Scrutiny Unit—criteria for keeping
or abolishing quangos
SUMMARY
The Coalition Government has recently completed
its initial review of the number and type of public bodies (quangos)
as part of its wider reform process to improve accountability
and cut costs. It is using three criteria to decide which quangos
to retain and which to abolish. The three tests (performing a
technical function, requiring politically impartiality and needing
to act independently to establish facts) have not been publicly
explained in any significant detail, and it is therefore difficult
to assess how they have been used to produce a coherent review.
This paper proposes a more detailed set of criteria under two
key headings: activities requiring protection from political interference,
and specialist/technical/strategically important activities. It
does not recommend adding a separate value for money test, but
does argue for the regular publication of standard, robust, cost
data to improve transparency and encourage benchmarking between
quangos.
OUTCOME OF
THE PUBLIC
BODIES REVIEW
Of the 901 quangos considered in the review,
some 192 will be abolished outright and a further 118 will be
merged down to 57. 380 will be retained as they are, with another
171 retained but due to be significantly reformed. The remaining
40 are still under review.
| |
| | | |
|
| Department | Abolish
| Merge | Retain
| Retain &
Reform | Under
review
| Total |
| | |
| | | |
| BIS | 21 | 6 |
20 | 1 | 9 | 57
|
| Cabinet Office | 7 |
| 6 | | 2 |
15 |
| CLG | 17 | |
5 | 1 | 1 | 24
|
| DCMS | 11 | 4 |
35 | | 1 | 51
|
| DECC | 3 | |
9 | | | 12
|
| Defra | 53 | |
23 | 163 | 6 | 245
|
| DfE | 6 | |
3 | | 8 | 17
|
| DfID | | |
2 | | | 2
|
| DfT | 6 | |
8 | 1 | | 15
|
| DOH | 30 | |
10 | | | 40
|
| DWP | 3 | 2 |
8 | | 2 | 15
|
| FCO | 2 | |
4 | | 4 | 10
|
| GEO | 1 | |
| 1 | | 2
|
| HM Treasury | |
| 1 | | | 1
|
| HO | 2 | 1 |
10 | | 3 | 16
|
| MoD | 1 | |
27 | | 1 | 29
|
| MoJ | 29 | 105
| 209 | 4 | 3 |
350 |
| Total | 192 |
118 | 380 | 171
| 40 | 901 |
| | |
| | | |
| | |
| | |
|
THE THREE
CRITERIA
The Minister for the Cabinet Office and Paymaster General,
Francis Maude, has told Parliament that:
We are committed to cutting the number of public bodies to
increase accountability and cut costs. In future, each public
body will have to meet one of three tests—does it perform
a technical function, does it need to be politically impartial
or does it act independently to establish facts?[6]
There has been no detailed explanation of the three criteria,
which presents problems in analysing how suitable they might be
in producing a rigorous and consistent approach to the reform
of public bodies.
The final list actually includes one additional explanation
for retaining quangos—transparency. This test was originally
one of the three set by David Cameron in 2009 when he announced
his proposals to reform quangos, but has since been rephrased
as the test of independently establishing facts. The transparency
test is therefore presumably the same as the independence test,
but separate figures are given in the table below. The table therefore
shows the reasons for retaining quangos on the four explanations
given within the final list:
| Technical
| Impartiality | Independence
| Transparency | No reason
| Total |
Retain | 102 |
115 | 5 | 152 |
6 | 380 |
| Retain & Reform | 1 |
| 3 | 1 | 166 |
171 |
| |
| | | |
|
1. Does it perform a technical function?
This is perhaps the criterion most open to interpretation,
as it could be argued that most, if not all, public bodies carry
out some kind of technical function. David Cameron has stated
that in these bodies "the public needs to know that people
with the right training, professional knowledge and specialist
skills are carrying out the work", and listed the Nuclear
Installations Inspectorate, the Bank of England and OFWAT as examples
of public bodies that met this test. Of these three, only OFWAT
appears on the final quango list, and no reason is given for its
retention.
Bodies adjudged to have passed this test include:
2. Does it need to be politically impartial?
In David Cameron's speech of July 2009 this test was specifically
directed at quangos that distributed taxpayers' money, such as
Research Councils. The test now appears to have become much broader
to encompass a wider group of bodies, including:
— Committee of Standards in Public Life.
— Civil Nuclear Police Authority.
— Care Quality Commission.
— Independent Police Complaints Commission.
3. Does it act independently to establish facts?
In David Cameron's speech of July 2009 and in Francis Maude's
letter this test also refers to the need for facts to be transparently
determined. David Cameron gave the example of the Office for National
Statistics, but this does not appear on the final list. Only five
quangos have been listed as passing this test, from DECC and Defra:
— Committee on Climate Change.
— Committee on Radioactive Waste Management.
— Fuel Poverty Advisory Group.
— Science Advisory Council.
The Ministry of Justice is the only department to retain
quangos on transparency grounds. Since it has retained other quangos
on the grounds of technical function and impartiality, one can
presume that it has used the term transparency to mean the independence
test:
— HM Inspectorate of Prisons.
— HM Inspectorate of Probation.
— Prisons and Probation Ombudsman.
— Restraint Accreditation Board.
— Independent Monitoring Boards of Prisons, Immigration
Removal Centres and Short-Term Holding Rooms (x147).
NEW QUANGOS
The government has proposed and created a number of new quangos
which can be subjected to the same three tests. Perhaps the two
most significant new bodies to have been set up are the Office
for Budget Responsibility (OBR) and the Office of Tax Simplification
(OTS), both of which were set up by the Chancellor of the Exchequer.
Both bodies are currently staffed by Treasury officials and physically
located in the Treasury building, leading to questions over their
ability to act independently.
The OBR is responsible for making independent assessments
of the economy, public finances and fiscal sustainability and
therefore clearly meets the criteria of needing to be politically
impartial. Because of the speed with which it was set up it is
currently operating within terms of reference agreed with the
Treasury, but legislation is due to establish it on a statutory
basis later this year.[7]
The less well-known OTS has been created as an "Independent
Office of the Treasury" to provide the government with advice
on simplifying the UK tax system. Treasury Minister David Gauke
has confirmed that the OTS is indeed a quango, and that it should
be at arm's length to the Treasury because it will "provide
independent advice in a technical area".[8]
It is funded out of existing Treasury and HMRC budgets so it its
independence (and the perception of independence) is perhaps more
contentious.[9]
CRITICISMS OF
THE REVIEW
The main problem with the review is that the tests have been
insufficiently defined, and the explanations for each decision
lack detail. These flaws mean that there is too much scope for
inconsistency in the decision-making, both within departments
and across government as a whole, and there is as yet no evidence
to support each decision, making it difficult to make an informed
assessment.
Technical function
The technical function test is particularly open to interpretation,
and its application has resulted in a number of apparently inconsistent
outcomes, including:
— Defra has proposed that the (Norfolk) Broads Authority
should be retained on technical grounds, but also decided that
British Waterways should be abolished and replaced with a charity
along the lines of the National Trust.
— The Department of Health has proposed to scrap the
Expert Advisory Group on AIDS (and transfer its functions into
the department itself) while the Home Office has argued to retain
the Advisory Council on the Misuse of Drugs on technical grounds.
— The Department for Transport has determined the British
Transport Police Authority should be retained on technical grounds,
while DECC has decided that the Civil Nuclear Police Authority
has passed the impartiality test.
— The Department for Transport has also judged the Civil
Aviation Authority to have passed the impartiality test (rather
than the technical test).
Retained with no justification
Six quangos are set to be retained with no explanation of
which test they have passed:
— Competition Appeals Tribunal (BIS).
— Health and Safety Executive (DWP).
— Royal Mail Holdings Plc (BIS).
Another 166 have been identified as being retained but due
for significant reform, but again without any explanation of which
of the tests have been passed. The vast majority of these, some
160, are local drainage boards, but the remaining six bodies includes
some of the country's largest and most controversial quangos:
— Environment Agency (Defra).
— Equalities and Human Rights Commission (GEO).
— Financial Reporting Council (BIS).
— Forestry Commission (Defra).
— Homes and Communities Agency (CLG).
— Natural England (Defra).
Satisfying multiple criteria
Only four of the quangos are listed as having met more than
one of the criteria. It would have been helpful (and in line with
the spirit of transparency) if each quango had been adjudged to
have passed or failed each of the three tests. Each of the four
quangos mentioned met both the technical and independence criteria:
Expert committees
Thirty quangos are to be abolished and reformed as expert
committees within departments (19 within DOH, 10 within Defra
and one in DCMS). They include a range of bodies such as:
— Advisory Committee on Pesticides (Defra).
— Expert Advisory Group on AIDS (DOH).
— Scientific Advisory Committee on Nutrition (DOH).
Francis Maude's leaked letter explains that these bodies
are being moved on efficiency grounds, and that steps are being
put in place to ensure their continuing independence, despite
being brought within departments.
Temporary quangos
The list fails to identify those quangos set up when the
government has stepped in to safeguard key services previously
provided by private institutions, such as large banks and transport
companies, or other bodies otherwise scheduled for future privatisation.
It would have been sensible to highlight those quangos that are
being retained on a purely temporary basis with a view to future
liquidation or transfer back to the private sector. Examples include:
— London and Continental Railways Ltd.
— Royal Mail Holdings Plc.
Lack of detailed explanation
No explanations have been provided for the retention of quangos
other than which criteria have been met. This makes it extremely
difficult to understand the decision-making process underpinning
the review, and potentially leaves some of the decisions open
to further debate. For example:
— Defra has decided that the British Wool Marketing
Board should be retained on technical grounds.
— CLG has retained the Architects Registration Board
on impartiality grounds.
— DCMS has determined the Horserace Betting Levy Board
should be retained on technical grounds.
Completeness of the review
Not all quangos appearing in the leaked list have been included
in the final list, raising doubts about the completeness of the
review. Three of the four quangos sponsored by the Treasury, for
example, were listed as due to be retained on technical grounds
in the leaked list (National Savings and Investments, Partnerships
UK and the Royal Mint) but are missing from the final list.
REVISED CRITERIA
The fundamental reason for the existence of quangos is to
allow necessary public functions to be conducted with some degree
of freedom from ministerial control. There appears to be two key
elements within this:
1. to provide protection from political influence; and
2. to allow greater operational freedoms to organisations
involved in certain technical activities, thereby allowing departments
to concentrate on their core policy functions.
The first criteria combines the government's current two
tests of impartiality and transparency. In practice there is little
real difference between those two criteria, and any body that
passes the independence test must also pass the impartiality test.
However, to ensure the test is applied accurately it should be
broken down into greater detail and quangos tested against the
individual components. Quangos may well pass more than one of
these sub-criteria.
The second test would be aimed at identifying those bodies
judged to be too specialised (or too extensive) to be properly
carried out within a department itself. Judgments on this test
would be particularly open to debate and could change over time,
making regular reviews particularly relevant so that the test
can be reapplied. Within this category it would perhaps be useful
to identify which quangos are in public ownership on a purely
temporary basis due to unforeseen circumstances.
Below are the two tests, together with their sub-criteria,
together with examples of organisations that might meet each test:
1. Activities requiring protection from political interference:
(a) Distributing taxpayers' money:
— Higher Education Funding Council for England.
(b) Generating empirical data/statistics:
— UK Statistics Authority.
— Office for Budget Responsibility.
(c) Independence (and perception of independence) in providing
advice and/or reporting to the public, Parliament and the government:
— Office for Budget Responsibility.
— Committee on Climate Change.
— Health Protection Agency.
(d) Public appointments, standards and salaries:
— Senior Salaries Review Body.
— Committee on Standards in Public Life.
(e) Tribunals and appeals:
— ACAS (Advisory, Conciliation and Arbitration Service).
— Independent Police Complaints Commission.
(f) Stewardship of National Assets:
(g) Banking and regulation:
— Competition Commission.
— Care Quality Commission.
— Office of Fair Trading.
2. Specialist/technical/strategically important activities:
— National Savings & Investments.
— UK Financial Investments (manages the government's
investments in The Royal Bank of Scotland and Lloyds Banking Group).
— Great North Eastern Railways.
— London & Continental Railways.
VALUE FOR
MONEY AS
A POSSIBLE
CRITERION
It is clear that quangos that provide poor value for money
need to improve, but a value for money test should not be used
to determine which quangos should be abolished; quangos that meet
the other criteria should be kept as they have been judged to
perform an essential function. What would be helpful, as the NAO
has repeatedly argued regarding government as a whole, is more
good quality, comparable management data that can be used to monitor
and benchmark value for money, which can then be used to drive
improvement.
In July 2009 David Cameron reaffirmed his commitment to introducing
a standard set of cost measures to allow efficiency to be compared,
but did not specify what those measures would be. In December
2009 Francis Maude committed the government to publishing efficiency
data on a departmental basis[10]—it
would make sense for the same metrics to be used across government.
He stated that departments would have to report every six months
on measures including average costs per square metre of property,
staff absence rates and average staff costs. He also referred
to department-specific metrics that could be compared internationally;
this approach could also be applied to quangos if similar comparator
organisations could be identified.
October 2010
6
HC Deb 9 June 2010 c313 http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm100609/debtext/100609-0001.htm#10060953000025 Back
7
http://budgetresponsibility.independent.gov.uk/d/terms_of_reference_final.pdf Back
8
HC Deb 20 July 2010 c183 http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm100720/debtext/100720-0001.htm#10072029000241 Back
9
http://www.hm-treasury.gov.uk/ots.htm Back
10
http://www.conservatives.com/News/Speeches/2009/11/Francis_Maude_Delivering_a_better_public_service.aspx Back
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