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

Scrutiny Unit—criteria for keeping or abolishing quangos


  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.


  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.

DepartmentAbolish MergeRetain Retain &
BIS216 201957
Cabinet Office7 62 15
CLG17 51124
DCMS114 35151
DECC3 912
Defra53 231636245
DfE6 3817
DfID 22
DfT6 8115
DOH30 1040
DWP32 8215
FCO2 4410
GEO1 12
HM Treasury 11
HO21 10316
MoD1 27129
MoJ29105 20943 350
Total192 118380171 40901


  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 ImpartialityIndependence TransparencyNo reason Total

102 1155152 6380
Retain & Reform1 31166 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:

    — BBC.

    — UK Trade & Investment.

    — The National Archives.

    — Ordnance Survey.

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:

    — Research Councils.

    — Committee of Standards in Public Life.

    — Civil Nuclear Police Authority.

    — Care Quality Commission.

    — NHS Pay Review Body.

    — 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:

    — Coal Authority.

    — 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.

    — HM Land Registry.

    — Official Solicitor.

    — Prisons and Probation Ombudsman.

    — Restraint Accreditation Board.

    — Independent Monitoring Boards of Prisons, Immigration Removal Centres and Short-Term Holding Rooms (x147).


  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]


  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).

    — Equality 2025 (DWP).

    — Health and Safety Executive (DWP).

    — Monitor (DOH).

    — OFWAT (Defra).

    — 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:

    — BBC World Service.

    — Ofqual.

    — Ofsted.

    — UK Anti Doping.

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.


  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.

    — Research Councils.

    — Big Lottery Fund.

    (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.

    — Food Standards Agency.

    — Health Protection Agency.

    (d) Public appointments, standards and salaries:

    — NHS Pay Review Body.

    — Senior Salaries Review Body.

    — Committee on Standards in Public Life.

    (e) Tribunals and appeals:

    — ACAS (Advisory, Conciliation and Arbitration Service).

    — Tribunals Service.

    — Independent Police Complaints Commission.

    (f) Stewardship of National Assets:

    — British Library.

    — National Archives.

    — Museums and galleries.

    — National Parks.

    (g) Banking and regulation:

    — Bank of England.

    — Competition Commission.

    — Ofgem, Ofcom etc.

    — Care Quality Commission.

    — Office of Fair Trading.

  2.  Specialist/technical/strategically important activities:

    — Bank of England.

    — UK Trade & Investment.

    — Ordnance Survey.

    — Met Office.

    — British Council.

    — Royal Mint.

    — National Savings & Investments.

    (a) Temporary holdings:

    — 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.


  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 Back

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8   HC Deb 20 July 2010 c183 Back

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