Smaller Government: Shrinking the Quango State

1.

How should the Government decide which public bodies should be abolished?

1.1

The recently published report by the Institute for Government [1] notes that the popular term ‘quango’ is loosely defined and covers a very wide range of arm’s length bodies which vary in size, function and scope. Some are independent bodies carrying out statutory functions; some are advisory bodies; some are tribunals with jurisdiction in a specialized field; and others are regulators. There is likely to be a correspondingly wide range in the performance of individual bodies and in their overall cost to the tax payer. This level of diversity makes direct comparisons difficult. Before a decision is taken about the possible abolition of a particular public body, it is vital to establish a real understanding of: what that public body does; whether it is necessary; whether it has tangible value; how proportionate and cost effective that work is; whether all or any of the organization’s functions are being undertaken efficiently and effectively elsewhere, and the impact that abolition would have on stakeholders. The typology put forward in the Institute’s report is helpful in this respect.

1.2

I am mindful of the value that certain public service functions have for service users (particularly the poorest and most vulnerable users) where, for example, financial or legal issues are concerned. The resulting challenge for government will be to achieve a balance that realizes required savings, yet retains functions that have an important public benefit.

1.3

Careful consideration needs to be given to evaluating those areas and activities that were positioned at arm’s length from direct ministerial responsibility in order that they were perceived as being demonstrably non-politicized; and in order to maintain public confidence through fair and accessible independent mechanisms. The use of smaller arm’s length bodies can also help provide specialist functions and a high degree of expertise in a given field, which may be more difficult to achieve as part of a sub-section of a much larger department.

1.4

I believe that there are inherent risks in abolishing bodies that currently provide an independent tier of decision making and grievance resolution. This action could, in effect, exclude some important aspects of decision making from independent review and scrutiny. It is a fundamental tenet of administrative justice that citizens should have recourse to an independent grievance process. This plays an important role in promoting public confidence.

1.5

The process adopted by government should be structured and have a consultative element. Not adopting such an approach risks eroding confidence in the purpose and fairness of such a process. Other risks related to a less considered approach are:

· transferring functions may negate potential savings, by generating set up and transitional costs

· erosion of valuable expertise in a given area

· weakening lines of accountability and visibility for related functions, as they compete for attention within a wide range of departmental concerns and priorities.

2.

Are the three criteria outlined by the Government the correct ones? Should there be others, for example an additional value for money criterion?

2.1

I believe that overarching government tests for whether a public body should continue to exist should focus on impartiality, specialist function, value for money, transparency and whether the public body serves a useful function, undertaken in the public interest.

2.2

Value for money and current performance should be key considerations in any government review of individual public bodies. The Institute for Government’s recent report on arm’s length government [1] makes the following comments :

based on historical experience, an excessive focus on the number of bodies will be unlikely to yield long-term improvements to arm’s length government, and it neglects the fact that ALB spending is concentrated in just a handful of larger bodies.

3.

How does the Government decide whether a public body that fails the tests should be merged, abolished or reabsorbed into department?

3.1

Based on the tests mentioned above, key considerations will include:

· value for money in relation to process costs of potential merger and the ongoing operational costs;

· the impact that any option would have on the service provided, expertise, public confidence, stakeholders, delivery, realizing tangible benefit from economies of scale, and the extent to which particular functions must be seen to be impartial and independent from government;

· when comparing the costs and benefits of merger or re-absorption, whether the functions are closely aligned with another public body or a particular government department;

· the distinct culture and structure of the particular body or department within which the arm’s length body could be merged; and

· whether a public body duplicates the work of other arm’s length bodies or existing government departments. There may be scope for the merging of functions where there is clear overlap, or to extending remits at the expense of those delivering an analogous function but with much higher operating costs.

4.

Is the process for deciding which public bodies should be abolished sufficiently transparent?

4.1

This question raises two distinct considerations: how to ensure sufficient transparency for the general public and also for the body under review. For some public bodies there is likely to be continuing public interest. This may heighten the importance of managing the media reaction as carefully and positively as possible, and openly engaging with stakeholders (including staff from the body under review) ahead of abolition. To facilitate an evidence based assessment of whether abolition is appropriate, it will be important to give any public body under review the opportunity to make their case for retention. There are of course risks, and the recent (presumably unauthorized) disclosure of information relating to arm’s length bodies being reviewed will not have enhanced confidence.

5.

How can the Government ensure that the abolition/merger/re-absorption of public bodies result in long term savings?

5.1

It is important to take a long term view of wider government objectives and adopt a realistic view of whether integrating public service organizations and functions is tenable in the longer term. Clear accountability mechanisms should be established and regular reviews conducted. An open and constructive relationship between the public body and it’s sponsor department should help to maintain focus on long-term savings. The Institute for Government [1] report highlights the diversity of existing practice in these relationships. An important element here is the quality of leadership, both within the sponsor department and the public body, and that both parties are able to handle these relationships with the requisite maturity.

6.

How can the Government minimise the disruption and costs caused by changes to the structure and remit of public bodies?

Steps taken to minimise disruption and costs might include:

· ensuring that key appointments to public bodies attract the appropriate investment of attention and expertise from the sponsor department;

· keeping staff and external stakeholders informed throughout the change process; including regular consultation;

· recognizing from the outset the cultural differences between organizations and the need to harmonize these; whilst also identifying and reinforcing areas of common ground;

· clear milestones and regular progress reviews;

· sharing best practice from similar projects in the public and private sectors; and

· ensuring that service delivery to the benchmarked standard remains seamless throughout the change process.

7.

Will the abolition of public bodies lead to increased public accountability?

7.1

Much will depend on the accountability framework that is being implemented. The abolition or merger of some public bodies should underline, for all public bodies, their important duty in relation to public accountability; as well as those who are undertaking the reviews. By reducing the number of public bodies it is assumed that one result should be that it will be clearer to members of the public which particular bodies should deal with specific issues. This should lead to increased public accountability, if it is linked to more transparency about roles and remits.

8.

How could the Government improve the accountability and effectiveness of remaining public bodies?

8.1

It will be important to establish an effective business model that includes the following characteristics:

· an organizational structure with as few layers as possible;

· processes that are proportionate and able to deliver core functions effectively and efficiently;

· clear lines of accountability, both to government and across the range of stakeholders that include users and taxpayers;

· transparency of reporting systems; and

· an appropriate level of scrutiny.

8.2

Periodic reviews, perhaps every three years as a minimum, should be a key to improving accountability and effectiveness. To promote public confidence, reviews should ideally be carried out through independent mechanisms, such as select committees. Putting this framework in place introduces potential to identify and deal with, at an early stage, a range of performance issues: including scope for efficiency savings. The review framework would also help to focus ongoing attention on whether functions carried out by a particular public body are contemporary, whether that the body in question is best placed to deliver them and whether any growth in the scale or scope of a body is grounded in a clear business case.

8.3

Continued transparency is crucial to ensure the right degree of accountability to government and the tax-payer, and to ensure public confidence. Ideally, all public bodies should produce and make publicly available annual reports, which should include information about their remit and functions, their performance against key targets and (where appropriate) operating unit costs. This information should be easy to access and presented in ways that make it meaningful to service users.

8.4

Public bodies should seek and take account of public feedback, in order to promote an ongoing process of reviewing their own effectiveness.

8.5

I believe that a strong relationship between the public body and the sponsoring department is vital. This should be underpinned by a Memorandum of Understanding which highlights respective roles. This would be agreed at the outset and supported by regular and direct interaction between the parties involved.

October 2010