Smaller Government: Shrinking the Quango State - Public Administration Committee Contents

Examination of Witnesses (Question Numbers 219-259)

Sir Ian Magee CB, Professor Matthew Flinders and Professor Colin Talbot

9 November 2010

Q219   Chair: Welcome to our new witnesses. I wonder if you could give your names and roles for the record, please.

Professor Flinders: Matthew Flinders, Professor of Politics, University of Sheffield.

Sir Ian Magee: Ian Magee, Senior Fellow, Institute for Government.

Professor Talbot: Colin Talbot, Professor of Public Policy and Management at Manchester Business School.

Q220   Robert Halfon: The language around the cull of the quangos has been quite colourful—some might even say intemperate. Do you think that we have lost sight of the fact that some of these bodies do perform very useful functions and that they are vital to a modern democracy?

Sir Ian Magee: Yes. I think that is right; the debate has been captured in particular terms. I should just make clear that in our report, "Read Before Burning", our institute is neither an apologist for quangos, nor do we advocate abolition of quangos. Sorry, I should really say "arm's length bodies", taking my cue from the previous witnesses. What we do say is that this is a very confused landscape and that it needed sorting out, so to that extent we very much welcome the fact that the Government have begun to do that and have begun to look at some of the facts, some of the data and some of the numbers rather than necessarily just talking the language of bonfire, or whatever other emotive phrase you want to use. I think it's in the interest of everybody—not least the public, who don't seem to get very much of a mention in this debate in my view, but also ministers and civil servants—that the picture is clearer. I thought, incidentally, that the coalition's Chancellor probably gave the best articulation as to why they are sometimes necessary when he created the Office for Budgetary Responsibility. He spoke about the fact that he might, if I remember the quote properly, find that at some stage in the future it could become a rod for his back, but nevertheless he felt that it was absolutely right that this function should be at arm's length from government.

Q221   Robert Halfon: But do you think that some of the lack of affection has come about because of stories about the pay of senior quangocrats, as I mentioned earlier, and because of the examples of waste and confusion about what they are for, and also because of the view that party placemen are just placed on these quangos?

Professor Flinders: There is a great deal of mythology around these bodies, and I must say the debate tends to create more heat than light. People who work in this Palace of Westminster often contribute more to that than others do. The fact of the matter is that if you look beyond the UK, which is something that the debate does not do at the moment, you will find arm's length bodies used in every advanced liberal democracy in the world. The thing that we manage to do with them is use them in such an ad hoc, confused manner that we maybe don't deliver the efficiencies, in terms of financial rewards, and harness the social capital that these bodies can bring on occasion. As for the thing about pay, it's often just ridiculous that you will in effect demonise some people for a salary that is equivalent or much lower than they would get in the private sector or in other full-time posts. So I think the language itself is a big barrier to a sensible and mature debate, and I think that's maybe part of the problem that we currently face with the reform agenda.

Q222   Robert Halfon: But do you not see that the public are worried about the waste in some of these quangos? For example, as a new MP, every single day I get 50-page glossy brochures from many of these quangos, and things like that annoy people and they do not understand why they are spending money in this way. What is your view about that?

Sir Ian Magee: Yes, there may be an element of "What did the Romans ever do for us?" around this as well, in that quangos are curious beasts. A straw poll of my friends will say the same when they hear that I am talking about this sort of thing: "They need to be culled. They are unaccountable. They are unelected," et cetera. But if you speak about individual bodies, expert committees and the like, then you find—we have not been able to find the MORI poll evidence to substantiate what I am saying, but I can recall seeing it at some stage—that some of these individual bodies get very high ratings indeed. So I think one needs to differentiate. The implication of your question, I think, was: should we couch this debate in different terms? I would say very much yes.

Professor Talbot: There are two things I would say. First of all on this issue of pay, it has become politically significant recently, but it is not a new issue. The previous Conservative Government paid the Director General of the Prison Service, the Director of the Defence Evaluation and Research Agency and the Director of National Savings considerably larger amounts of money than normal civil service pay to take on those roles in the early 1990s. So it's not as if it is a new phenomenon; this thing has been going on for quite a while. But the second point I would make is to make an even stronger defence of arm's length bodies. I would say not only do they appear in all advanced Western liberal democracies, but I think they are an essential part of advanced Western liberal democracies. If you take the most common arm's length body that exists not just in advanced countries but in most developing countries as well, it's tax collection agencies, and there are very good reasons why they are kept at arm's length from politicians. First of all, they don't want the politicians putting their hands in the till, and secondly they want to ensure that people's tax bills are not influenced by their political affiliations. That is why, if you look round the world, most tax collection agencies are on a statutory basis at arm's length from executive government, quite rightly.

Q223   Robert Halfon: We haven't touched on the waste argument and the amount of literature and management-speak that these quangos produce, which does, as I say, irritate people. Also, often the quangos are used as a means of satisfying party activists. So each government will place party activists to run these quangos as a reward of some sort. What you said in your paper, which I thought was interesting, about democratic participation and the fact that quangos could be good forums for this, in the past it does not seem to me that they have been, and I would be interested to tease out further how quangos could be democratised.

Professor Flinders: Sure. I don't want to be too conflictual, but I think actually you are a bit mistaken in your approach to understanding the role of patronage and ministerial powers to appoint. Actually, in the last 10 years, what you have had is a great restriction on the discretion that ministers enjoy in making appointments to public bodies. I am sure you have met Janet Gaymer a few times, and the regulations and procedures that she and her predecessors have put in place are quite forthright. There is nothing wrong with a minster appointing somebody who shares their policy preferences; you would not expect ministers to appoint their enemies. What we have is a system, increasingly with a role for Select Committees, that makes sure that those appointees are above the bar. It would be irrational for a Minster to appoint somebody who could not do the job, and the chances of it lasting more than a week with the sensationalist media that we have is pretty ropey as a strategy. This is the big thing about pay: I don't know if you know this, but most people who serve on the boards of NDPBs do not get paid. Did you know that?

Robert Halfon: Yes, I did.

Professor Flinders: Right, well this whole, big debate about how much people get paid is really misguided, because there is a lack of understanding about the fact that most of the people who serve on the boards of public bodies do so for no money at all; it is their contribution to public life, because they will not get involved in—big "P"—Partisan Politics, because of the immature debates and sniping that goes on.

Q224   Chair: So why are—sorry to use the word again—quangos so unpopular? Why are they such an easy target?

Professor Flinders: I think they are an easy target because the way we use them in this country puts them in a shady, unclear, un­transparent position. If you were to locate the use of arm's length bodies within a clear governance structure, most people, when you talked to them, would realise that actually they present opportunities for a wider range of people to play a role in politics. The debate about the big society is not, "What functions can we get rid of and give to the public sector or the third sector?" That might be one element of the debate, but the bigger debate is, "How can we increase the diversity of those people who can play a role on the boards of public bodies?" If you look at the history of Northern Ireland, there was a great shift away from local and central government departments to arm's length bodies as a way of ensuring that sectarian tensions were put to one side and that various different people who would not get involved in politics did so on the boards of public bodies.

Q225   Robert Halfon: Would you accept that one way may be to have elections to some public bodies, as they do in America?

Professor Flinders: No.

Q226   Robert Halfon: Why?

Professor Flinders: Because there is a current fetish for elections. Where is the evidence that the public want a greater role in elections?

Q227   Robert Halfon: Where is the evidence that they do not? I believe in democracy and democratic accountability—

Chair: Let him answer.

Professor Flinders: I will tell you what evidence there is. There are a lot of data and survey evidence, actually, that you can find from Ipsos MORI that will actually say the public are not interested in elections. What they want is the delivery of high-quality public services at a low cost. Now, in some areas that might be done by the private sector or the third sector, but often it will be done by the state. Now, the important thing here is not how much people get paid, it's not about the media and it's certainly not about cronies; it's about the governance system. That is the bigger question that the Institute for Government's report put at the centre of the table and that has been missed. That is the core that nobody is dealing with.

Sir Ian Magee: In answer to really both of your questions about popularity, unpopularity and why, one of things that we did when we did the research was establish that at the moment there are at least 11 different sorts of arm's length bodies. That of itself, we argue, leads to a lack of clarity and confusion in everyone's minds. It is hardly surprising that Members of Parliament and sometimes people in departments themselves, as we found from one or two of the seminars we ran, are not as clear as perhaps they could be about what the nature of these bodies is. We recommend in the report that you reduce that very simply to four different types by way of bringing clarity to this. We don't think, as I saw the minister was quoted as saying to you last week, that this is just administrative tidiness; we think this would really help an understanding of the situation.

Okay, these arm's length bodies may have proliferated in the past, but if you accept the premise that in many cases it is still necessary for some of these functions to be carried out at arm's length—and I observe that even after the cull there are more of them that exist than don't exist by some considerable factor here—we should go for a much more simple taxonomy, as we have called it; you judge the need for an arm's length body as to how independent it needs to be. So constitutional bodies like, for example, the National Audit Office, where the accountability is direct to Parliament, ought to be thoroughly independent—more independent, for example, than the independent public interest bodies, as we have called them; they would include the regulators, and the Office for Budget Responsibility, too. It was interesting that the Treasury Select Committee suggested that was categorised as a non­ministerial department, largely because this landscape is so confused that we have to shove it into some category, because the independent public interest body category doesn't exist at the moment. Then you would have the great majority of them that report through departments to ministers.

Q228   Robert Halfon: A final thing: I find it astonishing, Professor Flinders, that you talk about a degree of democratic potential, but you do not think there should be any kind of democratic elections to quangos. It may be that you are saying that the public do not want it, but they have never been offered the opportunity. On the logic of your argument, if you say the public do not like elections, you might as well banish elections per se and not have any elections for any kind of governing body or government at all.

Professor Flinders: That is ridiculous. The key issue is proportionality. It's a balance between electoral and unelected roles within public life. That's the way public life has always worked; it's the way it works around the world. If you go and visit other countries, you will see that there is a balance made up there. I serve on the board of a large public body—an independent acute mental health trust—with 43 other governors who are drawn from all members of the background of South Yorkshire. None of them would be interested in getting involved in party politics; they are willing to play a distinct role by being appointed on a single board, and together we play a massive, massive role in changing the shape of South Yorkshire society. Now on that issue, we have to by law hold a lot of public functions and provide opportunities to account. I spend many, many mornings in those meetings where not one member of the public comes to utilise those accountability mechanisms. So all I am saying is that this is a matter of balance and proportionality. We have elections; we have more elections now than most other countries. We have lots of elected politicians at various levels. There is a balance, and different opportunities provide a richness. The question we need to grapple with is: how do we construct a clear and transparent governance framework that allows people from a more diverse range of backgrounds to play a role in public life? That is how you will rebuild trust in politics.

Robert Halfon: I just think it seems—

Chair: No, we are stopping there. We are moving on. David Heyes.

Q229   Mr Heyes: Yes. Sir Ian, you mentioned the importance of independence as being one of the criteria to use in making these decisions about the future of these arm's length bodies, and the Government have said that that was one of the criteria they used; they also used the need for political impartiality, the question about whether it performed a technical function and really the question of whether it should exist at all. Those, in broad terms, were the criteria that were used. Now, you have your list; you know what has been proposed. Have you found any indication that these tests have been applied in a consistent way? It's not just a question for you, but for all the panel.

Sir Ian Magee: There are two points to make there. The first is that we think the tests are okay as far as they go, but we don't think that they go far enough. For example, we would incorporate value for money into these tests as well and have rather more data than is the case right now. In answer to your direct question about consistency, no; we don't think that they have necessarily been applied consistently at first blush. It's not immediately clear, for example, why arts and sport funding needs to be independent, but film funding doesn't need to be independent, just to take a fairly obvious example. One of the things that we argue for is that there needs to be some resource and if you want to slim down—

Q230   Chair: May I just interrupt you there, Sir Ian? In fact, they both have the same minister, so the Secretary of State has not even himself applied the same consistency within his own department. Is that what you are saying?

Sir Ian Magee: I think that there is a certain amount of inconsistency about the way in which these decisions have been taken, yes. If you are applying the tests rigorously across the piece, no doubt you could find other consistencies or inconsistencies. One of the things that we argue is that there is a role for the Cabinet Office; it does not have to be a whole team of people, but some role to promote best practice. That probably becomes even more important when you are going through transition and closing these bodies down, because, candidly, Whitehall's collective memory, as I can remember from way back in my own time in Whitehall, is probably not as good as it ought to be here.

Q231   Chair: Sorry, can I just clarify one thing? Are we expecting DCMS now to be doing film funding from within the department? Is that the plan?

Sir Ian Magee: I honestly do not know whether that is the case or not.

Chair: I suspect they think it is something the Arts Council should do, rather than them.

Sir Ian Magee: Absolutely, put it wherever you want. All I am saying is, responding to the point about consistency of tests, that it did appear to us not to be absolutely consistent.

Q232   Chair: But if they are transferring the film funding to another arm's length body, that would not be inconsistent, would it?

Sir Ian Magee: That arguably would not be inconsistent, if that is what they do.

Chair: Sorry, just to make the point. Mr Heyes.

Q233   Mr Heyes: Well, we could have problems if we argue every individual case here. What I'm really trying to get from you is, is this inconsistency widespread? Are there many other examples of it? Colin?

Professor Talbot: Well I haven't looked in detail across all of them, but I suspect yes, partly because the process has been conducted at such an extraordinary pace. To have reviewed allegedly 900 bodies in however many weeks it is, I can't for a moment imagine that is being done very carefully in a lot of cases.

Q234   Mr Heyes: So it is not credible?

Professor Talbot: I don't think it's terribly credible. There are pretty clearly some instances of smoke and mirrors going on. A very small example, from something I did with the BBC a couple of weeks ago, is the historic ships non-departmental public body, which is being deregistered. At the time we spoke to the Chief Executive, he did not know what they meant. He thinks it meant that they were no longer going to be an NDPB, but probably converted into a charity. They would continue to be funded by DCMS to exactly the same level they are getting at the moment, more or less; I think they are having about a 15% reduction. They would be doing exactly the same thing, but they would no longer be on the books, so that would be one quango to tick off the list. So there has been a certain amount of smoke and mirrors going on around this.

But can I make a wider point on something Sir Ian Magee just said? One of the things that I find worrying about all of this is the lack of institutional memory in Whitehall. We had a big experiment with how to manage arm's length bodies back in the 1990s under the last Conservative Government, when executive agencies were created within the Civil Service and executive NDPBs were put on to a similar footing as executive agencies with a whole paraphernalia of objectives set by ministers, performance targets set, publication of performance reports, giving them greater operational freedoms and so on; a whole range and, by the way, periodic reviews of these. That system seemed to fall into disuse in the early part of the Labour Government, but nobody has gone back and said, "Well what worked and what didn't about that, and what should we use in the future?" Whatever the outcome of this review, it is pretty clear we are still going to have a lot of these arm's length bodies, and it's quite worrying that nobody seems to be thinking through seriously how we manage them better.

Professor Flinders: Can I come back to the issue of consistency? The answer is no. There are many examples where you can't find any explanation for why one body is going and another one is being kept. Why get rid of the Security Industry Authority and keep the Gangmasters Licensing Authority? Why keep seven Research Councils? Why get rid of the HFEA and keep NICE? This is too much too quick; that is the key issue here. The process for assessing the future births, deaths and marriages of public bodies has simply not been transparent; nobody understands. The three tests are okay at a very high level of generality, but in terms of applying them, nobody can really understand how exactly they have been mapped on to the current topography of departments; the landscape. The bigger picture really of this announcement is that this is about cosmetic pruning. The real story here is how many bodies will continue to exist.

Q235   Chair: Is it significant that the three tests are not being included in the Bill?

Professor Flinders: I think it is very significant. The House of Lords Constitution Committee, which has just published its report on that, is scathing. The draft Bill basically gives ministers major powers to reform at will, without any detailed explanation of why that would be necessary. However, as Colin quite correctly said, the big question, looking to the future, is how we prevent the future proliferation of these bodies. One of the big vacuums at the centre is how to support departments in managing, supporting and steering these bodies.

Q236   Mr Heyes: There is some hope for the future though, isn't there, in the Public Bodies (Reform) Bill? It says that—

Chair: Sorry, could we just hear from Professor Talbot?

Mr Heyes: Oh yes, sorry.

Professor Talbot: Just because you picked up the point about the Bill. One of the things I think this Committee ought to look at is its previous report on the Government's ability to reorganise departments, because we have seen the same sort of phenomena take place with departments. There are clear trends in departmental reorganisations to go from small departments focused on individual areas to large super­departments, to going back to small departments again, all on the whim of the Prime Minister. This Committee quite rightly in the previous Parliament criticised that and called for greater institutional checks and balances on that, and instead what we are seeing is actually those powers extended to non­departmental public bodies as well as ministries.

Q237   Mr Heyes: I would make an observation on that rather than a question. The Prime Minister said just the other day that he was envisaging a new role for the Civil Service; that it would no longer be there to deliver public services, but to ensure that they are delivered. There is an irony, I think, that much of what has happened as a result of this review has resulted in delivery being moved back into the Civil Service.

Professor Flinders: Some.

Mr Heyes: There appears to be a contradiction. I just wanted to mention—

Chair: Mr Heyes, can I just ask Mr Flynn to come in for a moment?

Q238   Paul Flynn: Mr Talbot brought back a happy memory. Now I'm in the time of life of a politician when I'm in my anecdotage so I powerfully remember the next step agencies that were set up by a Conservative Government because the departments were overloaded and couldn't do their work properly. At that time, the questions from Honourable Members would go in, were answered, but did not appear in Hansard. They actually produced the answers and ran something called Open Lines as a private enterprise, which the Government then nationalised and took over. But it is extraordinary, as you rightly and fairly say, that what was fashionable then is being reversed now. This seems to be something that is being done almost entirely because of the Daily Mail agenda; the mindless prejudice against these bodies, without any deep consideration of the effect it is going to have. Could you give us examples? Will accountability be improved or will there be less accountability under the new arrangements?

Professor Talbot: It's quite interesting to go back and look at the justifications that were given at the time for the creation of executive agencies—at their height, 140 new arm's length bodies were created. The justifications given at the time were that they would improve accountability by creating executive agencies and that they would improve the efficiency and effectiveness of those bodies. Now exactly the same justifications are being given for taking bodies back into departments and amalgamating them into the hierarchical structure of departments. The reason that at the time people argued that it would improve ministerial accountability—and this came up in your previous session—was because if you take a large department like the Home Office, for example, a small part of that department, something like the Fire Service College or the Passport Agency as it now is, is in practice, within the normal hierarchical structure, very difficult for ministers to hold to account because they have to go down through the whole chain of command, through about four or five layers of civil servants, before they get to it. The creation of executive agencies created this parallel structure outside of that, where agency Chief Executives were allegedly directly accountable to ministers for what they were doing in running the agencies. So that's where it was argued it improved accountability. Exactly the same argument is now being deployed about improving accountability to take away exactly those sorts of arrangements around NDPBs and some agencies and merge them back into departments. I find it quite odd.

Sir Ian Magee: I will go into my now somewhat distant past in talking about accountability. I have been in my time Chief Executive of three very different executive agencies. The first thing, just to correct any impression here, is that they are parts of departments, and they are accepted as being parts of departments. I felt very accountable, for what it might be worth, in that my reporting line was to the minister and thence to Parliament as Chief Executive. It meant that you as MPs knew who the Chief Executive was; it meant that I could answer. Some MPs chose to go nevertheless directly to the minister for answers on questions to do with the agency that I was responsible for; others chose to come to me. I did not see anything fundamentally wrong with that. But just to be clear, that's not part of what the Government has sought to do here; it has specifically excluded executive agencies, although as it happens, in our work we considered executive agencies as part of the general framework of arm's length bodies.

Q239   Paul Flynn: The answers that came back from parliamentary questions to the heads of next step agencies were far better than the answers that one would expect from the department. This was certainly true; they were fuller and they were not as defensive as departmental answers. Can you see going back from this situation as being a retrograde step and there really is not any desire here to increase accountability; it is purely an excuse for putting through what is seen to be a politically advantageous policy for the Government?

Sir Ian Magee: Well, Professor Flinders may want to comment on this rather than me. I would only say that I think it is entirely proper that the Government of the day—and we have said this in our commentary on the report—makes whatever decision it wants to about this and if it decides that it wants ministers to be accountable, that is fine. Let us just be clear what we mean by accountability. As with so much else in this landscape, I think a bit of clarity as to what we mean by accountability and a bit of clarity as to what we mean by the bodies will help to illuminate and will therefore help the understanding of those who have to deal with these bodies.

Professor Flinders: It's very interesting to look at the debate about the public bodies reform. I think it's quite clear that pre­election and just after the election the reform was couched in the language of efficiency savings; it was to save money. Only in recent weeks did the focus drastically shift towards increasing accountability. I have spoken to ministers who tell me that that clearly happened because when you sit down and look at all these executive bodies, you suddenly realise that in opposition it is much easier to throw bombs, but when you are in charge, you realise that a lot of these bodies do a lot of good work and you don't want them back in your departments. Will it increase accountability? No. Why? Because if you look at comparative evidence­based research, that doesn't happen. In Wales, where part of the devolution debate was to get rid of all these terrible quangos, the Welsh Assembly Government has taken them back in and now there is a backlash because all the different civil society groups that had built very positive working relations with those bodies now say those relationships and accountability channels have been closed down.

Q240   Chair: But isn't one of the hostilities that people have to NDPBs that they are part of the client state; you set up a body and it creates its own clientele and its own little world and that annoys people?

Professor Flinders: Yes, that can be a problem. However, I was watching the appearance of the minister in front of the Committee and it seemed that there was a very simple line: "Bringing functions to departments—accountable. Beyond departments— unaccountable." That is like going back hundreds of years. There are different forms of accountability and by bringing it back in, what you are actually likely to do is re­politicise those issues and make the officials more risk averse.

Professor Talbot: Just a very small point, picking up on what Sir Ian said. I would agree that clearly it's up to the Government of the day whether it wants to change institutional and organisational arrangements, but I would agree with your predecessors in the last Parliament that that ought to be subject to the active engagement and approval of Parliament over both the structures of ministries and structures of other public bodies. I think that is where both the Bill and this process with non-departmental public bodies that they have just been through falls down very badly. It is surprising that a government that said it wanted to be far more transparent about these processes has gone through what has been a very un­transparent process in relation to NDPBs.

Q241   Chair: That is a very strong criticism to make.

Professor Talbot: Well, that's what has happened. What has happened is we have had a review of 900 bodies in the space of a few weeks—a couple of months at most—with no public consultation at all around it, no clear indication of why judgments have been made about these particular bodies, and as I said, it is only one small example, but at least in the case of the public body to which I spoke, the Chief Executive did not even know what the decision was exactly, other than that they weren't going to be a NDPB any more, which is some indication of how little real conversation has gone on in the decision-making process.

Sir Ian Magee: I take a slightly different view, in that I think that the review was overdue. It is not surprising that governments of all political colours want to do something like this when they first come into office, for all the reasons that we began to explore in the first instance. But we don't think that the review has gone far enough and there is potentially an opportunity missed here. We have set all of that out in our report and we would prefer to concentrate on that aspect of things. We do think that the Government is entitled to have a review of the way in which it wants accountabilities to work in the future—of course it is—and if it wants to do the sort of things that it is doing, fine. But we have talked about some of the inconsistencies, we have talked about the fact that there is still this non­framework of 11 different types of bodies as far as we can see, and we think that those are questions that need to be addressed. We think there should be more parliamentary accountability and involvement of Select Committees, as we have set out.

Q242   Paul Flynn: But doesn't Karamjit Singh, the Social Fund Commissioner, make a powerful point when he says that abolishing public bodies "risks weakening lines of accountability and visibility for related functions as they compete for attention within a wide range of departmental concerns and priorities"? What a specialist Chief Executive covering a small area, clearly accountable, can give would be lost in the great work of a department.

Professor Talbot: That is precisely the argument that was given in the Next Steps report in 1988 about why it was that central ministries were so bad at organising the services that they did deliver themselves, because the priorities for the operational management of those services—in some cases very big services, like Jobcentre Plus and the Prison Service and HMRC as it is now and so on—tended to be downplayed. As one Permanent Secretary said to Pam Alexander when she was doing the Alexander Review, although it was not actually published in the report, "Those that can do policy. Those that can't run agencies." That is very much the attitude of a lot of senior civil servants, unfortunately.

Q243   Paul Flynn: A political party marches the troops up to the top of a hill, they are up there for 20 years, they forget why they are up there, and then it marches them down again. This is what the Government is doing at the moment. It probably had the right idea in the 1980s and early 1990s.

Chair: Are you giving evidence, Mr Flynn?

Paul Flynn: Yes, sorry. I will give evidence to the 12 ministers, yes.

Q244   Chair: You can help write the report. Before we get to Mr Roy, can I just clarify this? What you basically seem to be telling us is that whatever the malaise is, this review of the NDPBs is probably not going to address this feeling of public dissatisfaction and frustration that is directed at NDPBs. What is the malaise and how should the Government be addressing it?

Professor Flinders: I think the bigger question here is that this was an open goal for a new government; it was a win­win situation where the state was clearly in need of some structural change. There were some quangos that needed to go. However, moving to that very quickly led to almost a demonisation that quangos are bad, departments are good. I was shouting at the TV screen watching Sir Francis Maude, "What about the Rural Payments Agency?" If anyone wants to see lack of accountability it is there, as many of your colleagues on other Committees have covered at great length. The question is: where is the bigger picture that allows us to understand what these bodies do, why and how? That will increase public understanding and give MPs much more clarity. Most ministers that I work with don't even know what public bodies they are responsible for. The last major review of all public bodies was in 1979. Can you remember who that was by? A famous guy, Sir Leo Pliatsky—a real character. That was the last fundamental review. In 2004, this Committee said that that needed to be redone. The Cabinet Office started to do it, but it found so many bodies lurking that it was shelved. There are lots more bodies than the 900 bodies that the Government says it has already looked at out there; they have just not been defined as NDPBs or executive agencies. They have been created off the radar.

Sir Ian Magee: The malaise is that lack of clarity about government and the way that government performs its functions can't help anybody, least of those who look to the government for public services. So addressing that and bringing some more clarity into this situation—again, if you accept the premise that some functions need to be discharged at arm's length from government—is a pretty good starting point for all this.

Professor Talbot: I would just add that there ought to be a positive framework for saying why we want some functions of government to be handled by independent or arm's length bodies—

Q245   Chair: But that is in the tests, isn't it, however unsatisfactory the tests are?

Professor Talbot: It is in the tests to some extent, but I think it needs to be spelled out more clearly by government why it is a good thing.

Q246   Lindsay Roy: Sir Ian, you said specifically that opportunities have been missed. Can you give some detail? We have mentioned already words like cosmetic and rushed. What opportunities have been missed in this review?

Sir Ian Magee: Well they were not my words but—

Lindsay Roy: No, I understand that.

Sir Ian Magee: I think again, it goes back to this question of clarity of understanding; of the ability to say, "Well, instead of this very confused and confusing network of different sorts of arm's length bodies at the moment"—non­ministerial departments where a Chief Executive, as I said before, said to us at a seminar, "What differentiates me in that respect is that I do not have a department and I do have a minister", which cannot help with clarity at all—instead of this confusing landscape, let's simplify the landscape. Let's try to get something that everybody understands", not least the opinion formers, yourselves, the journalists and others, so that instead of bandying about words about this beast called a quango that needs to be slaughtered, we can talk about how services are delivered, how they may be more effectively delivered, and how ministers can be held to account for the delivery of those services. That I think in summary is the opportunity that is missed here.

Professor Talbot: I would add that a fundamental review of arm's length bodies, including executive agencies, which looked not only at whether they need to exist but whether they need to exist in the format in which they are, could have asked some serious questions. Take for example the English and Welsh Prison Service. I know there has been a long term debate; I was involved in the review of the Prison Service on behalf of the Government in 1996­97. There has been a long-term debate about whether or not we need a single national Prison Service for Wales and England. We have two perfectly functioning prison services in Scotland and Northern Ireland that work quite well and are much smaller. There's a strong argument for localising prison services; there's no real debate though about whether or not that should be a national body, whether it should be an executive agency or an NDPB, for example, or one of the new statuses suggested by the Institute. Similar arguments would apply to things like Jobcentre Plus. It is absolutely unclear to me why Jobcentre Plus needs to be a single national agency. I am not advocating breaking those up, but if there had been a fundamental review that had looked at these things more seriously right across the board, with some clearer principles that had been thought through, and if we had looked at the history a bit more of what had worked and what had not worked when we had tried these various forms of arm's length management over the years, you might have been able to do something more serious with it. Instead what has happened is we had a fairly narrow review, essentially only looking at NDPBs, rushed through very, very quickly. Okay, it has got rid of a few, but it really hasn't taken the opportunity to seriously rethink the landscape. It does need rethinking. I would agree completely with Matthew that we have probably one of the most chaotic landscapes; not the only one that is as confused as this, but probably one of the most chaotic landscapes and it needs some rationalisation.

Q247   Lindsay Roy: And it hasn't occurred?

Professor Talbot: It hasn't occurred at all, no.

Q248   Lindsay Roy: Only nine of the 901 have moved outwith the public sector. Why do you think that is the case?

Professor Talbot: Because in most cases these are jobs that government at the end of the day has determined actually needs to be done by somebody in the public sector, because they were mostly set up for very good reasons. Again, actually, it is probably the case that if you had done a more fundamental review, you could have moved some more things out of the public sector. I couldn't say what off the top of my head and I wouldn't want to, because I think you need to take these things seriously and actually look at the evidence.

Q249   Lindsay Roy: It sounds like a recipe for bigger government.

Professor Talbot: I don't think it is a recipe for bigger government. It's a missed opportunity for reconfiguring how government is done and possibly in some cases moving things out of government.

Sir Ian Magee: I guess the argument would be that that is a decision for individual ministers to take in their departments as to whether they go down a privatisation, outsourcing or whatever route. So in a sense, it may be too early to say that this is only going to happen to nine. That is my impression, at any rate.

Q250   Lindsay Roy: What are the main inhibitors to moving outwith the public sector?

Sir Ian Magee: Well it is not an area that I or the Institute have given a great deal of thought to. Having outsourced some services myself, just to declare something, when I ran the Information Technology Services Agency, from the then Department of Social Security in 1994­1995, I think there are sometimes some very strong reasons to do with expertise and economies of scale for putting services out to the private sector, but I would hesitate to say that that was necessarily an argument that you would apply in detail to these bodies.

Q251   Chair: Would it not be more honest to say that there are just some things that the Government shouldn't do and if they don't happen at all, that is the price of shrinking government? If you want smaller government, that is the price of smaller government.

Professor Talbot: Well there are two types of putting out to the private sector. One is where you are outsourcing something that the Government still wants to do and still funds, but wants to be done by private sector bodies. There certainly can be cases where that makes sense and that needs serious review. The other is where the Government says, "Well it does not matter whether this continues to happen or not and we will privatise or abolish whatever is there". But again, I don't get the sense that there has actually been a very serious review of these things in this process.

Q252   Chair: So what hopes do you have for the triennial reviews?

Professor Talbot: The time that we had this before was when we had the Next Step agencies and, if I could say, the agencification of executive non­departmental public bodies in the 1990s, and most of the triennial or quinquennial reviews that took place then led to no change at all to those bodies. In most cases, they were fairly routine processes.

Q253   Chair: So you don't hold much store by the triennial reviews?

Professor Talbot: Well first of all, they were conducted entirely within the ministries and there was no external input into those processes. I think if there was some external input, some peer review element to it and some parliamentary input, not for all of them—

Q254   Chair: How could a Select Committee do a triennial review of 901 public bodies? It is a nice idea, isn't it?

Professor Talbot: I was trying to say, Chair, that I take your point from the previous session that you wouldn't want to do that for things like the Defence Animals Centre, which trains guard dogs for the Forces or whatever. But for the bigger agencies and NDPBs, you may well want to get involved in them and I would be surprised if you didn't. If there was going to be a review of Jobcentre Plus, for example, I would expect the Work and Pensions Committee to be very interested in whether or not that remained as an agency or became an NDPB or was outsourced to the private sector.

Q255   Chair: But the previous Government, Sir Ian, used to have regular reviews, but they found they cost a lot of money.

Sir Ian Magee: Yes. There are reviews and reviews. We recommended that there should be reviews, particularly of the big spending agencies, which goes to a point that you raised with the union representatives at the last session. Both the departmental Select Committee and your own Committee, Chairman, have a locus when a new non-departmental public body is created if, as we are recommending, it sets out a clear business plan. Then you have something against which to measure it. It does not have to be at the detailed level. The quinquennial reviews were incredibly detailed in some cases; I underwent four of them and I think I'm choosing my words advisedly, really, because they were not just a drain on resources in terms of time, but also a drain on money resources. So there is that. The second thing is that these reviews will be most effective if they look at departments as well. One of the reasons that we are in the state that we are in is that, as I think we brought out in our own evidence, departments have sometimes been pretty ineffective in holding their arm's length bodies to account. The evidence that we collected suggested that their interventions ranged on the one end of the spectrum from micromanagement with a number of different Directors General getting involved so that the agency was almost inhibited from doing its job properly, right the way through to almost benign neglect on the other, where the agency or non­departmental public body has taken on its own life, as it were, and where Secretaries of State get frustrated because a policy unit has built up within the non­departmental public body that appears to be mirroring and duplicating the functions within the department. If reviews go to address those sorts of points and if they are properly wide ranging and if they are focused so that your time is not wasted but is actually specific, then they will mean something.

Q256   Chair: But doesn't a quinquennial or triennial review leave all these bodies under the cosh? Is that good for their morale and their effectiveness?

Professor Flinders: Well I think what is very bad for the morale of these public bodies is the process they have just been through, to be quite honest, because most bodies and the employees, which are the greater part of the public sector, have been left incredibly anxious and frustrated about where exactly they stand. So I think in terms of public morale, not doing this process again would be a good starting point. I do not think there is anything wrong with a creative tension; most public and private bodies I have been involved with will have some regular form of external friend questioning about their roles, fitness for purpose, etc. I do not think anybody would have any problems with that. I think the problem with the quinquennial reviews was that they were internal reviews and a lot of departments lack the support to know how to run them effectively. I think this goes back to this issue about the centre. The Civil Service College is changing; a lot of people have been critical about what it provided; support for training and sponsorship. The Institute for Government has filled an incredibly important vacuum at the heart of government. It's really about how can we build the skills and knowledge base that allow us to manage this arm's length model better?

Q257   Chair: Is it a good idea to have a three-year review of the whole lot or would it be better, as the Institute for Government suggest, to have sunset clauses for each one so that there is a rolling review of different organisations at different times and it's just a constant part of management of arm's length public bodies?

Professor Talbot: I would completely agree with that, but I would also pick up on this point about the management; it is interesting we use the language of parent departments. If I can paraphrase what Sir Ian has said, I have researched this problem about the relationship between parent departments and arm's length bodies in a number of different countries and the common problem comes up about either the parent department taking this liberal parent approach of, "Well we don't have to manage that anymore because it has been set up as an agency" or whatever it has been called in different countries, or they continue to micromanage as if it was still part of the department. They find it very difficult to develop a more adult relationship, if I may say, between the agency delivering the services and the sponsoring department. That is a major problem. One of the problems there—and the literature on strategic management in diversified private sector organisations makes this very clear—is that if you have too many different sorts of relationships between your various satellite organisations and the corporate centre, it makes it incredibly difficult for the corporate centre to know what sort of managerial relationship it has with these different bodies, which is why, if you look at successful diversified corporations, most of them have a simple subset of relationships with their constituent companies so that they know exactly what sort of relationship they have with what sort of body. I think the work the Institute has done on highlighting the complexities for most government departments, having a range—the Institute said 11; I suspect it is an awful lot more than that—of different types of relationship, nobody knowing what the relationships are and who is responsible for what, makes it almost impossible for departments to actually operate this system properly.

Q258   Chair: Right, we must draw to a close, but can I just ask very briefly, should this business of reviews be in some way expressed in the Bill?

Professor Flinders: I think some acknowledgment that a regular review of some kind would be a matter of common good governance in most other countries would be very helpful. I think the Bill actually has a lot of work to be done before it is at a stage that it should be passed.

Sir Ian Magee: Yes.

Professor Talbot: Yes.

Q259   Chair: Yes, okay. And finally, just looking at the whole question of managing the transition, which we have quite substantially discussed already, in fact, and I don't know whether we need to revisit this at all—I think we are actually done. You have been very, very helpful. Thank you very much indeed and if you have any further thoughts you want to add on paper, please do send them in. Thank you very much indeed.

Sir Ian Magee: Thank you.

Professor Flinders: Thank you.

Professor Talbot: Thank you.

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