2 The Government's review |
8. Shortly after its election, the Coalition
Government undertook a review of all public bodies sponsored by
departments, excluding executive agencies. The stated aim of this
review was "primarily" to increase the accountability
of government. To achieve
this the review attempted to identify functions that could be
transferred from public bodies to central departments. The Government
argued that ministers would then be directly responsible for these
activities, and could be held to account by Parliament for the
discharge of these functions. We evaluate the merits of this position
in Chapter 6. A total
of 901 public bodies were considered as part of the review. Table
1 (below) provides a summary of the review's outcomes.
1: Outcome of Public Bodies Review
|Retained and Reformed
9. Francis Maude, Minister for the Cabinet Office,
described how the review was to be conducted when he reported
to the House on its outcome:
I have led an intensive review into public bodies,
subjecting each to four tests. The first test was existential
and asked, does the body need to exist and do its functions
need to be carried out at all? The answer to that question in
some cases was no. [...]
If, as in most cases, the body's functions were deemed
necessary, we then sought to establish whether those functions
should properly be carried out at arm's length to government.
If the body carries out a highly technical activity, is required
to be politically impartial or needs to act independently
to establish facts, then it is right for it to remain outside
direct ministerial accountability.
10. Before this, and the accompanying written
statement, the only explanation of the tests we can find is in
David Cameron's speech of July 2009 on public bodies reform where
he described the second set of tests:
there are three particular areas where the public
would want reassurance that actions, decisions, or the provision
of services are insulated from political influence.
The first is when a precise technical operation
needs to be performed to fulfill a ministerial mandate. In
these circumstances the public needs to know that people with
the right training, professional knowledge and specialist skills
are carrying out the work.
The second area where it may be right to delegate
power to an independent body is when there is a need for politically
impartial decisions to be made about the distribution of taxpayers'
money. In areas like the arts and science, the public expects
funding on merit, not favouritism.
The third area where there is likely to be a need
for independent action is when facts need to be transparently
determined. We have seen how information, once in a politician's
hands, can be distorted to score a political point. A freeze becomes
a zero percent rise. Cuts in capital expenditure become increases.
Of course this has not been the preserve of any particular government,
at any particular time.
11. From these comments we deduce that there
was a two stage process: first, whether a body was performing
a function that it was necessary for the State to perform - the
"existential test". If a body passed this stage then
the Government used three further tests to determine whether the
function needed to be delivered outside a central department -
the "technical" test, the "impartiality" test
and the "facts" test.
12. We asked the public bodies that gave evidence
to us whether the second stage tests had been explained to them.
Ms Done, Chair of the Youth Justice Board (YJB) replied that "I
don't think there was anyone able to explain what they all individually
Sinclair, Director of the Taxpayers' Alliance also expressed concern
about the lack of clarity in the tests, commenting that the Government
had come up with a series of criteria that were "very
easy to fudge."
13. We asked the Minister how the tests had been
defined, focusing specifically on the "technical" test.
He responded that:
Well, if it's doing something that does not requirewhere
the decisions being made are purely technical, I think that's
the consideration: where you're not making policy judgments.
... for example, the Child Maintenance and Enforcement
Commission will become an executive agency, because actually that
is fulfilling an important public functionnot a technical
one in that sensewhich should be accountable to Parliament.
Sometimes, there are technical functions that the public will
expect to be clearly not capable of being interfered with by ministers.
This seems an odd basis on which to make a decision
as it implies that a technical function cannot be an important
public function. Regulating pollution, the example the Minister
later gave of a technical function, is surely an important public
14. Francis Maude also said that the application
of the test was not "absolutely precise" and
at the end of it, we're making judgments about whether
we think public functionsstate functionshave to
be delivered in a way that is unaccountable. These are tests that
help us to reach those judgments; this is not a precise science.
These comments caused us to doubt whether the tests
had been properly thought through or whether they were capable
of clear definition. We wrote to the Cabinet Office to ask whether
it had issued guidance or clarification to departments explaining
the tests. The Cabinet Office wrote to all departments in June
with an "initial view on how the four tests could apply
to each department's public bodies". The Cabinet Office
also said that a series of meetings on how to apply the tests
had taken place, at both official and ministerial level. However,
no written guidance had been issued.
15. It is also unclear whether all three of the
tests the Government set were necessary in determining whether
a function should remain at arm's length from Government. The
IfG, during its research for its report Read Before Burning,
conducted its own evaluation of public bodies and the level of
independence they need to discharge their functions properly.
Their evidence states that:
The key issue for deciding to put a function at arm's
length is the degree of independence from day-to-day ministerial
intervention needed to enable the body to command public confidence
that it can perform its function in the public interest.
The IfG said that its analysis "put less
emphasis on technical expertise and more on the need to give independence
to bodies which need to command public confidence in their ability
to scrutinise government and to develop regulatory or standards
regimes" and concluded that there was "no
necessary reason why technical functions should be put at arm's
length from government, unless that is necessary to command public
16. The Minister acknowledged that some technical
functions were already exercised by executive agencies.
He went on to argue that technical functions should remain outside
the department when this was necessary to ensure public confidence
that the function was being discharged impartially.
What I think we mean is that this is a function that
the public would not expect to be carried outit overlaps
into the criterion about political impartialitya function
that requires political impartialitywhere you would not
expect the decisions on technical issues to be able to be overset
by ministers or councillors.
17. This argument is premised on ensuring that
technical functions which needed to be beyond ministerial influence
were discharged in a way that was demonstrably politically impartial.
When pressed as to whether technical function itself was a relevant
criterion, he responded that it was necessary "because
it overlaps, but there are plenty of these bodies that will continue
to exist because they in some way meet more than one of these
Based on these comments we can see no reason why the "technical"
test should be one of the tests at all.
18. We have similar doubts about the third test:
the "facts" test. This appears to be a sub-section of
the wider political impartiality test. Only five bodies have been
retained on these grounds,
although there are more than five bodies that independently establish
facts. Francis Maude explained that for a body to pass this test
it needed to "measure facts in a way that requires it
to be seen to be independent of government".
The common denominator for all three tests is independence from
government. In addition to the existential test, "impartiality"
is the only other criterion public bodies should be asked to meet,
regardless of their functions.
19. The three second stage "tests"
may have seemed superficially plausible at the outset, but they
are hopelessly unclear. "Impartiality" is the test that
is relevant and this appears to be the motivating factor behind
the other two tests. In fact, the "technical" test and
the "facts" test serve only to confuse.
20. The Government's four tests focus on two
issues, whether or not the body performs a necessary function
("existential" test); and whether this function needs
to be, and appears to be, independent of political influence ("impartiality
test"). They are silent on a range of other issues, such
as the implication of changes on the wider public policy framework,
value for money, or current performance of organisations. We asked
our witnesses whether these or any other considerations should
have been included in the review. We were told by Sir Ian Magee,
IfG that value for money should have been incorporated into these
Karamjit Singh, the Social Fund Commissioner, argued that the
criteria were too limited because they failed to take account
of the current performance of, and value for money being achieved
by, existing bodies.
21. The Government has repeatedly said that these
reforms are "primarily" about improving accountability.
While cost savings would be achieved, they were not the main force
motivating the review. However, the Government has introduced
considerations that seem to be about value for money in the Public
Bodies Reform Bill [Lords]. Clause 8 of the Bill says that
when exercising the powers given to them by the Bill Ministers
must have regard to:
i. achieving increased efficiency, effectiveness
and economy in the exercise of public functions; and
ii. securing appropriate accountability to Ministers
in the exercise of such functions.
While this does not explicitly say that value for
money is an issue that Ministers should consider, increasing
efficiency and effectiveness and economy in the exercise of public
functions would appear to be similar to increasing value for money
in the delivery of these functions. Achieving value for money
is a perfectly legitimate aim for the Government, and one that
we are keen for it to pursue, but it should be transparent about
22. We are also concerned that difference between
the original government tests and the provisions of Clause 8 of
the Bill (above) will lead to confusion. Currently, there are
the "existential" and "impartiality" tests
which were used in the Government review; while tests concerned
with accountability and efficiency are written into the Public
Bodies Reform Bill.
23. The tests used in the review
should be the tests contained in the Bill. Confusion about the
three second stage tests might explain why the tests the Government
used in the review are not those outlined in Clause 8 of the Public
Bodies Reform Bill [Lords]. The inclusion of a "value for
money" test in the Bill but not the review is a further inconsistency.
There should be a single set of tests that covers: whether a function
needs to be performed (existential), whether it is appropriate
for it to be performed independently by a public body (impartiality);
and how it can be delivered most cost-effectively (value for money).
The present incoherence and inconsistencies cannot have helped
the conduct of the review or the drafting of the Bill.
24. The Government's most recent guidance on
consultation, issued in July 2008, states that "effective
consultation brings to light valuable information which the Government
can use to design effective solutions. Put simply, effective consultation
allows the Government to make informed decisions on matters of
However, the Government does not seem to have followed its own
advice when deciding how to proceed with public bodies reform.
Many witnesses told us that they felt the Government had failed
to conduct a proper consultation exercise when performing this
25. The Public and Commercial Services (PCS)
Union's written evidence stated that they had "major concerns"
about the lack of consultation with those that use and provide
public bodies' services.
This was a theme that the unions expanded upon during their oral
evidence. Charles Cochrane, Secretary of the Council of Civil
Service Unions told us that:
Whilst we initiated some discussions with the Cabinet
Office to ask both about the general process of reviews and abolition
of public bodies and of the Bill, we certainly weren't subject
to any formal consultation.
Jonathan Baume, Secretary-General of the FDA said
We were not consulted beforehand. On one or two cases
we might have had about an hour's advance notice of announcements
being made, but certainly no advance consultation.
Commenting on the decision to abolish the regional
development agencies, Geoff Lewtas of PCS, complained that:
There has been no debate at all about the real reasons
for that decision and no possibility since of any proper consultation
that means you can have a dialogue about the reasoning behind
it and the justification for it and start to examine those arguments
and discuss them in a proper manner.
26. Public bodies themselves were not consulted
in any consistent way. For example, Christopher Banks, Chair of
the Public Chairs Forum
said that there is a "sense of tokenism" in the
Government's engagement with bodies under review. He quotes one
Chair who said that:
The Government's version of involving an ALB [Arm's
Length Body] in the decision about its future appears to be telling
it that it is being reviewed and that they will be told the outcome
at the end of the process.
Frances Done, Chair of the Youth Justice Board (YJB),
also reported that the Board had not been directly consulted about
the decision to abolish it.
27. The Minister was asked what consultation
the Government had undertaken in advance of taking these decisions.
He responded that the level of consultation would have been "very
varied [...] in some cases, will have been quite extensive;
in other cases, will have been very little."
He explained that this was because the reviews were conducted
by individual departments and each of them will have followed
their own procedures. He also said that:
These are essentially decisions in principle; these
are decisions made where departments will know, or should know
and I'm sure do, in a great deal of detail what those bodies do,
what their functions are and how they are carried out.
This can only mean that he believes that the nature
of the decisions the Government was taking meant that consultation
was unnecessary; that these were academic questions which could
be answered solely by thinking about the type of function that
a body performs. This is not the case. As
a minimum the bodies affected by these reforms should have been
consulted to see how they thought the Government's tests applied
28. We are not alone in expressing concerns about
the lack of consultation. The Lords Constitution Committee recommended
that all orders made using the Public Bodies Reform Bill should
use the "super affirmative procedure" which would involve
publishing the order in draft for consultation.
The Government has itself acknowledged that there is a need for
greater consultation as it has brought forward it own amendments
to the Bill that would require it to consult before bringing forward
an order to implement a change to a public body.
29. The Government did not consult
properly on these proposals. When undertaking such a fundamental
review of the machinery of government it is desirable and sensible
to do so. We welcome that fact the Government is now taking steps
to rectify this, but question how useful consultation can be,
given that decisions on the future of many bodies have already
been taken. Having agreed to amend the Bill to allow for more
consultation we expect these consultations to have real effect
on the outcome of the review; even if this means reversing decisions
that have already been made. We expect the Government to give
us such an assurance in its response to this Report.
APPLYING THE TESTS
30. We also have concerns that the Governments
did not apply its tests consistently.
Lack of explanation
31. In several cases, the Government has declined
to provide an explanation for why it intends to retain a body.
This has happened in cases where:
i. The body is being retained and subject to
radical reforms e.g. Environment Agency, Equalities and Human
Rights Commission, Financial Reporting Council, Forestry Commission,
Homes and Communities Agency and Natural England;
ii. Two or more bodies are being merged e.g.:
Certification Office and Central Arbitration Committee; Competition
Commission and Office of Fair Trading; Postcomm and Ofcom; Gambling
Commission and National Lottery Commission; UK Sport and Sport
England; Pensions Ombudsman and Pensions Protection Fund Ombudsman;
Serious Organised Crime Agency into the new National Crime Agency;
and Crown Prosecution Service and Revenue and Customs Prosecutions
iii. The body is simply being retained e.g. Competitions
Appeals Tribunal, Equality 2025, Health and Safety Executive,
Monitor, OFWAT, and Royal Mail Holdings Plc.
This suggests that some decisions may have been taken
without reference to the tests.
Transparency: a further test?
32. The Ministry of Justice has retained bodies
on the grounds of "transparency" despite the fact that
this is not one of the tests that the Government laid down.
Since it has retained other quangos on the grounds of technical
function and impartiality, we can presume that it has used the
term transparency in place of the "facts" test. However,
the use of an additional term to justify a decision suggests that
the tests were not applied consistently.
Similar bodies treated differently
33. Finally there is evidence of similar bodies
being treated differently. For example, Sir Ian Magee, IfG, said
that it was not immediately clear "[...] why arts and
sport funding needs to be independent, but film funding doesn't
need to be independent".
Professor Flinders, Sheffield University, gave further examples:
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? [...] The process for assessing
the future births, deaths and marriages of public bodies has simply
not been transparent; nobody understands it.
34. There was also a general agreement amongst
the academics that this inconsistency had been at least partially
caused by the speed at which the review had been conducted. Professor
Talbot commented that he could not imagine that the process had
been conducted with the necessary care due to the "extraordinary
pace" at which the Government had proceeded.
35. Mr Burkard, Centre for Policy Studies made
a similar point, noting that the speed at which the review had
been conducted had led to some bodies not receiving the level
of detailed scrutiny that was required.
The fact that the thing was rushed has a lot to do
with political necessity to show that something has been done,
but the fact that it was rushed also meant that an awful lot of
bodies that probably need a lot more scrutiny haven't received
that kind of scrutiny.
36. When challenged about whether the tests had
been applied consistently, the Minister insisted "that
the results of the review are reasonably consistent."
He also said that his ministerial responsibilities included overseeing
the review "to ensure that it was carried out in a way
that was reasonably consistent." We suggested the possibility
of an analysis being produced on how the tests had been applied.
He replied that:
I'd recommend you looking in detail at what each
department has said and see whether you think they're meeting
thatwhat you would like to see. I think you'll find that
quite a lot of them have done that.
In the first instance it is the responsibility of
the Minister of the Cabinet Office to ascertain whether each department
has applied the tests consistently.
37. We are not convinced that
the Government has applied its tests consistently. Neither can
we find any evidence to suggest that it took any steps to ensure
a uniform approach was taken. We recommend that the Cabinet Office
publish details on how the tests have been applied to all public
bodies that are still under review, so we can ensure that in future
these tests are applied consistently.
38. The lack of consultation
and inconsistent application of the tests, which are themselves
confusing, have led us to conclude that there was no coherent
and consistent process for reviewing public bodies.
The Minister's own comments seem to confirm this. He said, "What
process each one went through, I suspect, will have varied enormously".
When asked directly whether
the Cabinet Office had issued any guidance as to how departments
should conduct this review, he replied:
No, we simply said, "These are the tests which
you must apply," and we then have oversight of the results
of the review, and we test the conclusions that the departments
have reached and, as I made clear in the statement whenever it
wastwo weeks agosome of the reviews are not yet
complete and some of the bodies are still being considered.
The Cabinet Office's submission also states that
no written guidance was given to departments on how to apply the
tests, but that consistency was ensured through discussion between
officials in the Cabinet Office and other departments.
39. The Cabinet Office should
have offered guidance to departments on how to conduct these reviews
of public bodies; including provision for a meaningful consultation
exercise and details on how the tests should be applied. While
this might have taken longer, we see no reason that justifies
rushing the review process. This extra time would have allowed
the Government to conduct a measured and balanced review, and
also have given it the opportunity to consider in more detail
which functions it was necessary to retain.
5 With value for money being a secondary consideration. Back
See para 73 ff Back
HC Deb 14 October 2010, col 505 (our emphasis) Back
(our emphasis) Back
Q 20 Back
Q 302 Back
Q 57 Back
Q 59 Back
Qq 58-59 Back
Q 67 Back
Ev 62 Back
Ev 50 Back
Q 59 Back
Q 62 Back
Q 63 Back
Ev w14 Scrutiny Unit note [Note: references to Ev wxx refers to
the volume of additional evidence published solely on the Committee's
Q 50 Back
Q 229 Back
Ev w5 Back
Public Bodies Reform Bill [Lords], Clause 8, [HL Bill 25 (2010-2011)] Back
HM Government, Code of Practice on Consultation, Foreword,
July 2008 Back
Ev 56 Back
Q 150 [Mr Cochrane] Back
Q 151 [Mr Baume] Back
Q 151 [Mr Lewtas] Back
Which describes itself as "a network of Chairs committed
to improving public service delivery". Back
Ev w2 Back
Q 15 [Ms Done] Back
Q 44 Back
Q 43 Back
Lords Constitution Committee, Public Bodies Reform Bill [HL],
Sixth Report of the Session 2010-11, HL Paper 51 Back
Amendment 114 Back
Ev w14 Back
Q 229 Back
Q 234 [Professor Flinders] Back
Q 233 Back
Q 296 [Mr Burkard] Back
Q 66 Back
Q 80 Back
Q 43 Back
Q 48 Back
Ev 62 Back