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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