scott 2004), both of
which refer to the “decentred” understanding of regulation
deemed necessary in the 21st century (Black 2002).
How has this process developed in Britain? Particularly in
the past decade, the paradigm of professional self-regulation
has been called into question with significant reforming
pressures. The main impetus for British government’s recent
reforms has been the Office of Fair Trading’s (OFT) 2001
report, Competition in the Professions. The basis of the
report was a consultation exercise that allowed 93
professional bodies across a whole sector to identify possible
restrictions on competition. The report identified restrictions
arising from law, professional rules, or other sources, and
challenged those responsible to remove the restrictions
unless they could be clearly identified as benefiting customers.
The government was called to address those restrictions
originating in statute; eg to remove the exclusion of
professional rules from the Chapter I prohibition which
existed at the time. The majority of restrictions, however,
were found to originate with self-regulatory organisations
(SROs), who were called upon to either remove or justify
them.8 Professional bodies were given twelve months to do
so, with the OFT threatening to use competition enforcement
powers if rules appearing to infringe UK competition law were
not addressed.
Many of the OFT’s identified restrictions were addressed
by professional bodies, such as restrictions on comparative
advertising and restrictions on direct access to the
professional. The OFT also found the professions’ arguments
on behalf of certain other restrictions persuasive. However,
some significant restrictions remained unaddressed. This was
the key motivation for the government’s independent reviews
of regulatory reform in specific professions (for example, the
Smith Reports 2002-2005 for the medical profession, the
Clementi Report 2004 for legal professionals, and the Morris
Report 2005 for actuaries), as well as professions taking action
themselves to pre-empt similar reviews (such as the Carsberg
Report 2005 for surveyors). As Phillip Collins, Chairman of
the OFT, explains:
“The OFT’s experience has been that
the professions, when confronted with
well articulated arguments, have often
responded to the plausible threat of
enforcement by amending their rules
as requested.”
(Collins 2006, footnote 31 corresponding to section 4.7).
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).
British Professions Today: The State of the Sector © Spada Limited 2009
13
Changing regulatory structures continued >>
Perhaps the most visible of the British reforms are the
government-imposed new regulatory models of “front-line
regulators.” Front-line regulators are accountable to a new tier
of sectoral “meso-regulators” across key professional
industries such as law, accounting, and healthcare (Kaye 2006).
These “meso-regulators,” eg the Council for Healthcare
Regulatory Excellence (CHRE), the Financial Reporting
Council (FRC), and the Legal Services Board (LSB), answer to
the government rather than to the regulated profession. They
are charged with providing the sustained oversight to the
front-line regulators which central government agencies lack
the specialization to offer. Such bodies have been designed
expressly to address concerns about traditional regulators,
namely that self-regulatory bodies have been more responsive
to practitioners’ concerns than those of the general public.
The specific regulatory functions of the new tier of “mesoregulators” remain ambiguous. One of the most important
powers to emerge has been the ability to question front-line
regulators’ disciplinary decisions (Kaye 2006).
2.4 Case study: the legal professions
The legal professions are an interesting case study with regards
to regulation for two reasons: 1) the review of legal services’
regulatory structures has affected multiple professional bodies,
and these entities have responded differently; and 2) law and
regulation have a complex relationship, being intimately bound up
with one another. As Scott states, “If regulation can be conceived
of as the processes through which conduct is sought to be
controlled through systematic oversight by reference to rules then,
with many regimes, law supplies both the substantive rules and
the procedural rules governing monitoring and enforcement”
(Ibid. 2004).
The legal professions have been under increased scrutiny since
the Thatcher governments, with enquiries coming to a head in a
government-sponsored independent review in 2004. The review,
led by Sir David Clementi, considered what regulatory framework
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).
14
The Clementi review concluded that the legal professions’
regulatory systems were flawed as a result of: the governance
structures of the main front-line bodies being inappropriate for
the regulatory task they faced; the over-complex and inconsistent
system of oversight regulatory arrangements for existing front-line
regulatory bodies; there being no clear objectives and principles
which underlie this regulatory system; and, the system not having
sufficient regard to consumers (Collins 2006).
The main recommendations of the report were accepted by the
government and set forth in the Legal Services Bill, which received
Royal Assent on 30 October 2007. The Legal Services Act (LSA)
provides for a single external oversight regulator in legal services
called the Legal Services Board (LSB) to provide consistent
regulation of professional bodies such as the Law Society and the
Bar Council. The LSB may be considered a meso-regulator, along
the lines of the FRC or the CHRE.
The Act also requires professional bodies to make governance
arrangements separating their regulatory and representative
functions. The ring-fenced regulatory bodies will retain day-to-day
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).
British Professions Today: The State of the Sector © Spada Limited 2009
In response to the Clementi review, and in anticipation of the
changes required, both the Law Society and the Bar Council have
ring-fenced their regulatory and representative functions. In 2006,
the Bar Council separated its regulatory function with the creation
of the Bar Standards Board (BSB). This Board has entirely
separate membership from the Bar Council, and a lay chair.
The BSB has final say on all changes to the Code of Conduct and
other regulatory processes, including consumer complaints, which
are handled by the Complaints Committee and overseen by the
independent Complaints Commissioner.
The Law Society also separated its regulatory function after
Clementi, establishing the independent Solicitors Regulation
Authority (SRA) in January 2007 (previously called the Law Society
Regulation Board). The SRA is composed of all non-Council
members, with eight solicitor and seven lay members, and a
solicitor Chair. The SRA handles all regulatory functions, including
setting the standards for qualifying as a solicitor, drafting rules of
professional conduct, administering the roll of solicitors, and
investigating (non-consumer) concerns about solicitors’ standards
of practice.
15
Changing regulatory structures continued >>
Complaints about solicitors are handled by the independent Legal
Complaints Service (LCS), previously known as the Consumer
Complaints Service (CCS) and before that, the Office for
Supervision of Solicitors (OSS). The LCS Board consists of seven
lay and six solicitor members, with a lay Chair. Whilst the Bar
Standards Board hopes to retain its complaints handling function,
the Law Society recognises that the LCS is transitory and
handling of consumer complaints will pass to the Office of
Legal Complaints in a few years’ time (Chapman 2007).
The nature of the legal services professions’ regulatory structures
may be different from the other professions due to the relationship
between law and regulation. Law is written (by legal professionals)
and enforced by agencies and others on the ground. The question
of how law itself is regulated is necessarily complex. To what
extent is modern law autonomous, and what is the role of wider
social and economic activities in steering law? Much regulation is
oriented towards law (eg ‘command and control’), but regulation
can be achieved through other mechanisms. A delicate balance is
needed to ensure that law is neither dominant nor unimportant in
regulation (Scott 2004). Some contemporary scholars have
suggested that “regulated self-regulation” like the new structures
proposed by the LSA may provide a middle path which is also
able to accommodate the pluralism of many regulatory systems
(Parker et al. 2004).
Although many have faith in the proposed structures, criticisms
have already been raised about the Legal Services Board’s
potential regulatory power. One can only speculate about how well
the new system will function when the Act takes full effect in 2-3
years. The LSB is not intended to be a mega-regulator along the
lines of the Financial Services Authority (FSA). While the FSA
spends roughly £200 million per annum on regulatory activities,
the budget of the LSB is estimated at £4.5 million annually.
However, the events of 2008 suggest that the FSA’s big budget
has been no guarantee of its effectiveness as a regulator.
The LSB’s power lies in its leverage over the regulatory activities
of the professional bodies; yet, these will reduce their selfregulatory activities once the legislation is passed. The LSB will
be expected to develop its own regulatory expertise and offer the
“sustained and focused control” that central government cannot,
eg acting as an appellate mechanism for the fitness of practice
decisions of front-line regulators, or ordering a front-line regulator
to change its rules. The possibility of LSB intervention to change
a front-line regulator’s rules has been criticised with speculation
that it may encourage such regulators to leave tough decisions to
the LSB. A new tier of regulation may shift power, and regulatory
expectations, upward, without appropriate resources allocated to
make effective decisions (Kaye 2005).
The questions raised in the legal professions’ regulatory
development are applicable to any of the professional bodies
faced with expanding, decentred regulation. Professional bodies
face a trade-off: is alleviating the risk of market failures which
are inherent in the principles of self-regulation worth risking new
dangers of ineffective regulation due to blurred remits of
multiple oversight bodies and scattered resources? How far are
professional bodies content to rely upon the market to protect
consumer interests?
16
The professional economy >>
3
The professional economy >>
All things will be produced in superior
quantity and quality, and with greater
ease, when each man works at a single
occupation, in accordance with his
natural gifts, and at the right moment,
without meddling with anything else.
Plato, 427-347 BCE
How, and to what extent, do the professions
contribute to the growth of the British and
European economies?
In the absence of a clear operational definition
of the professional sector, we must rely upon
proxies (or substitutes) to measure the
professions’ contributions to the British economy.
No document or dataset currently exists that
accurately measures the true value of the
professional sector to the UK economy – by
Sir Alan Langlands’ definition of ‘profession’ or
any other. The fact that comprehensive statistics
on the professional economy are not available is
an important finding in and of itself.
Data disclaimer
We use the Standard Industrial Classification (SIC) 74, “Law,
accounting, architecture, and other business activities not
elsewhere classified,” as the best extant proxy for the
professional services sector.9 SIC 74 includes most of the
occupations generally considered “professional:” the legal
profession (including barristers, solicitors, and other legal
professionals), accountancy, tax consultancy, financial
management, general management consultancy, architecture,
surveying, urban planning, engineering, technical consulting,
advertising, market research, public relations, and labour
recruitment and provision of personnel.
However, SIC 74 also includes occupations that one would
not generally consider to be professional, many of which do
not have a specific public interest remit (eg investigation and
security activities, industrial cleaning, photographic activities,
and call centre activities). The classification also leaves out
many occupations that might be considered professional:
notably, real estate, financial services such as banks, insurance,
and fund management, and the public sector professions,
eg teaching and medicine.
9 The Standard Industrial Classification is identical to the EUROSTAT
System NACE at the four digit class level and the United Nations system
ISIC at the two digit Divisional level. The SIC was recently reviewed, and a
series of consultations resulted in a major revision (2007). Although
technically new classifications have been in effect as of 1 January 2008,
most statistical bodies have not yet made the change from the old SIC
(2003). Accordingly, all data used in this report refer to SIC 2003.
18
Our data has been sourced from the Office of National
Statistics (ONS), including the Pink Book 2007 and the Blue
Book 2007, and the Sector Skills Development Agency (SSDA)
data matrix, a comprehensive source of key labour market
data by sector, in July 2008.10 The SSDA matrix contains data
from the ONS (including the Labour Force Survey, Annual
Business Inquiry, Annual Survey of Hours and Earnings, and
the Inter-Departmental Business Registry) and employer skills
surveys from England, Wales, Northern Ireland and Scotland.
Data reliability has been maintained by adhering to the
guidance provided by the administrator or owner of the data
set used. The SSDA is not able to control or verify the
accuracy of the raw data used, therefore neither the SSDA
nor the authors of this report can give any warranty as to
the accuracy of the data and shall not be liable for any use of
the data.
Percentage of total UK output
(real UK GDP) by sector
9
8
7
6
5
4
7.7
6.3 6.3
3
5.9
5.3 5.4
5.0 5.1 5.1
2
3.8 3.9
3.2 3.3 3.3
2.4 2.4
1
1.7 1.8 1.8 1.9
0.7 0.7
0.4 0.6
3.1 Output
7.9
7.2
0
1.1
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
Source: IER 2006/SSDA Sector Skills Matrix 2008
*Professions in group “Law, accounting, architecture, and other business activities”
Output, the total value of goods and services produced, is
an important estimate of the whole economy’s welfare.
The professional sector accounts for the largest single share
of UK output (in UK real GDP), contributing 8% of total UK
output (IER 2006/ SSDA Sector Skills Matrix 2008).
The impact of recession notwithstanding, the sector is
predicted to have a comparatively high level of long-term
output growth. Professional services expanded at an
impressive annual rate of 6.1% per annum between 1994
and 2004. This growth is forecast to moderate to 3.4% per
annum in the forecast period 2004-2014. One can compare
this to the rate of output growth of the whole economy,
3.0% average annual increase in UK GDP over the 1994-2004
period, and forecast to grow at 2.4% per annum in
the 2004-2014 period (IER 2006/SSDA Sector Skills
Almanac 2007).
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
Mining and quarrying
Textiles and textile products
Wood, pulp and paper products
Furniture, jewellery, musical instruments, sports goods,
games and toys; recycling
Agriculture, hunting, forestry, fishing
Basic metals and fabricated metal products
Publishing, printing and reproduction of recorded media
Electricity, gas, water supply
Transport equipment
Food, drink and tobacco
Sale, maintenance and repair of motor vehicles; fuel retail
Machinery, electrical and optical equipment
Post and telecommunications
Computer and related activities
Hotels and restaurants
Coke, petrol, nuclear fuel, chemicals, rubber, plastics, glass,
ceramics and cement
Financial services
Wholesale trade
Transport
Community, social, personal service activities
Public admin and defence; compulsory social security
Education
Construction
Retail trade
Health and social work
Real estate, renting and research and development
Law, accounting, architecture and other business activities
10 Following the closure of the SSDA, the Sector Skills Matrix went offline in
July 2008. The SSDA has been replaced by the UK Commission for
Employment and Skills (UKCES). The UKCES will be developing a web
based Labour Market Information (LMI) tool in 2009. More information on
the UKCES’ LMI products and services will be available from the Research
section of its website (www.ukces.org.uk) in due course.
British Professions Today: The State of the Sector © Spada Limited 2009
19
The professional economy continued >>
3.2 Business creation
The number of new businesses registered each year indicates
the approximate rate of new business creation, a measure
of ‘entrepreneurialism,’ the state of business optimism, and
(inversely) barriers to market entry.
VAT registrations and deregistrations
as a percentage of stock
16
Deregulations
Registrations
14
12
Business creation has been relatively high in the professional
sector, with VAT registrations as a percentage of stock
exceeding deregistrations, indicating a marginal expansion in
total stock. Of the 371,235 registered professional businesses,
VAT registrations account for 11.1% of stock, while
deregistrations account for 7.8%. The stock of businesses is
the largest single block in the British economy (IDBR 2006/
SSDA Sector Skills Matrix 2008).
10
8
13.5
12.7
6
11.4
11.1
10.8
10.1 9.8
4
10 10
8.6
8.3
7.8
7.4
8.0
8.0
7.9
7.1
6.7
7.5
7.3
6.8
7.0
6.8
6.0
5.4
2
4.4
4.1
2.7
1.0
0
0.5
1
2
3
4
5
6
7
8
Source: IDBR 2006/SSDA Sector Skills Matrix 2008
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
20
9
10
11
Community, social, personal service activities
Health and social work
Education
Public admin and defence; compulsory social security
Law, accounting, architecture and other business activities
Real estate, renting and research and development
Financial services
Wholesale and retail trade
Transport, storage and communications
Hotels and restaurants
Construction
Electricity, gas, water supply
Mining and quarrying
Agriculture, hunting, forestry, fishing
Manufacturing
12
13
14
15
3.3 Productivity
Output per employed job by sector
(£000s, current prices)
Industry productivity is measured in terms of Gross Value
Added (GVA), the contribution to the economy of each
sector and an important measure in GDP estimation. The
link between GVA and GDP can be defined as: GVA + taxes
on products – subsidies on products = GDP. The source of
sustainable GVA in a sector is the willingness of customers to
pay substantially more for the value they perceive in a
company’s products and/or services than the company paid
for the goods and services it used in creating them.
Productivity in the sector is average for the economy, both
domestically and internationally. The professional sector’s
GVA per employed job is £38,000, compared to £33,000 for
the whole economy (ABI 2006/SSDA Sector Skills Matrix
2008). Productivity in the sector was projected to grow at an
average annual rate of 2% over the period 2004-2009, the
same rate as productivity in the whole economy is projected
to grow (IER 2006/SSDA Sector Skills Matrix 2008).
Indexes comparing the UK to the EU and the US find that
productivity per worker per hour is lower for the professions
in the UK than competitor nations. Sector productivity is 83%
of EA15 levels and 80% of US levels, measured in output
(GVA) per hour worked based on purchasing power parity
(Experian 2006, Groningen Growth and Development Centre,
60 Industry database).
Agriculture, hunting, forestry, fishing – 27
Manufacturing – 48
Community, social, personal service activities – 32
Health and social work – 14
Education – 2
Law, accounting, architecture and other business activities – 38
Real estate, renting, research and development – 39
Wholesale and retail trade – 32
Transport, storage and communications – 55
Hotels and restaurants – 16
Construction – 49
Electricity, gas, water supply – 187
Mining and quarrying – 362
Source: IER 2006/SSDA Sector Skills Matrix 2008
British Professions Today: The State of the Sector © Spada Limited 2009
21
The professional economy continued >>
3.4 Balance of payments and trade
2006 balance of payments,
trade in services (£ million)
The balance of payments and trade measures economic
transactions between UK residents and the rest of the world,
an important indicator in the broader systematic set of the
UK national accounts. The professional sector accounts for
£15,849 million of British trade in services, or over half of
the total £29,194 million (balance of accounts, as credits less
debits) (The Pink Book 2007).
25,000
22,575
20,000
15,849
15,000
10,000
Comparatively, trade in goods contributed -£83,631 million,
leaving the balance of total trade in goods and services at
-£54,437 million. The surplus on ‘invisible’ or services trade
has significantly offset trade in goods deficit for most of the
past decade.
5,000
3,831
2,565
290
0
1,974
1,285
129
604
-2722
-5,000
2006 balance of payments,
other business services (£ million)
-10,000
16,000
-15,000
-15,978
14,202
14,000
-20,000
12,000
Transportation
Travel
Communications
Construction
Insurance
Financial
Computer and information
Royalties and license fees
Other business
Personal, cultural and recreational
Government
10,000
8,000
6,000
4,000
3,119
2,553
2,380
2,092
2,000
1,384
936
778
794
166
0
1
2
3
4
5
6
7
8
9
10
22
1
2
3
4
5
6
7
Legal
Accounting
Business management and management consulting
Advertising and market research
Research and development
Architectural, engineering, and other technical services
Agricultural, mining and on-site processing
Services between affiliated enterprises
Other
Total miscellaneous business, professional,
and technical services
8
9
10
Source: The Pink Book 2007, Table 3.1: Trade in Services Summary Table (pp. 34; data from 2006)
*Professions in group “Other business”
3.5 Employment
A considerable portion of the professions’ contributions to
the UK economy is represented by the opportunities they
create for employment.
The professional sector is the largest employer in the
UK, with 11.5% of total employment (IER 2006/SSDA Sector
Skills Matrix 2008). Total employment stands at 3,465,000
(Ibid.). By comparison, the second largest employer is the
health and social work sector, making up 10.7% of total UK
employment (IER 2006/SSDA Sector Skills Matrix 2008).
The professions have been a growing industry with 2.5%
average annual past employment growth 1999-2004. The
workforce has been projected to grow at an average rate of
1.6% per annum 2004-2009, compared to workforce growth
of 0.4% over the whole economy. Strong employment
growth in the sector has been a trend across Europe, with
the professions boasting the highest annual average growth
of employment (4.0%) in services in the EU27 from 2002
to 2007 (Eurostat 2008).
Percentage of total UK employment
by sector
3.6 UK professions in Europe
14
12
10
8
6
11.5
10.4 10.7
4
8.1
6.2 6.5
6.9
Professions comprise 3.9 million enterprises in Europe,
together generating EUR 739.6 billion of value added and
employing 19.4 million persons in 2004 (Eurostat 2008).
The UK was by far the largest contributor to the EU27’s
professional sector in 2004, with EUR 203.5 billion of value
added. It generated 27.5% of the EU27’s sectoral value added
and employed 19.5% of its workforce. The UK is the most
professionally specialised Member State, with professions
contributing 21.1% of non-financial business economy
value added, compared with the EU27’s average of 14.5%
(Eurostat 2007).
5.1
2
3.9
0.2 0.4
0
1
2
3
4
5
6
7
8
9
10
11
12
13
1
0.6 0.6 0.8
4.2 4.3
2.6
2.0 2.1 2.3
1.6 1.8 1.8
1.2 1.3 1.4 1.5
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
Mining and quarrying
Electricity, gas, water supply
Textiles and textile products
Wood, pulp and paper products
Furniture, jewellery, musical
instruments, sports goods,
games and toys; recycling
Transport equipment
Publishing, printing and reproduction
of recorded media
Agriculture, hunting, forestry, fishing
Food, drink and tobacco
Basic metals and fabricated
metal products
Post and telecommunications
Computer and related activities
Coke, petrol, nuclear fuel,
chemicals, rubber, plastics, glass,
ceramics and cement
14
15
16
17
18
19
20
21
22
23
24
25
26
27
Sale, maintenance and repair
of motor vehicles; fuel retail
Machinery, electrical and optical
equipment
Real estate, renting and research
and development
Financial services
Wholesale trade
Transport
Public admin and defence;
compulsory social security
Community, social, personal
service activities
Hotels and restaurants
Construction
Education
Retail trade
Health and social work
Law, accounting, architecture
and other business activities
British Professions Today: The State of the Sector © Spada Limited 2009
23
Social and political contributions
4
Social and political contributions >>
To depend upon a profession is a less
odious form of slavery than to depend
upon a father.
Virginia Woolf, Three Guineas, 1938
The professions have played a big role in pushing
society to achieve a more meritocratic society,
where people are judged on skills rather than
social class. Because professionals are typically
amongst the most educated groups of society,
people and governments often look to them to set
standards. As trusted experts, professionals have
a unique opportunity to be highly influential in the
public sphere. Professions as a group help shape
ways of thinking about problems which fall within
their realm of technical expertise (Dingwall and
Lewis 1983). However, the political role of the
professions is a murky picture. They are either
seen as businesses or lobbyists, their commitment
to the public interest often mistrusted. In today’s
changing political environment, where public
opinion and the “spin” of media commentary are
more important than ever before, stable
democracy needs the technical expertise that
professions offer.
British Professions Today: The State of the Sector © Spada Limited 2009
4.1 Social mobility
Social mobility, considered by many to be a measure
of the extent of a society’s equality of economic and social
opportunity, has increased enormously since the rise of the
professional class. Professional societies have developed
differently across cultures, evolving in accordance with
different values, social norms, political cultures, and economic
resources. In Europe the professions arose along with the
bureaucratic and administrative apparatus of the state. In
England and America, conversely, the professions emerged
out of a competitive struggle for special legal privileges and
favourable market positions, rather than becoming appendices
of a centralised state (Jennings et al. 1987).
Despite such differences, all post-industrial nations have in
common some major trends that characterise professional
societies. Professional societies put most of their man- and
woman-power into services rather than agriculture and
manufacturing. The UK economy made this transition early,
and the economy continues to be dominated by service
provision. The latest statistics show that the services sector
continues to grow, with 80% of the workforce employed in
services-producing sectors, compared to 72% in 2000 (ONS
Labour Force Survey August 2008). Professional societies
raise living standards for all, not just for the few. The rise of
professional society has made the UK much wealthier as a
nation. GDP per head has almost trebled in real terms in
the last generation alone, from £6,960 in 1957 to £19,978
in 2006 (ONS Time Series Data).
25
Social and political contributions continued >>
In professional societies meritocracy is, at least in
theory, substituted for class as the basis of social structure.
Consequently, social mobility increases, and women are
incorporated into the workplace, achieving new levels of
liberty. Britain’s labour force has seen a marked increase in
the number of jobs performed by women since the rise of
professional society. Over the last two decades alone women
have closed a big gap: in 1981 men filled 3.2 million more jobs
than women, whereas now the numbers are almost equal,
with men filling 12.8 and women 12.7 million jobs (though
nearly half of women’s jobs are part time, and women are
still much more likely to do administrative or secretarial work
than men) (LFS 2002).
Government, too, expands to provide the universal benefits
of a welfare state. Government administration has grown
substantially over the past two decades, despite reducing the
number of direct employees (eg civil servants) (Hood et al.
1999). The provision of higher education is particularly
important in order to create human capital (Perkin 1996). In
the UK, greater access to higher education has been made
available largely by the upgrading of colleges and polytechnics
to university status (Perkin 2002).
Evidence suggests that whilst social mobility and access to
the professions is an ongoing concern, the professions have
a comparatively good record for setting clear, meritocratic
entry standards and working to help individuals from all
backgrounds reach them. Still, the connection between
professional societies and progress towards meritocracy is
under-studied, and a subject worthy of further research.
Today, the UK ranks near the bottom of a comparison of
social mobility in Europe and the US, with lower social
mobility than many advanced nations (save for the US)
(Blanden et al. 2005). Do professional skills and qualification
structures have the capacity to boost lagging social mobility?
Research which charts the evolution, and establishes variables
of causation, could measure the professions’ potential roles in
pushing society forward towards greater equality and social
justice in the future.
26
Gateways to the professions
The Labour government signalled its commitment to social
mobility through improved access to the professions with the
Gateways to the Professions initiative, which arose from
Sir Alan Langlands’ report 2005. The Langlands report
examined the potential impact of variable fees in terms of
access to the professions. Key issues facing access to the
professions were found to be: outdated, stereotypical
perceptions of the professions, accumulation of student debt,
length of study, and retention, particularly of women in those
professions which lack flexible or “family-friendly” work
practices (Ibid.).
The government accepted all of Sir Alan’s recommendations
and has taken action on a number of fronts, including the
creation of a “Gateways to the Professions Development
Fund.” The fund provided up to £6 million over three years
(up to March 2008) to support projects that tackle the full
range of issues and barriers faced by people seeking to enter
the professions through higher education. Individual
professions have also developed a range of their own
initiatives to breaking down barriers to their professions.
A collaborative forum of representatives from professional
bodies continues to meet to share and develop strategies
which will support access to the professions. The professions
must continue to work alongside current government
programmes and structures (particularly school systems), not
to mention ingrained systems of hierarchy and tradition, to
make access for all a reality.
Civil society
Given the decline in deference and shift in values over recent
years, those trusted professionals who can break through
citizens’ automatic scepticism or cynicism occupy a privileged
position in society. Scholars in the social capital tradition
consider trust to be a fundamental characteristic of effective
democracy (Putnam 1993). Though trust is in many ways an
intangible quality, people have clear and measurable opinions
about the trustworthiness of various occupations. If
democracy depends upon high levels of interpersonal trust, it
is perhaps worrying that trustworthiness is a quality citizens
find lacking in their legislators (Ipsos MORI 2007). The
comparative, albeit recently declining, trust endowed in
professionals suggests that society may welcome the
amplification of their advice and consultation to social and
political institutions. Professionals might build upon their
integral contributions to charitable, sporting and social clubs
– contributions which shore up civil society – to play a larger
political and social role, in collaboration with government, the
civil service, consumer groups, and the third sector.
Our research finds that professionals have an important role
in setting societal benchmarks, eg putting forth the initial test
cases which change legal precedents in common law. Although
influential people may come from a range of backgrounds, and
are not necessarily differentiated by age or gender or any
other demographic characteristics, what does differentiate
them, according to recent research, is: 1) being gregarious/
outgoing; 2) being part of a number of networks; and 3)
being well-read/having expertise (Duffy and Pierce 2007).
Professionals have expertise, a prerequisite to socio-political
influence, and (almost always) built-in networks of
professional colleagues and clients. Of course, not all
professionals will be, or want to be, socio-political influencers;
however, their status, knowledge, and networks make them
well placed to do so. In fact, they may even underestimate
their own influence. Additional research to quantify the
professions’ contributions to broader society and to measure
their collective leverage might further clarify the potential
scope of the professions’ future socio-political role.
British Professions Today: The State of the Sector © Spada Limited 2009
4.2 Political consultation
Radical academic Ivan Illich once categorised professions
as cartels which dominate modern society (Ibid. 1977). His
modern-day disciples might include the likes of Prem Sikka,
who claims that, “the aim of the International Accounting
Standards Board (IASB) is nothing less than global domination
and to make the rest in the image of the West, fit for major
corporations” (The Guardian 29 August 2007). Turning to the
other extreme, government often underestimates professional
expertise and influence. The fact that the ONS and other
official sources do not collect statistics on the professions
as a group suggests that the state has not recognised the
significance of the professional sector.
The reality of the professions’ political influence surely
lies somewhere in between. Professional bodies are key
institutions for post-industrial states founded on liberal
principles, providing an effective method of regulating
certain spheres of economic life without developing an
oppressive central bureaucracy. Just as professions are
(partially) regulated by government, vice versa, professions
have a role to play in moderating government. The professions
provide another “check and balance” on government,
with its tendency to centralise power and to produce
increasing quantities of legislation and regulation in an ad hoc,
reactive fashion.
Professional bodies have key roles to play in the political
consultation process. They also provide an important
counterweight to centralised government administration
through their systems of self-regulation. Without them, a
sophisticated law-based liberal society and late-stage economy
could not function. As Frits Bolkestein, EU Internal Market
Commissioner, states: “Economies only work if companies are
run efficiently and transparently. We have seen vividly what
happens if they are not: investment and jobs will be lost – and,
in the worst cases, of which there are too many, shareholders,
employees, creditors and the public are ripped off ” (quoted in
Gosschalk and Hyde 2003).
27
Social and political contributions continued >>
There is an essential difference separating the political goals of
a professional membership body from a professional firm. The
former has a public interest remit, evidenced by self-regulatory
functions to maintain quality standards, often via Royal Charter
membership, whilst the latter is a business, concerned
primarily with commercial interests. The public interest is the
top priority in professional bodies’ political consultation, even
over members’ (short-term) interests when the two conflict
(Craig 2007; McAdoo 2007; Labrey 2007; Hatcher 2007;
Chapman 2007). In fact, most professional bodies do not see
a conflict at all between the public interest and professional
members’ long-term interests because professionals must
maintain the public trust in order to survive.
Two types of policy consultation
The processes involved in political consultation vary according
to the issue. Broadly speaking, there are two types of policy
consultation: 1) responsive, when a professional body is called
to consult or advise the government on a relevant policy issue;
and 2) proactive, when a professional body goes to the
government with advice on a policy which may be on the
agenda sometime in the future. Professional bodies initiate
projects and influence governments, but more often
professions are responding to external demands for change,
which can be social, economic, and political.
The formal process of political consultation does not differ
greatly across the professions. It consists of monitoring
government, assessing the situation to evaluate which actions or
proposals merit responses in light of limited resources, advising
on how to argue the platform in terms of wider political
engagement, and facilitating the discussion between members
of the profession and the state (McAdoo 2007; Labrey 2007).
The role of the public affairs and policy teams of professional
bodies is to determine where and how their organisation can
participate in the debate, what the key platforms are for the
public interest, how to engage them, and marshalling
membership to do so. Members are typically willing and eager
to participate in the government consultation process, and do
so pro bono. Members, and firms, are likely to be willing to
provide their time and expertise free of charge because they
see the value in helping to shape public policy (Ibid.)
28
The informal process of political consultation occurs when a
professional body sees a gap or a problem which may not be
on the government’s agenda but should be (Craig 2007). This
form of communication and advice is non-traditional for most
professional bodies (Craig 2007; Hatcher 2007; McAdoo
2007; Labrey 2007; Chapman 2007). Still, most see significant
value in becoming more proactive in their approach. Forward
thinking allows professions to get involved with the agendasetting before ideas develop into (much more inflexible) policy
proposals (Chapman 2007).
Quantifying professional influence
Too often professional bodies are overlooked when it
comes to making complex, technical policy decisions relevant
to their fields of expertise. The case of Home Information
Packs (on page 30) is one instance in which consultation with
the relevant professional body might well have resulted in a
better-designed policy to achieve the government’s aims
of simplifying the property-buying process. One way of
evaluating the impact of professional bodies is to measure
the number of times professional bodies are mentioned in
parliamentary debate, committee hearings, written
statements and other official transcripts.11 This analysis does
not capture many facets of the consultation process, such as
informal meetings and behind-the-scenes counsel. Still, the
mention of a professional body in parliamentary debate is
one indication of political influence. The following chart
compares the average yearly number of references of four
professional bodies against the coverage of top professional
services firms in their respective sectors. The analysis also
compares coverage of the Confederation of British Industry
(CBI), Trades Union Congress (TUC) and other major
institutional bodies.
11 Hansard, the Official Report, is the printed transcript of parliamentary
debates. Hansard transcripts cover proceedings in the Commons
Chamber, Westminster Hall and Standing Committees. Lords Hansard
covers proceedings in the Lords Chamber and its Grand Committees.
Both contain Written Ministerial Statements and Written Answers
(“Hansard” 2007).
All political consultation provided by professional bodies is
pro bono. Another way to begin quantifying the professions’
political consultative efforts may be to look at the hours of
the people directly involved, the internal public affairs and
policy teams. How many are on the teams, what is the scope
of the budgets they work with, and how much member time
do they co-opt? Beyond time donated, what is the value
of the content provided, the expert advice? In many cases,
these records are not kept. Professions might pursue the
approach of valuing their contributions to society – such a
methodology would allow them to evaluate costs and benefits,
measure performance and demonstrate accountability
and transparency.
Professional influcence in official
parliamentary proceedings
180
Accountancy
Property
Legal
Other bodies
160
Yearly average of Hansard mentions
The period of analysis is, for most bodies, the past seven
years, 2000 – 2007.12 The analysis was carried out using the
Hansard search engine available via the website www.
theyworkforyou.com. This site conducts a search for words
within the text of House of Commons debates, Written
Answers, Westminster Hall debates, Written Ministerial
Statements, Lords debates, and Northern Ireland Assembly
debates. The chart shows that some organisations are more
successful at achieving parliamentary ‘coverage’ than others:
KPMG and PricewaterhouseCoopers both average above 80
mentions per year whilst the ICAEW and CIPFA average under
30. One should bear in mind that particular debates may skew
the results for some organisations, eg the Law Society, who
were the focus of sustained scrutiny over the development of
the Legal Services Bill. On average top firms in the accountancy
profession achieve far greater coverage than professional
membership bodies. In the property sector, the professional
body RICS does comparatively well at about 11 mentions to,
eg the British Property Federation’s nine and CB Richard Ellis’
less than one mention, but in the wider analysis compares
poorly to other sectors. Notably, the CBI has achieved by far
the most parliamentary mentions per year at 160. This initial
analysis provides a start to thinking about how scholars might
operationalise professional influence in policy-making and
chart its effects.
140
120
100
80
160
60
122.5
93.5
85.8
40
61.8
20
40.1
36
34.7
30
27.8 27.1
25.5
18
11.4 9.1
0
1 2 3 4 5 6
0.5
1.4
0.5
6.0
2.2
10
3.1
1.7
4.4
1.8
2.8
2.1
1.5
1 Institute of Chartered Accountants
2 Chartered Institute of Public Finance
and Accountancy
3 KPMG
4 Deloitte & Touche
5 Ernst & Young
6 PricewaterhouseCoopers
7 Institute of Chartered Surveyors
8 British Property Federation
9 CB Richard Ellis
10 Jones Lang LaSalle
11 Cushman & Wakefield
12 DTZ
13 King Sturge
14 Drivers Jonas
15 Bar Council
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
9
0.1
7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
27 28 29 30
Bar Standards Board
The Law Society
Solicitors Regulation Authority
Legal Complaints Service
Council for Licensed Conveyancers
Institute of Legal Executives
Allen & Overy
Clifford Chance
Linklaters
Slaughter & May
Freshfields Bruckhaus Deringer
British Retail Consortium
CBI
Institute of Directors
London First
12 For newly created bodies such as the Bar Standards Board,
the average yearly mentions were calculated only over the time
of the body’s existence.
British Professions Today: The State of the Sector © Spada Limited 2009
29
Social and political contributions continued >>
4.3 Case study: RICS and Home Information
Packs (HIPs)
The recent high-profile case of RICS’ opposition to the
government-proposed Home Information Packs (HIPs) and Energy
Performance Certificates (EPCs) illustrates that public interest and
political interests do not always coincide. The concept of a “Home
Information Pack,” to include evidence of title, copies of planning,
regulations consents, a local search, guarantees for any work on
the property, and an energy performance certificate, was first
vetted as early as 1997 (Knight 2007). HIPs were conceived
with the intent of making the home-buying process simpler and
quicker, and to ensure that fewer sales broke down. HIPs would
also include a Home Condition Report (HCR), carried out by
qualified Home Inspectors, which would detail the condition of
the property in plain English.
In their policy response to the Department of Communities and
Local Government (DCLG) consultation, RICS states that while
it supports reforms to the home-buying process to lend timeliness
and certainty to the current system, a number of concerns with
HIPs led the body to seriously question the policy. The government
intended to implement this proposal without ensuring that the
certification schemes for the inspectors or the databases to
hold their reports would be set up in time. According to RICS
spokesman Jeremy Leaf: “The Government’s own research shows
that we will need up to 7,400 Home Inspectors to ensure the
smooth introduction of the new regime.
30
However, to date, only a handful of candidates have satisfactorily
completed the Diploma in Home Inspection, the key prerequisite
for obtaining a Home Inspector’s licence”. (“HIP day...” 2005)
In addition, serious concerns about whether enough “specialist
energy assessors” required to have all homes energy rated once
every ten years would be available to do the job (Ibid.). RICS
was particularly concerned that the government was putting this
proposal forward without consulting the appropriate industry
members. Heavy hitters across the property industry opposed the
proposal, including RICS, the National Association of Estate
Agents, and large firms, eg Spicerhaart. Yet, rather than consulting
RICS or major firms, the government consulted people that had
set up businesses to be HIPs providers (Craig 2007).
After the government refused to meet with RICS on a number
of occasions, RICS finally went public with its discontent. On
15 May 2007, RICS started Judicial Review proceedings against
the Department for Communities and Local Government for the
department’s failure to carry out a full consultation on HIPs. The
government called RICS self-interested (and anti-green), implying
that RICS had ulterior motives and wanted to control the
implementation of HIPs. The body countered that in fact this was
quite low-value work for its members and very few (less than 100
of 100,000) were interested in becoming accredited to perform
this work. RICS maintains that the proposal was unworkable
(Craig 2007).
The Law Society, too, felt that the government’s plans to introduce
HIPs were potentially very costly to the consumer and damaging to
the property market (“Government not ready…” 2007). The Law
Society, along with other major stakeholders in the home buying
and selling process, wrote to Yvette Cooper MP, Minister for
Housing and Planning, urging the government to meet with them
and to delay plans (Ibid.).
In an attempt to avoid a lengthy court case and delays, the
DCLG reached an agreement with RICS, revised regulations, and
implemented certain changes, including the delays and continuous
assessment of HIP implementation (“Energy Performance…”
2007). The much-anticipated HIPs are now compulsory, following
a series of delays and a scaled launching of the packs according
to property type. Jeremy Leaf, RICS spokesman, described the
situation: “Although they are not the only factor, HIPs are
continuing to have a detrimental impact on the housing market,
in spite of assurances from the housing minister that this would
not happen” (The Telegraph 6 October 2007). Confirming this,
the January 2008 RICS house-price survey placed some of the
blame of the diminishing housing market on their introduction.
British Professions Today: The State of the Sector © Spada Limited 2009
Despite what may look like a policy failure, RICS views the HIPs
experience positively because the process of judicial review raised
the influence of the body amongst peer professions and other
government bodies (Craig 2007). The lessons of this example,
in which multiple professional bodies met with stone walls when
attempting to advise government on a technical policy issue,
suggest that professional expertise may be undervalued in the
political sphere – to the detriment of consumers and the public.
Should the professions have a larger, collaborative role to play
in helping consumers and citizens navigate free markets?
31
Conclusion
5
Conclusion >>
The best augury of a man’s success
in his profession is that he thinks it
the finest in the world.
George Eliot, Daniel Deronda, 1876
The professions inform critical aspects of our
day-to-day lives, not only by providing key support
for individuals, businesses and the economy,
but also by leading the march forward, helping to
shape the way we think about the world through
quickly-changing times. This report has shown that
the professions are vital to the UK economy, at
the forefront of the drive for social progress as
catalysts for social mobility, and provide, pro bono,
essential technical expertise to policy-makers to
legislate on complex matters. The findings of this
report also suggest that professions are
unclassified, under-studied, and under-valued in
social and political life. Although the public broadly
trusts professionals more than others, particularly
politicians and ‘big business,’ trust is declining and
public perceptions are often distorted. Given this
ambivalent state of affairs, what does the future
hold for the professions in British society?
5.1 Summary of findings
No single definition of ‘profession’ exists. Sir Alan Langlands
posed a basic definition which we employ as an operational
definition throughout the report: those occupations “where
a first degree followed by a period of further study or
professional training is the normal entry route and where
there is a professional body overseeing standards of entry
to the profession” (Langlands 2005). Although we have
noted that a first degree is not always required at entry level
by all professions.
Professional structures have grown up from the social clubs
and guilds of old to the institutions of today via a process of
gradual establishment and entering into regulatory bargain
with the state. Whilst professions have gained societal
importance with the rise of the information age, they have
experienced a simultaneous gradual decline in public esteem.
People question the incentives and the motives of institutions
so powerful that they can create their own marketplace,
especially when the aftermath of scandals like Enron and the
Shipman murders fuel suspicions that the professions may not
always have the public interest at heart.
Regulation
The perceived self-interest of the professions has brought
about significant changes in regulatory structures in what many
would see to be a backlash against professional independence.
The traditional concept of self-regulation as vital to
professional identity is changing along with the evolution (and
fragmentation) of social organisations in today’s global world.
Lines have become blurred, not only in the professional sector,
British Professions Today: The State of the Sector © Spada Limited 2009
33
Conclusion continued >>
but also in the continuum of organisations between the state
and society (eg the rise of the ‘third sector’). Robert Kaye has
noted that while many professions are moving towards what
he terms “regulated self-regulation,” there is remarkably little
explicit policy transfer between professions. Institutional
changes are often presented as sui generis (CARR
Conferences 2007). The findings of this report indicate that
inter-professional comparison and collaboration would be
useful if only to facilitate greater understanding of the
complexity of the new structures and processes affecting
most professional bodies, and to share ‘best practice.’
Economic contributions
The fact that an industrial category of analysis for the
professional sector does not exist, and thus that accurate and
comprehensive statistics on the economic contributions of
professional occupations cannot be precisely measured
and compiled, is a key finding in and of itself. Through use
of the proxy SIC 74, our findings show that even crudely and
conservatively quantified, the professions are a vital
contributor to British economy.
The professional sector accounts for the largest single share
of UK output (in UK real GDP), contributing 8% of total UK
output (IER 2006/ SSDA Sector Skills Matrix 2008).
Professional services continue to expand at an impressive rate,
forecast to grow 3.4% average annually from 2004 to 2014
compared to 2.4% average annual growth forecast for the
whole economy in the same period (IER 2006/SSDA Sector
Skills Almanac 2007). The professional sector accounts for
£15,849 million of British trade in services, or over half of
the total £29,194 million (balance of accounts, as credits less
debits) (The Pink Book 2007), helping to offset the growing
negative balance of trade in goods. The professions are the
largest employer in the UK, with 11.5% of total UK
employment (IER 2006/SSDA Sector Skills Matrix 2008).
UK professions are the largest contributor to the EU27’s
professional sector in 2004, with EUR 203.5 billion of value
added, generating 27.5% of the EU27’s sectoral value added
and employed 19.5% of its workforce. Finally, the professions
by their nature contribute to the economic growth of other
companies across industry sectors in immeasurable ways.
34
Social and political contributions
The professions have played a big role in the development of
meritocracy because of their emphasis on knowledge-based
skills rather than social class. Yet, social mobility in the UK has
slowed considerably compared to other European countries.
The findings of this report suggest that shoring up professional
skills and qualifications may be one way of advancing social
progress in the future. Indeed, professional bodies are working
with the government to improve equal access to the
professions – though more could certainly be done.
As trusted experts, professionals have a unique opportunity to
be highly influential not only in advancing social progress and
bolstering civil society, but also in the realm of policy-making.
However, our research finds considerable ambivalence about
how influential professional bodies are, and how influential
they ought to be. Professionals come up against distrust
because of their perceived self-interest, not to mention
periodic corruption scandals or worse. Still, in a fast-moving
world where government has limited resources, the
professions’ technical expertise is an integral, working
component of stable democracy. Should the professions have
a stronger, and more united, voice in the public interest?
5.2 Vision for the future
Professions matter to the state of GB plc. Their contributions
are invaluable. They are one of the world’s largest and most
influential industries. Yet, this report has shown that the
industry is, perhaps surprisingly, vastly under-studied, although
some commercial endeavours are under way (eg Edison
Investment Research sponsored by Noble & Company).
Collecting data is a big challenge, and currently structures for
comprehensive analysis – accurate variables and tested
methodologies – do not exist. New methodologies and
variables should be formulated, as well as greater transparency
and consistency in reporting, in order for the full extent of
professionals’ contributions to society to be brought to light.
The professions are a potential source of great progress
towards meritocracy via increased access and social mobility,
and a potential source of ethical role models via promulgation
of professional standards, ethics and morality in business,
government, and civil society.
Our initial report suggests that significant benefit – for
the public interest, government, and the professions
themselves – may come of the professions working together
and speaking with the authority of a single voice to
government and the public. For example, policy on
sophisticated technical skills in the UK is often legislated
without appropriate expertise. Ensuring that professional
knowledge and legitimate interests are incorporated within
UK public policy formulation benefits government, which
simply does not have the resources to manage the complexity
of information necessary on all issues. The problems in the
banking sector exposed by the financial crisis in 2008 illustrate
all too clearly the urgent need for professional standards,
including rigorous qualifications, high-quality codes of practice,
sufficient monitoring, and appropriate disciplinary mechanisms.
The public has, again and again, demonstrated a need for
authoritative professional expertise to protect their interests,
from medical to legal to financial, and to counter information
overload and the prevalence of web-borne and mediadisseminated technical or semi-technical information, some
of which may be of doubtful veracity and provenance.
British Professions Today: The State of the Sector © Spada Limited 2009
In an era of changing values, the strength of professional
structures and quality stands as one of the few
constants across generations and even centuries. This legacy
and consistency is formidable, but should not be taken for
granted in light of the threats posed by the evolution of
consumerist values, instant gratification, declining client loyalty,
increasing media scrutiny, and increasing regulation.
If we agree that the research outlined in this report paints an
accurate general picture of the professional sector, several
additional questions might be raised by the findings. It is our
hope that this report may spur debate in the appropriate
forums with key stakeholders – government, business,
education, organised labour, professionals themselves, and
most importantly consumers and the general public.
The financial sector’s recent and dramatic downward spiral
shows the critical importance of finding the right balance of
professional independence and regulation. What might be
the appropriate balance of stakeholders’ interests in the
regulatory regime going forward? The case of HIPs is
only one recent example of government resisting technical
advice to the detriment of consumers and the public interest.
What will it take for government to recognise professional
bodies (rather than individual firms) as sources of valuable
consultation in relevant fields of expertise? Might there be a
place for a general professional information service, campaign
or collaborative body to shore up political influence?
Finally, we cannot ignore indications that public esteem for
the professions has fallen. What does this mean for the future
of professional skills and quality, for social mobility and social
capital? How can we ensure that recruitment in the
professional sector attracts the most talented young people
(away from less publicly-minded occupations like banking),
ensuring ongoing quality of support services in the public
interest and ongoing progress toward meritocracy?
35
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37
Appendices >>
1. Lord Benson’s criteria for the professions
1 The profession must be controlled by a governing body,
which in professional matters directs the behaviour of its
members. For their part the members have a responsibility
to subordinate their selfish private interests in favour of
support for the governing body.
2 The governing body must set adequate standards of
education as a condition of entry and thereafter ensure
that students obtain an acceptable standard
of professional competence.
Training and education do not stop at qualification. They
must continue throughout the member’s professional life.
3 The governing body must set the ethical rules and
professional standards that are to be observed by the
members. They should be higher than those established
by the general law.
4 The rules and standards enforced by the governing body
should be designed for the benefit of the public and not
for the private advantage of the members.
5 The governing body must take disciplinary action,
if necessary expulsion from membership, should the rules
and standards it lays down not be observed, or should a
member be guilty of bad professional work.
6 Work is often reserved to a profession by statute –
not because it was for the advantage of the member,
but because of the protection of the public, it should
be carried out only by persons with the requisite training,
standards and disciplines.
38
7 The governing body must satisfy itself that there is fair
and open competition in the practice of the profession so
that the public are not at risk of being exploited. It follows
that members in practice must give information to the
public about their experience, competence, capacity to
do the work and the fees payable.
8 The members of the profession, whether in practice
or in employment, must be independent in thought and
outlook. They must not allow themselves to be put under
the control or dominance of any persons or organisation
that could impair that independence.
9 In its specific field of learning, a profession must
give leadership to the public it serves.
Source: Benson, Lord. 1992. “Criteria for a group to be considered a profession” as recorded in
Hansard (Lords) 8 July, 1206-1207.
2. Personal interviews
Name
Title
Affiliation
Mark Goodwin
Special Advisor to the Chief Executive
RICS
Simon Thompson and
Emma Winsor-Cundell
Head of Media Relations;
Head of Corporate Communications
ICAEW
Michael Burrage
Professor, Sociology
The London School
of Economics; UC Berkeley
Jill Craig
Head of Policy and Public Affairs
RICS
Mark Hatcher
Director, Representation and Policy
Bar Council
Harry McAdoo
and Jonathan Labrey
Director of Communications;
Head of Public Affairs
ICAEW
Vicki Chapman
Acting Director of Legal Policy
The Law Society
Vernon Soare
Executive Director, Professional Standards
ICAEW
Les Smith
Head of Executive Office
ICAEW
Alex Galloway
Consultant; former Clerk of the Privy Council
Privy Council
(1998 – 2006)
British Professions Today: The State of the Sector © Spada Limited 2008
39
Spada Research >>
Spada Research is the academic research arm of Spada Limited,
a public relations consultancy specialising in professional
services. Spada Research supports Spada’s involvement in
the professions, communications and media, adding value
to the critical debates in the professional services sector.
Spada develops thought leadership campaigns for leading
businesses to contribute their expertise on key issues affecting
their industry.
If you are interested in commissioning original research,
we invite you to contact us at Spada on +44(0)20 7269 1430.
40
Table of contents >>
1 Introduction
1.1 What is a profession?
1.2 History of the professions
1.3 Declining public perceptions
1
3
3
5
2 Changing regulatory structures
2.1 Why regulate?
2.2 Historical development
2.3 Regulated self-regulation
2.4 Case study: the legal professions
8
9
11
13
14
3 The professional economy
3.1 Output
3.2 Business creation
3.3 Productivity
3.4 Balance of payments and trade
3.5 Employment
3.6 UK professions in Europe
17
19
20
21
22
23
23
4 Social and political contributions
4.1 Social mobility
4.2 Political consultation
4.3 Case study: RICS and Home
Information Packs (HIPs)
24
25
27
5 Conclusion
5.1 Summary of findings
5.2 Vision for the future
32
33
35
References
36
Appendices
1. Lord Benson’s criteria for the
professions
2. Personal interviews
38
38
Tables, Lists and Charts
Percentage of total UK output
(real UK GDP) by sector
VAT registrations and deregistrations
as a percentage of stock
Output per employed job
by sector (£000s, current prices)
2006 balance of payments,
other business services (£ million)
2006 balance of payments,
trade in services (£ million)
Percentage of total UK employment
by sector
Professional influence in official
parliamentary proceedings
39
19
20
21
22
22
23
29
30
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