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

7  Opportunities for wider reform

100.  We have identified three ways in which we think the Government could have used this review to undertake more radical reform of the use it makes of arm's length bodies. These are:

i.  to advance the Government's "Big Society" agenda;

ii.  to reflect on what activities it is appropriate for public bodies to engage in; and

iii.  to simplify the complex public bodies' landscape.

Public Bodies and the Big Society

101.  The Cabinet Office describes the Government's intention behind the Big Society as follows:

We want to give citizens, communities and local government the power and information they need to come together, solve the problems they face and build the Britain they want. We want society - the families, networks, neighbourhoods and communities that form the fabric of so much of our everyday lives - to be bigger and stronger than ever before. Only when people and communities are given more power and take more responsibility can we achieve fairness and opportunity for all.[120]

We take this to mean the strengthening of civil society and non-governmental institutions. One of the methods the Government intends to achieve this goal is through "support[ing] co-ops, mutuals, charities and social enterprises", and enabling them to play a greater role in the running of public services.[121]

102.  Despite this intention, of the 901 bodies under review, only 9 - less than 1% - will be transferred out of the public sector with a further three others being considered for privatisation. Bodies that will see their status change include: British Waterways, the Design Council, the Alcohol Education and Research Council, and the Theatre Trust which will all become charities; and the Horseracing Totaliser Board which will be privatised.[122]

103.  When we questioned public bodies about their relationship with the private and voluntary sectors they provided many examples of how they were working, and could continue to work, with charitable and private organisations.[123] However, opinion was divided as to whether it would possible for more public bodies to become voluntary or private sector organisations themselves. Nick Gargan said the NPIA was "actively proposing what form of co-operative, community interest vehicle, or some mutually owned delivery vehicle for the service might be capable of being constructed."[124] Ms Done was less convinced, arguing that the possibility for such reform would vary depending on the nature of the body.[125] Ms Chester expressed concern that if a grant distribution role, such as that performed by Sport England, were discharged by a mutual it might result in one group within the mutual crowding out others.[126] Professor Talbot argued that the Government had struggled to find more functions to transfer to the voluntary and private sectors "because in most cases these are jobs that Government at the end of the day has determined actually need to be done by somebody in the public sector."[127]

104.  When we asked the Minister why the Government had struggled to convert many public bodies into charities, mutual or non-public sector organisations he did not accept this claim. He commented that "it's a considerably large proportion of those [bodies] to which changes are being made."[128] While it is true that not all 901 bodies in the review are being reformed 481 are; meaning that still less than 2% of bodies which are due to be changed are undergoing these kinds of reforms.

105.  The use of the "existential test" - which examines whether or not the Government needs to conduct a function - suggests that the Government did attempt to consider what activities the public sector no longer needed to engage in. However, it seems that the speed with which the review was conducted prevented more than cursory consideration. Professor Talbot believed that "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." But he had not got the impression "that there has actually been a very serious review of these things in this process."[129]

106.  Similarly, Mr Sinclair thought that the speed of the review meant that the Government had been "too wary of asking, 'Is this a function that should be pursued by Government?' rather than, 'Is this a function that should be pursued by a quango?'"[130] He went to give example of functions that he thought were better performed outside the public sector:

There is a sense that there is a problem with school food so Government should be doing something about that, whereas obviously the pressure for better school food should have been coming from the media, from the charitable sector and from parents. [...] The Equalities and Human Rights Commission is essentially campaigning to defend the Human Rights Act, and that political campaign is properly the objective of civil society groups, not of Government. There is a sense that if something is important Government should get involved. I think that is what causes a lot of these bodies to be created when they shouldn't.[131]

Undertaking a review of this kind is essential if the Government wishes to reduce public body expenditure. As we argued in the previous chapter, administrative efficiencies can only achieve so much; achieving significant savings from public bodies will require not doing the same for less but doing less with much less.

107.  Reforming public bodies has a much greater potential for strengthening civil society and its institutions ("the Big Society") than has so far been realised. While the Government has identified a few bodies that can be reformed as charities and mutuals we believe more could be considered. Doing this in a structured way involves not examining bodies on a case by case basis, but re-examining what service the state needs to deliver. This would not only provide greater space in which charities and mutuals could operate, but also allow for greater savings to be made in expenditure by public bodies.

108.  Some work has been done to develop methodologies the Government could use to evaluate what functions are ripe for re-location outside the public sector. BDO recommended that the Government should evaluate all bodies against two criteria: whether they are engaged in core public sector activities and whether they are effective at delivering those activities. The result of this analysis would then determine the "broad course of action" that the Government should pursue. Services that are core and effective should be retained and possibly improved, whereas ineffective or non-core services should be stopped. They note that it "may be appropriate to transfer non-core but effective functions into new delivery structures that sit outside of the departmental family". They argue that doing so could result in "the creation of value for the government through the proceeds of sale or transfer of appropriate debt into the new structure".[132]

109.  The Public Chair Forum has also commissioned research in this area to identify the various different models, for services outside the public sectors. The options they identified included; employee mutualism, joint ventures between ALB staff and the private sector, and privatisation through the sale of assets to the private sector.[133]

110.  The Cabinet Office has recently announced plans to encourage public bodies to reform as employee mutuals. In a speech on 17 November, Francis Maude announced new support for public service 'spin-outs' building on the Government's Pathfinder programme including:

i.  over £10 million to help the best fledgling mutuals reach investment readiness;

ii.  a new information line and web service for interested staff, provided by Local Partnerships, the Employee Ownership Association and Co-ops UK; and

iii.  a 'challenge group' involving employee-ownership experts including, John Lewis Partnerships, to investigate ways to improve regulation.[134]

The Minister said that this policy was central to the Government's "Big Society approach to public service reform",

Devolving power to people on the front line who know how things can be done better. The right to provide will challenge traditional public service structures and unleash the pent up ideas and innovation that has been stifled by bureaucracy. It will also put power at a local level so public services will be answerable to the people that use them.

When staff are given a stake in shaping services productivity and efficiency has been shown to improve dramatically. We must not be afraid to take bold decisions that will help create better public services at a time when there is less money to go round.[135]

111.  We welcome the Government's recent announcement encouraging the formation of employee mutuals. We ask the Government to provide us with an update as to how many public bodies have expressed an interest in taking part in this scheme, and how this programme related to the recent review of public bodies.

Public Body Activities

112.  Mr O'Connell, TPA, expressed concerns about public bodies extending their activities beyond those there were initially created to discharge.[136] Mr Burkard, Centre for Policy Studies, believed that this was due to a lack of clarity about the purpose of the organisation when they were created:

remit letters were very general and they left huge amounts of leeway for individual quangos to decide effectively that they could engage in as much mission creep as they wanted.[137]

113.  The Government's review identified several public bodies that it intends to "refocus on their core functions."[138] We believe that there has been a tendency in recent years for public bodies to go beyond their original remit and expand into new areas. There is a need for public bodies to concentrate on their core activities. The current financial situation gives additional cause for bodies to be reformed in this way. A reduction in expenditure will necessarily mean that organisations cannot continue to conduct all the activities that they currently engage in. Therefore, they will need to prioritise where they direct their resources to. This should be on the primary - often statutory - aim they were established to achieve.

114.  Deciding which bodies can be moved into the private and voluntary sector should form only part of the Government's review. It should also reconsider what activities public bodies should continue to engage in. Some public bodies have allowed their remit to increase over the years and there is a need to refocus them on their core functions. Identifying the essential activities of these bodies will both make them more efficient and reduce cost. This principle must be embedded in future reviews.


115.  One particular concern that was raised during our inquiry was the public bodies' lobbying activities. The TPA have been critical about what they perceived a public bodies engaging in "taxpayer funded lobbying." They argue that public bodies often "serve to cement the claims of particular interest groups [...] once set up the quangos affords the groups a platform from which to lobby for further funds, and to argue against reductions in public expenditure in their relevant sectors."[139]

116.  The current guidance says that "in certain limited circumstances an NDPB may be able to justify expenditure on publicity which would not be appropriate for a government department." It continues:

It will always be an improper use of public funds for NDPBs to employ PR or other consultants to lobby parliament or government departments in an attempt to influence government policy or obtain higher funding.[140]

117.  Despite the wording of this guidance some public bodies have been hiring lobby firms in an attempt to influence Government policy. The most notable recent example of this was the UK Film Council who were reported to have hired lobbyists to organise a campaign against their own abolition. The campaign included Facebook pages and an online petition,[141] with one newspaper placing the total cost at "tens of thousands of pounds."[142] Commenting on this decision to the Culture, Media and Sport Committee the Secretary of State, Jeremy Hunt, said that:

it was completely inappropriate for them to hire Portland Communications and use taxpayers' money to launch a lobbying campaign to protest against their own abolition.[143]

However, when questioned by that Committee, Mr Tim Bevan, Chair, UK Film Council denied that the company had launched the "Save the UK Film Council" campaign, saying it had merely helped it respond to press inquiries.[144]

118.  Mr Sinclair, Taxpayers' Alliance argued that the use of public funds to hire public relations firms "is absolutely an abuse of public money" if it is done to promote their own political interests - especially if members of the public body had a personal interest in the outcome of a decision.[145] When the Minister was questioned about the use of lobbyists by public bodies he referred to the existing guidelines, arguing that these should be sufficient to prevent public bodies from hiring lobbyists to lobby Government. However, he also said that he did not think that "those guidelines are sufficiently tight"[146] and would be reviewed.

119.  Some public bodies, such as those involved in promoting behavioural change, or providing information, will have a legitimate need to use its resources to run advertising campaigns. However, we agree that the guidelines around lobbying should be reviewed, but think this is a symptom of a deeper problem. Public bodies should not be engaged in activities that require the use of lobbyists in the first place. Reviewing what activities it is appropriate for public bodies to engage in, as recommended earlier in this report, is the surest way to ensure that in the future no public body has a need to hire PR organisations.

120.  Public bodies should never be engaged in activities that necessitate instructing lobbyists. We recommend that the Government revise the guidance to public bodies to make it clear that it is not appropriate for it to hire PR organisations; especially when such organisations are used to lobby Government. The current guidance already prohibits such activities but has failed to prevent abuse. The Minister must establish effective monitoring and enforcement procedures.

121.  Another public relations activity of arm's length bodies that attracted criticism is spending on stands at party conferences. Mr Sinclair raised the case of a Regional Development Agency which "spent a lot of money—£250,000, that order of magnitude—attending party conferences in 2008. I think the only way you can properly interpret that is that they were there defending their role and their existence, which is not how they should be spending taxpayers' money. The taxpayer has no interest in that."[147]

122.  When we raised this concern with the Minister he said that he thought that whether it was justifiable would "vary [...] Some of them would say that it's justifiable to make decision-makers more aware of what they do", but that this activity was covered by the advertising and marketing moratorium he had introduced. When pressed on whether this would be permitted in future he said that he would have to approve all future requests for public bodies to attend party conferences.[148]

123.  We welcome the Ministers commitment to examine all future requests for public bodies to attend party conferences. However, we can see no reason why this activity should not be banned outright, as it could be construed as indirect taxpayer funding of political parties.

Reform of the public bodies landscape

124.  One of the central recommendations in IfG's Read Before Burning Report was the need to implement a new, and much simpler system for classifying public bodies. Its research revealed a muddled picture of governance arrangements with similar bodies having different governance and freedoms for no apparent reason. Professor Talbot argued that the UK had "probably one of the most chaotic landscapes."[149] This echoes comments made by Sir Gus O'Donnell, Cabinet Secretary, at the launch of the Institute:

The more I look into these bodies, the more convinced I am that the current situation owes far more to history than it does to operational effectiveness.[150]

In total the IfG identified 11 different types of arm's length bodies. These are: Advisory NDPBs; Executive NDPBs; Independent monitoring boards; 'other' NDPBs; Tribunal NDPBs; Executive Agencies; Non-Ministerial Departments; Public corporations; Independent statutory bodies; Special health authorities; Parliamentary bodies; and the Bank of England.[151]

125.  The purpose of simplifying the system would be "to ensure that a body's set-up relates more closely to function and ensures governance reflects the degree of freedom the body needs to perform that function."[152] Sir Ian Magee, from the IfG, argued that the sheer number of different types of public bodies had led to "a lack of clarity and confusion in everyone's minds." He commented that, in seminars the IfG had run, both Members of Parliament and sometimes people in departments themselves had not been "as clear as perhaps they could be about what the nature of these bodies is."[153] He also argued that a simpler landscape would also improve the quality of the debate surrounding public bodies:

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 [...] is the opportunity that is missed here.[154]

The IfG's solution to this problem was to devise a new taxonomy with four different types of public bodies, with each type having a different relationship with its sponsoring department. This framework is replicated below in fig 1.

The Minister agreed that the current system was "very untidy" and was the result of "a random process".[155] He also agreed that having eleven different types of bodies was "probably unnecessary."[156] However, he was cautious about implementing a new governance framework:

I'm kind of temperamentally slightly allergic to trying to create a top-down overall scheme of arrangement for all of this.[157]

He then reiterated his support for a simplified system, but argued that it should not be done "to meet the demands of administrative tidiness."[158]

126.  Sir Ian directly responded to this argument, saying that a reorganisation would deliver more than administrative tidiness. "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."[159]

127.  The variety of types of bodies is indicative of the tendency of UK public administration to 'muddle through'. Where it is necessary for functions to be undertaken by the state they should be subject to ministerial accountability. The exception is where a degree of independence is necessary to ensure public trust. Independent bodies undertaking similar functions should take similar forms and operate under similar governance arrangements. Administrative untidiness can only undermine clear understanding and accountability.

128.  This review has highlighted the complex and confusing nature of the public bodies' landscape. Simplifying this set-up is not a matter of administrative tidiness but a necessary step to ensure the accountability and effectiveness of these organisations. The current system is chaotic, making it difficult to understand why different types of bodies exist and what these variations mean in practice. We recommend that the Government use its triennial review process to re-examine the proper governance arrangements for each public body and place them in a new simplified taxonomy.

120  Back

121   Ibid  Back

122 Back

123   Q 31 [Ms Done & Mr Gargan] Back

124   Q 32 [Mr Gargan] Back

125   Q 33 [Ms Done] Back

126   Q 33 [Ms Chester] Back

127   Q 284 Back

128   Q 105 Back

129   Q 251 Back

130   Q 268 [Mr Sinclair] Back

131   Q 284 Back

132   Ev w10 Back

133   Public Chairs Forum, Arms Length Bodies Alternative Models for Service Delivery, Section 3 Back

134 Back

135  Back

136   Q 300 Back

137   Q 267 [Mr Burkard] Back

138 See comments on Passenger Focus, Financial Reporting Council, and Equalities and Human Rights Commission. Back

139   Taxpayers' Alliance, ACA to YJB: A Guide to the UK's Semi-Autonomous Public Bodies Back

140 6.1.4-6.15 Back

141  Back

142   Film quango spends public money on fight against closure - The Times 25/08/2010 Back

143   Evidence taken before the Culture Media and Sport Committee on 14 September Q26 Back

144   Evidence taken before the Culture Media and Sport Committee on 19 October Qq 129 -134 Back

145   Qq 273 - 274 Back

146   Q 109 Back

147   Q 271 Back

148   Qq 114-116 Back

149   Q 246 [Professor Talbot] Back

150   Institute for Government, Read Before Burning, p10 Back

151   A full description of each different type of body can be found in Read Before Burning, p22 Back

152   Ev 50 Back

153   Q 227 [Sir Ian Magee] Back

154   Q 246 [Sir Ian Magee] Back

155   Q 140 Back

156   Q 139 Back

157   Q 141 Back

158   Ibid Back

159   Q 227 [Sir Ian Magee] Back

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