House of Commons - Smaller Government: Shrinking the Quango State

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

6 Accountability

73. The Government has stated that the primary motivation behind the reforms to public bodies is to improve the accountability of government. Speaking in the House about the outcome of the review process, Frances Maude, Minister for the Cabinet Office, argued that the changes were:

principally about increasing accountability - the important presumption that when an activity is carried out by the state, and there is no pressing need to do so at arm's length from government, it should be carried out by someone who is accountable democratically, either a Minister who is accountable to this House and, through this House, to the public, or a local authority that is accountable to local residents.[86]

This is a reasonable aim for the Government to pursue. The current accountability arrangements are not always easy to understand and the Government is often held responsible, by the media and the public, for activities of bodies that it has a limited ability to control.

Accountability or cost savings?

74. The Government hopes to improve accountability by bringing the functions of public bodies back into departments unless there is a reason why the function needs to remain at arm's length from ministerial influence. By doing so ministers, or other elected officials, would be directly responsible for the majority of government activities and could be held to account by Parliament and the electorate for the discharge of those functions. As Mike Penning, Parliamentary Undersecretary of State at the Department for Transport told us, a significant feature of his activity as minister had been to pull in more closely a number of departmental agencies. "I have several large agencies that under the previous Administration were given huge autonomy; I've reined that autonomy in as hard as I can."[87]

75. Not all of our witnesses were convinced that improving accountability was the main factor motivating the reforms. Professor Flinders, Sheffield University, argued that originally the intention had been to save money. He believed that it was only after the election that the focus of the debate shifted towards accountability:

I think it's quite clear that pre-election 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.[88]

76. The Conservative party's manifesto makes the following comments on public bodies:

Over the course of a Parliament, we will cut Whitehall policy, funding and regulation costs by a third, saving £2 billion a year, and save a further £1 billion a year from quangos bureaucracy.

We will cut the unaccountable quango state and root out waste.

The explosion of unaccountable quangos, public sector 'nonjobs' and costly bureaucracy is an indictment of Labour's reckless approach to spending other people's money. Once again, it undermines public trust in the political process.

Under Labour, the quango state has flourished. Government figures show that there are over 700 unelected bodies spending £46 billion every year, but this does not even include the range of advisory bodies, public corporations, taskforces and regional government bodies that have sprung up under Labour. We believe that Ministers should be responsible for government policy, not unelected bureaucrats.[89]

77. These comments indicate that concerns about both cost and accountability were motivating the Conservative party's thinking. A similar mix of concerns can be found in David Cameron's speech on public bodies that he made on 6 July 2009.

The growth in the number of quangos, and in the scope of their influence, raises important questions for our democracy and politics.

Questions of accountability - now vital in the light of the damaged trust in our political system.

Questions about public spending control - now vital in the light of the debt crisis.

And questions about sheer effectiveness - increasingly urgent as people see their taxes going up, but the quality of their lives going down.[90]

However he then went on to make a number of points which seemed to highlight the importance of using public body reform to reduce government spending. Most notably when he said "we'll never get control of public spending unless we get control of quangos."[91]

78. When we asked the Minister whether cost savings were a consideration in the review he replied that:

Well, it's a factor, but it's a secondary factor. Certainly it was a factor in taking the decisions to remove duplication where there were bodies which were duplicating their activities, with overlapping functions—sometimes functions which were in conflict with each other—seeking to remove those, driven primarily by the desire to save money and improve value for money, but as I say, the primary consideration throughout has been to increase accountability.[92]

ACCOUNTABILITY AND THE REVIEW PROCESS

79. The process that Government has used in the review to evaluate public bodies partly supports the claim that accountability was the main motive for the reforms. Both the scope of the review and the three "main" tests were designed to establish the appropriate level of ministerial accountability for a public body's function.[93]

80. However, the tests that the Government announced would be used as part of the review do not seem to be the only tests they are applying. The Public Bodies Reform Bill [Lords] includes a different list of factors that the Minister must have regard to when making reforms to public bodies. When we questioned the Minister about this discrepancy he denied that the Government had "moved the goal post" insisting that "everything we [the Conservatives] said about this before the election made it clear that this was principally about accountability."[94]

THE PRIMACY OF ACCOUNTABILITY?

81. Some reforms proposed by the review do not seem have any basis in accountability. A number of bodies that were reviewed have had their outcome listed as "retain and reform". In most cases there is very limited information available about the nature of these reforms. But in some cases the short description of the "substantial reform" suggests that cost savings and not accountability drove individual changes. For example, the Financial Reporting Council is to be retained and "substantially reformed" the reform being to "remove reliance on Government funding". The reforms to the Equalities and Human Rights Commissions are intended to ensure a "better focus on its core regulatory functions and improved use of taxpayers' money." Similarly, Passenger Focus will be reformed to focus on "core role of protecting passengers, while reducing cost to taxpayers."[95]

82. We asked Sir Gus O'Donnell, Cabinet Secretary, to write to us with the latest estimates of the total savings likely to be achieved by the review. In his response he emphasised that the "primary reason for the reforms to public bodies is to ensure that accountability rests in the right place."[96]But he continued that he expected "the exercise will reduce duplication of effort and activity, either by stopping functions that are no longer vital to the delivery of public services, or by streamlining activities and reducing administrative costs."[97] He was not able to give us an estimate for the total cost saving, merely saying that public body reform would "make a contribution" to the achievement of wider targets for administrative savings.[98]

83. At the outset, both accountability and value for money were considerations, but the extent to which quangos reform would yield significant savings was probably exaggerated. This created a false expectation that the review would deliver greater savings than it has been able to realise. Consequently, the Government appears unsure about the extent to which the reform will result in significant savings for the taxpayer.

COST SAVINGS

84. We questioned why it was not possible to use the review to deliver significant reductions in public expenditure. Mr Sinclair, Taxpayers' Alliance (TPA), certainly thought that there was scope for the review to have delivered greater cost savings.

Anyone who has tried to put together a package of cuts that would add up to a substantial amount—certainly we found this—without getting rid of some of the larger quangos, which are the ones which haven't been touched—as you say, haven't been hit enough in this review—will find it very hard to make those sums add up without putting what may be an untenable burden on household budgets. That is why more of these quangos need to be abolished.[99]

85. We believe that the answer to this question is that there is a limit to the amount of savings that can be found by changing how functions are delivered. As the IfG notes in its report:

much of the money 'spent' by NDPBs could not realistically be reduced by simply abolishing a body: 75% of NDPB costs are grants that are passed on to others, funding universities, legal aid and other core government functions. To make cuts in these areas, difficult policy decisions would be required.[100]

If the Government wishes to make significant savings in public body expenditure it needs to take a more fundamental look at which services it wishes to continue to provide. While it is possible to make greater efficiency savings, there will be a limit to the reductions that can be made in public body expenditure unless a political decision is taken for these organisations to do fewer things. We do not believe that the Government has used this review to undertake this sort of analysis - another reason why the Government should have taken longer to conduct this review.

Increasing accountability?

Doctrine of ministerial accountability

86. The Prime Minister summarised this argument in his speech of 6 July 2009 when he said:

Our starting presumption is a preference for democratic accountability over bureaucratic accountability. That means that wherever possible, we will expect ministers to exercise their responsibility through their departments.[101]

One argument advanced in favour of bringing functions back into departments is that previously public bodies had allowed ministers to evade responsibility for decisions that they should have been accountable for. Mr Sinclair, Director of the TPA, argued that when a department was directly responsible for delivery "you don't have that ability to blame an outside body when things go wrong."[102] The TPA's report ACA to YJB: A Guide to the UK's Semi-Autonomous Public Bodies cites the delay in the marking of SATs papers in 2007 as an example where a public body (in this case QCA) was blamed for decision when in reality ministers had been closely involved.[103]

87. The Minister made a similar point arguing "in the past, various public bodies were set up in order to avoid ministers having to take responsibility for difficult decisions."[104] He believed that ministers should be responsible for these decisions "that seems to us [to be] what ministers are for: to take decisions and justify them."[105] Essentially this argument can be reduced to the claim that there are some public bodies that perform functions that do not require independence from ministerial influence. Therefore, these are functions properly performed by central departments.

88. Francis Maude said that the advantage of having responsibility reside with a minister is that "minister[s] can be held accountable in Parliament for how that function is carried out, how the policy is set and how the policy is administered." In essence this was an argument based on the primacy of Parliament as a forum for accountability. The Minister summarised his position by saying:

[...] it all depends whether you believe in parliamentary accountability. Call me old-fashioned: I believe in parliamentary government.[106]

WILL IT WORK?

89. Not all those who contributed to our inquiry agreed with the Minister's view that his proposals to transfer functions from public bodies back into departments would result in greater accountability. Those who currently served on public bodies argued that there were already a number of mechanisms in place to ensure that they were suitably accountable for their actions. Ms Done, Chair, Youth Justice Board described the various ways in which her organisation was held to account including: the Secretary of State setting performance targets and signing the corporate plan and annual review; being audited by the NAO; and having a senior manager from the department attend board meetings.[107] Ms Chester of Sport England made similar points.[108]

90. When asked if these reforms would lead to them being more accountable Ms Chester said she was sure the current standard of accountability and transparency would be "maintained" following the merger of Sport England with UK Sport. Ms Done did not believe that the transfer of youth justice functions to the MoJ would lead to any increase in accountability "because quite honestly we're very closely working with them [ministers] already."[109]

91. Many of the academics and think tanks which contributed to our inquiry were equally unsure whether these reforms would deliver greater accountability. The IfG state in their evidence that they do not think that "rationalisation of the arm's length landscape will necessarily improve accountability." They continued that:

there may be a trade-off between the relative transparency of decision-making in an ALB, with a Board and Chief Executive publically answerable for decisions, and more direct ministerial accountability.[110]

Similarly, Christopher Banks, Chair of the Public Chairs Forum, argued that increased accountability is not a necessary outcome and will depend greatly on the detail of the new arrangement.[111] Professor Flinders was perhaps the most scathing of the Minister's description of accountability, saying:

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.[112]

He concluded that there were different forms of accountability beyond traditional ministerial accountability.

Other forms of accountability

92. We explored these other forms of accountability with our witnesses. One of the benefits identified in the current system was that a public body, with a Chief Executive and a Board, responsible for defined policy area, were in some ways more accountable than civil servants who perform similar functions from within departments. The IfG expanded on this point in Read Before Burning:

ALBs are not as exempt from blame and sanction as commentators sometimes suggest. Indeed, NDPB chairs often argue that they are in practice much more accountable than their civil service counterparts. They are accountable to the department and the minister, they can be summoned to appear before a select committee, and while civil servants are rarely named and can take refuge behind the doctrine of ministerial responsibility, ALB chairs and CEOs appear in the media in their own right and can carry the can for their decisions.[113]

93. Another frequently voiced concern was moving a function from a public body into a department meant running the risk of neglecting some important public function. As Mr Singh, the Social Fund Commissioner, stated in his evidence, 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."[114] Ms Done said:

There is a big issue for anyone who's interested in youth justice about how, when moving into a very big department like the Ministry of Justice—which has got a huge focus on adults—the five per cent that is the youth justice system gets the attention it needs.[115]

94. In addition to a lack of attention from the department, Professor Flinders argued that these reforms could lead to less challenge and input for outside organisations. Evidence from previous reorganisations showed that these reforms were unlikely to increase accountability because they would undermine the relationships that had developed between bodies and their stakeholders in civil society. Such relationships would not survive the functions transition back into departments:

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.[116]

Ms Done also used her evidence to highlight the importance of these other channels of accountability.

In terms of wider accountabilities, which I think are really important, we're very accountable to the youth justice system as a whole—all those people out there working with young offenders—and that's done through our relationships at local and national level. [...] So we feel very accountable. In fact the prison reform lobby is not unwilling to come forward and be demanding information at any time or explanations. So very accountable for what we do.[117]

The Executive Agency model

95. Professor Talbot argued that bringing a function into a department could make it more difficult for a minister to exercise direct control over it, owing to the number of levels of civil service management between the minister and the responsible policy officer. Speaking about the establishment of Executive Agencies in the 1980s. He said that:

The reason that at the time people argued that it would improve ministerial accountability [...] was because if you take a large department like the Home Office, for example, a small part of that department, something like [... the] Passport Agency as it now is, [it] 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.[118]

While this is an interesting argument, there is a fundamental difference between Executive Agencies and public bodies. Ministers are directly responsible for the activities of Executive Agencies, which is not the case with public bodies. However, it does suggest a possible solution to the problem the Government currently faces. Where possible, it should convert public bodies into Executive Agencies; this would allow ultimate responsibility to lie with ministers and allow them to have a degree of control to match that responsibility but without the risk of functions getting ignored within a large departmental structure.

96. The Government has not made the case that these reforms will improve accountability. We believe that its narrow definition of accountability has inhibited its ability to develop mechanisms that will actually deliver a more responsible and transparent system. We sympathise with the desire of ministers to have direct responsibility for functions for which they are likely to be held to account. But we also believe that bringing functions back into sponsor departments is likely to undermine other channels of accountability, particularly with relevant stakeholder groups, and risk leaving policies fighting numerous other priorities for ministerial attention. This will mean less effective accountability and challenge on a day-to-day basis.

97. We believe that the Executive Agency model offers a possible solution. It allows ministers direct responsibility for policy, combined with the ability to influence it, while still enabling high quality "day-to-day" accountability by stakeholder groups. We recommend that the Government consider converting those organisations which it intends to retain and move into Government departments into Executive Agencies. If this is not feasible, we recommend the Government explain why this is not a workable solution.

Accountability to Parliament

98. Another important way that public bodies can be held to account is through the Select Committee system. Departmental Select Committees are charged with the scrutiny of public bodies that fall within their department's remit, and many appointments to public bodies are subject to a pre-appointment hearing. However the Minister did not believe that this was a substitute for having a minister directly responsible for a policy area. "They [Chairs of public bodies] can be summoned in front of a Select Committee, for sure, but the essence of parliamentary government is that ministers are accountable in Parliament."[119]

99. We believe that accountability to Parliament, including the appearance before Select Committees is an important mechanism for scrutinising public bodies. Many of our witnesses argued that there should be a greater role for Select Committee in monitoring the activities of public bodies. We intend to bring forward proposals to strengthen Select Committees' role in scrutinising changes to public bodies in our future report on the detail of the Public Bodies Reform Bill.

86 HC Deb 14 October 2010, col 505 Back

87 Oral Evidence taken before the Public Administration Select Committee on 7 December 2010 Q 231 [Mike Penning MP] Back

88 Q 239 [Professor Flinders] Back

89 http://media.conservatives.s3.amazonaws.com/manifesto/cpmanifesto2010_hires.pdf Back

90 http://www.conservatives.com/News/Speeches/2009/07/David_Cameron_People_Power_-_Reforming_Quangos.aspx Back

91 Ibid Back

92 Q 52 (Our emphasis.) Back

93 Please see para 8 ff for a fuller description of the scope of the review and tests used. Back

94 Q 55 Back

95 http://www.direct.gov.uk/prod_consum_dg/groups/dg_digitalassets/@dg/@en/documents/digitalasset/dg_191543.pdf Back

96 Ev w13 Back

97 Ev w13 Back