House of Commons - Who's accountable? Relationships between Government and arm's-length bodies

Who's accountable? Relationships between Government and arm's-length bodies - Public Administration Committee Contents

4 Sponsorship of public bodies by government departments: the importance of relationships

26. The relationships between central government departments and public bodies are crucial. As we concluded in relation to civil servants and ministers in Truth to power: how Civil Service reform can succeed, strong relationships are based on shared understanding of purpose, mutual dependence, and openness and trust.[64] In 2012 the Institute for Government published a report on how to create effective relationships between Government and arm's-length bodies.[65] This includes a 'framework' for effective relationships against which departments can assess their progress on, for example, whether both sides have access to timely and reliable data.[66] We heard about variation in the seniority and frequency of contact, and how this changes over time in response to events. Some departments are moving to risk-based relationships, where bodies that demonstrate efficient use of public money have greater autonomy.[67] Some arrangements are extremely complex, as for NHS England (Box 1).[68]

Box 1: Case study: NHS England

NHS England is the largest public body, with a budget of £95.6 billion.[69] It assumed full statutory powers in April 2013, and has overall responsibility for the system for commissioning healthcare.
NHS England holds 211 clinical commissioning groups to account for their performance, decides how much money each group receives, and in 2013-14 distributed £64.7 billion between them.[70] It also commissions £27.2 billion worth of services directly - primary care, specialised services (such as treatments for rare cancers) and healthcare for prisoners and military personnel.[71]
As a result of the Health and Social Care Act 2012, day-to-day responsibility for health has been devolved to NHS England, with the Department of Health "overseeing the running of the NHS".[72] It assumed full statutory powers in April 2013, having been specifically designed to reduce ministerial involvement in NHS policy and resource allocation.[73] In oral evidence to this inquiry, Una O'Brien, Permanent Secretary at the Department of Health, described NHS England as having been designed due to concerns that clinical commissioning groups "needed to be under some form of umbrella that ensured they properly cared for their money, that they conducted themselves with propriety, and that there was consistency in those fundamentals of good stewardship of public money."[74] We heard that there is "still quite close involvement from Ministers, the Department, and NHS England on their behalf, overseeing the running of the NHS".[75] Una O'Brien did not dispute our contention that the establishment of NHS England was inconsistent with the general direction of the Government's public body reforms, to reduce the number of 'quangos'.[76]
The Department of Health told us that they have "a complex working relationship" with NHS England, involving "regular dialogue and engagement, to ensure effective partnership working" and "clear delegated responsibilities from the Department."[77] There are monthly meetings between the Department of Health's Senior Departmental Sponsor and NHS England's National Director of Commissioning Strategy, Ian Dodge. They discuss operational and governance issues, and NHS England's risks and issues.[78] The Chair and Secretary of State for Health meet every two months.[79] Board meetings are held in public and the minutes are published.[80] Additional accountability arrangements are in place for NHS England, compared to other Department of Health arm's-length bodies, given its scale and complexity.[81] Professor Ham of the King's Fund explained that this relationship is still evolving and only dates from April last year. He told us it remained to be seen how they will eventually transform the relationship between the Secretary of State for Health and the NHS.[82]

27. At the top, relationships should be structured, but not adversarial, we heard.[83] Accountability arrangements are set out in documents known as 'framework agreements' or 'framework documents' and in 'Accountability Systems Statements' or 'Statements of Accounting Officer's responsibilities'.[84] No single document sets out all the roles and responsibilities for school oversight, and the Department of Education's incomplete statement is out of date, the National Audit Office found in October 2014.[85] There should be two way consultation between department and public body, and, we were told, a 'no surprises' rule.[86]

28. The Department of Health told us accountability describes the formal relationship between the Department and NHS England, while assurance is how the Department seeks, and NHS England demonstrates, that it is performing its statutory duties and meeting its objectives.[87]

29. This is not always the case. Some senior staff of public bodies told the National Audit Office they felt triennial reviews had been 'done to them' rather than with them.[88] As the Institute for Government observed, however, roles and responsibilities do need to be written down somewhere. Otherwise, there is duplication of effort and weak policy coordination.[89] Relationships should be guided but not bound by framework documents. As Bronwyn Hill, Permanent Secretary of the Department for Environment, Food and Rural Affairs (Defra), told us: "If we were referring to it constantly I would be worried".[90]

30. Our evidence discussed the culture of accountability. As Professor Chris Skelcher, Dr Katharine Dommett and Dr Katherine Tonkiss put it, "Within our political system, accountability is regarded primarily as a way of allocating individual blame."[91] Accountability should also be seen as having a positive side, about reward, encouragement, mentoring, and support, argued John Redwood MP.[92] Culture change is needed, or debates on form and function are academic, Rob Whiteman argued.[93] The official distance between a department and a public body-the length of the arm-is affected in practice by a range of informal and cultural factors, as Thomas Elston and HM Inspectorate of Prisons explained.[94] In 2013 the National Audit Office interviewed staff of bodies which had been brought back into central Government. Some argued that the formal change in status had brought only minor benefits, as they continued to work as a separate unit, with little contact with other parts of the department.[95]

31. Some functions carried out by public bodies, such as immigration control, are highly political. In these cases it is difficult to separate policy and implementation.[96] Other more technical or operational decisions should in theory be made by the public body. But the Environment Agency and Defra were not able to tell us which of them made the decision not to dredge the river Parrett in Somerset.[97] The lack of this dredging exacerbated the flooding in the winter of 2013 to 2014, it has been argued.[98] We were also told that NHS England and the Department of Health jointly agreed policy on the minimum practice income guarantee for GPs. Members of Parliament need to decide whether to take up health issues raised by constituents with the Department of Health or with NHS England. Una O'Brien told us that, if an MP wished to raise a concern, they should contact the Department in case of a systemic issue, or NHS England for individual cases.[99]

Governance of relationships between public bodies and Whitehall departments

32. There is disagreement within Government on the extent of central control it should exercise.[100] The Cabinet Office's interest in public bodies has increased, as have the resources it devotes to overseeing them.[101] Nick Hurd MP explained why:

102

While some of this is welcome, we heard complaints of micromanagement and unintended consequences. For example, Lord Chris Smith of Finsbury, Chair of the Environment Agency, and Bronwyn Hill, Defra Permanent Secretary, told us about HM Treasury strictness on the balance between revenue versus capital funding, and of the difficulty for public bodies of medium-term financial planning.[103] We also heard complaints about the Cabinet Office's blanket ban on public bodies awarding their staff bonuses, and of the controls framework leading to poor value for money and reducing the ability of public bodies to innovate.[104]

Sponsorship

33. A key part of accountability is how a department manages its relationship with a public body. This is known as sponsorship. The Cabinet Office explained to us that, normally, a senior departmental official acts as the designated sponsor, and is supported by a sponsorship team for day-to-day liaison between the department and the body.[105] We raised concerns in 2011 about the quality of departmental sponsorship of public bodies.[106] Whitehall remains "in the early days of building effective sponsorship", Professor Skelcher, Dr Dommett and Dr Tonkiss told us.[107]

34. The Cabinet Office is now "trying to facilitate learning across different departments" and has launched "a Civil Service specialism and learning and development pathway" for sponsors.[108] The Department of Health told us about the seven standards they have developed for good sponsorship, from championing the body in Whitehall to knowing the body and its business.[109] We also heard about a number of problems: variation between departments in the style and standard of sponsorship, lack of Cabinet Office oversight of the degree of this variation, the inadequate seniority of sponsors, and turnover among sponsors.[110] Some sponsors hold senior roles in their departments: Richard Douglas, the Department of Health Finance Director, is the NHS England sponsor, as well as sponsor to four other health bodies.[111] The Cabinet Office wants sponsors to be more senior, and plans to collect and share examples of best practice.[112] Professor Skelcher, Dr Dommett and Dr Tonkiss highlighted two key risks:

· 'Asymmetric information'-the sponsor department does not know as much about a public body's performance as the public body itself; and

· 'Political ignorance'-the public body or department is unaware that particular matters need ministerial attention.[113]

35. Junior ministers need support too. John Redwood MP, a former minister in several government departments, questioned whether any training or assistance is available to new ministers who take on responsibilities for bodies; "because I think not everyone takes to it naturally or has relevant experience."[114] We heard that wider improvements in the civil service are also needed to improve sponsorship.[115] For example, in relation to financial management, Rob Whiteman argued that more than governance changes were needed to address short-termism.[116]

Crises

36. This inquiry was prompted by the flooding crisis and public criticism by Ministers of the Environment Agency. During our inquiry another crisis, a backlog in processing passport applications by HM Passport Office led to a sudden change in organisational type (see Box 2). Good relationships and clear boundaries can improve the response to crises when they occur, argued Timothy Hornsby, a former Civil Servant and public body chair writing to us in a personal capacity.[117] As Defra Permanent Secretary Bronwyn Hill explained to us:

118

37. Good relationships are important because they lead to learning and it is therefore less likely that accountability crises will recur.[119] The evidence we heard suggests that the positive relationship between the Agency and Defra only broke down during the crisis when the Secretary of State was unavailable for medical reasons and another minister stepped in without the benefit of an established and confident relationship.[120] But crises are inevitable.[121] When they happen, proper accountability is more than seeking the right person to blame.[122] Instead, Government should wait until blood has cooled before reflecting on what went wrong, as Tom Gash of the Institute for Government argued.[123]

Box 2: Case study: HM Passport Office

HM Passport Office deals with applications for passport issue and renewal. It was absorbed into the Home Office on 1 October 2014, having been established as an executive agency of the Home Office on 13 May 2013.[124] Prior to May 2013 the organisation was known as the Identity and Passport Service, which was also an executive agency of the Home Office.[125]
The Passport Office's most recent change in status was prompted by a backlog of passport applications, peaking at over 500,000 in June 2014.[126] The Home Secretary announced on 12 June that she had asked Mark Sedwill, Permanent Secretary of the Home Office, to establish two reviews: the first on the capability and resilience of the Passport Office, and the second on its agency status.[127]
As a result of these reviews, the Home Secretary announced on 26 September that the body would become part of central Government, with a Director General in the Home Office replacing its Chief Executive.[128] She cited accountability in explaining the change: "As the events of the summer showed, it is essential that [it] is run as efficiently as possible and is as accountable as possible."[129]

38. However complicated the arrangements may have to be, there is no excuse for lack of a clear understanding of statuses, roles and relationships. It is not acceptable that the Department of Health took more than two years to update its 'accountability system statement'. This left accountability relationships unclear during a period of major organisational change. NHS England is a now the largest arm's-length body. Its accountability should not be in any doubt, but the current arrangements for it are extremely complicated and still evolving.

39. We are concerned by reports of Cabinet Office micromanagement, as strategic leadership is needed. The Institute for Government has produced a useful 'framework' to help departments build effective relationships with their public bodies. Improvements are needed to both formal roles and responsibilities, and attitudes and behaviour. The Department of Health's sponsorship standards are a good start.

40. The Government must above all promote good relationships between central Government and public bodies. As well as holding leaders to account, those in sponsoring departments must also review and learn from what works well, and encourage, motivate, and reward the leadership of public bodies. The Cabinet Office can promote good practice and highlight examples of success. Relationships between government departments and arm's-length bodies should be partnerships of mutual interest with high trust, shared understanding, and low tendency to blame, so that disagreements are more open and honest, and there is learning from mistakes. The next phase of public bodies reform must address both formal and informal relationships, or it will achieve far less than the Government hopes.

41. The oversight and accountability arrangements for NHS England should be kept under review by select committees, the National Audit Office, and others.

42. As the public bodies reforms continue, the Cabinet Office should commission research to show which controls are effective and increase accountability, so it can discontinue those which undermine trust and value for money.

43. Each department should set as a goal the improvement of its relationships with arm's-length bodies, via discussions, seminars and training. Departments should report in their annual reports on the effectiveness of their sponsorship of arm's-length bodies - a key skill we are examining in our inquiry on Civil Service skills-and the next Civil Service Reform Plan update should report on progress overall in improving sponsorship. Sponsorship of arm's-length bodies must be seen as a vital skill set in the Senior Civil Service, or it will continue to be seen as second class. The Cabinet Office should build upon the new 'Sponsorship Specialism Competency Framework' but this must be supported by effective training on how to be an effective sponsor.

64 Public Administration Select Committee, Eighth Report of Session 2013-14, Truth to power: how Civil Service reform can succeed, HC 74 [incorporating HC 664-i-x, Session 2012-13], paragraphs 76, 80, 121 Back

65 Institute for Government, It takes two: How to create effective relationships between government and arm's-length bodies, March 2012 Back

66 As above Back

67 Cabinet Office, Public Bodies Reform Strategy Document, July 2014 Back

68 Department of Health (QPB25) Back

69 NHS England, NHS Allocations for 2013-14, accessed 4 November 2014 Back

70 The Guardian, NHS Commissioning Board launches, 12 March 2013 Back

71 As above Back

72 Q335 [Professor Ham] Back

73 As above Back

74 Q332 [Una O'Brien] Back

75 As above Back