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

Conclusions and recommendations

The Government's review

1.  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. (Paragraph 19)

Additional test?

2.  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. (Paragraph 23)

Review process

3.  As a minimum the bodies affected by these reforms should have been consulted to see how they thought the Government's tests applied to them. (Paragraph 27)

4.  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. (Paragraph 29)

5.  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. (Paragraph 37)

6.  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. (Paragraph 38)

7.  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. (Paragraph 39)

Future Reviews

8.  We welcome the Minister's comments which indicate that future reviews will include considerations about efficiency and value for money. This seems a sensible way to proceed. However, we would ask him to clarify how it will avoid some of the flaws of previous review processes, particularly the lack of external input and challenge. (Paragraph 47)

9.  We are pleased that the Minister was confident that he would be able to devise a more cost-effective review system than previous efforts. We invite him to provide us with his most recent estimate of the cost of the future review process. (Paragraph 49)

Reviews and the Public Bodies Reform Bill

10.  We welcome the Government's intention to introduce a regular review of public bodies. We recommend that the process for conducting these reviews, including the criteria that they will be evaluated against, should be included in the Public Bodies Reform Bill. (Paragraph 52)

Managing the transition

11.  It is important that clear guidance is issued to departments to help them manage what will inevitably be a complicated reorganisation process. Failure to do this will result in duplication of effort and unnecessary costs. We recommend that the Cabinet Office incorporate guidance we have developed with the NAO into the guidance it is developing for departments. (Paragraph 61)

Role of the Cabinet Office

12.  We ask the Government to clarify, in its response to this report, what role the Cabinet Office will have in scrutinising departments' implementation plans, and whether the Minister for the Cabinet Office will personally approve each plan. (Paragraph 63)

13.  We are concerned that an ongoing task is listed as a "completed" in the Cabinet Office's business plan. We welcome the intention behind the publication of departmental business plans, but they will only be useful tools to help the public hold the Government to account if the information contained in them is accurate. We request the Cabinet Office update its business plan to reflect the reality of the situation. (Paragraph 65)

Sponsoring Public Bodies

14.  The Cabinet Office should revise its guidance on public bodies as quickly as possible, placing more emphasis on the proper, on-going relationship between departments and the organisations they sponsor. It should make clear what kind of decisions are purely the responsibility of the bodies, when the department should be consulted and whether any decisions - such as the overall business plan - should be subject to ministerial approval. (Paragraph 72)

Accountability or cost savings?

15.  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. (Paragraph 83)

16.  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. (Paragraph 85)

17.  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. (Paragraph 96)

18.  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. (Paragraph 97)

Accountability to Parliament

19.  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. (Paragraph 99)

Public Bodies and the Big Society

20.  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 on public bodies. (Paragraph 107)

21.  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 reviews of public bodies. (Paragraph 111)

Public Body Activities

22.  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. (Paragraph 114)

23.  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. (Paragraph 120)

24.  We welcome the Minister's 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. (Paragraph 123)

Reform of the public bodies landscape

25.  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. (Paragraph 128)

Progress in the Lords

26.  It seems clear to us that the Bill as originally drafted contains insufficient safeguards to prevent the misuse of powers by ministers. It is essential that the exercise of powers under this Bill is subject to rigorous Parliamentary scrutiny. We will be carefully following the Bill's progress in the House of Lords. We are currently minded that the Bill should contain a general sunset clause; it should only serve the current review and fresh primary legislation should be required for future reviews. We will issue a further Report on this Bill itself after it has completed all its Lords stages, and reserve our judgement as to whether additional safeguards will be needed. (Paragraph 135)

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