PART 5: SUMMARY OF GENERAL
EVIDENCE ON THE PUBLIC SERVICE AND THE COMMITTEE'S CONCLUSIONS
AND RECOMMENDATIONS (continued)
STRUCTURAL
CHANGE IN
THE PUBLIC
SERVICE
157. A theme which emerged
strongly from the evidence given to the Committee was that there
had been extensive structural change in the public service over
the last thirty years, and the Committee considered the implications
of the various changes for the unity, continuity and shared ethos
which were important to the integrity of the public service as
a whole.
The Problem of
Classification
158. The Civil Service
now consists of many different types of organisation. There are
Ministerial departments, non-Ministerial departments, executive
agencies, and outside the Civil Service, quangos, NDPBs, regulatory
bodies-each with a different set up, scope and status. The Committee
questioned whether there was a single underlying rationale or
scheme of classification which had determined that a particular
function was most appropriately carried out by a body constituted
in a particular way. Some witnesses suggested that the drive to
farm functions out to agencies and NDPBs was based not on a solid
rationale or scheme, but on an ideology of decentralisation. Professor
McLean observed (Q 350) "It is clear that the recent change
is the most ideologically driven". In the earlier part of
our enquiry into the sale to the private sector of the Recruitment
and Assessment Services, the First Division Association claimed
(1st Report, p 42) that "the decision to privatise Cabinet
Office agencies seems to be based more on the ideological prejudices
of Ministers than any rational analysis of agencies' performance".
Sir William Reid, a former Parliamentary Commissioner for Administration
(Ombudsman), asked about Next Steps executive agencies (Q 551),
said "some of the new agencies are purely cosmetic, it seems
to me, in the sense that they were in existence before. I am thinking
of some of the smaller Government departments, like the Department
of the Register in Scotland, which were self-standing organisations.
They are now in that enormous list ... of next steps agencies
and I am not sure that they have really changed all that much,
but they are now clocked up as agencies which they were not before."
159. When Sir Christopher
Foster was asked (Q 79) what were the criteria for deciding whether
an organisation should be structured as a quango or an executive
agency, he replied, "That is absolutely mysterious. It is
quite impossible to find any logic. I think I know what it ought
to be, but what it is is beyond human imagining almost."
He went on (Q 80) "I think the best example of how there
cannot be a strategy is the difference between Historic Scotland
and English Heritage. One is an agency and one, I think, is a
quango. They are doing exactly the same job and yet they have
a difference of status." Professor Bogdanor also said (Q
129) that he could see no rational criteria, as did Sir William
Reid (Q 552). Professor Hennessy commented (QQ 1897 and 1898)
"This is the way, is it not, the British state develops?
... There is something peculiar, the 'this is England' syndrome.
It is all right for other countries with a lesser tradition than
ours. They have to write things down but that is their misfortune.
We are deeply, deeply engrained as a back-of-the-envelope nation,
certainly in the organisation of the central state".
160. Mr Charles Cochrane
of the CCSU said (Q 1793), "It is always fascinating when
one has overseas visitors and tries to explain why the Immigration
Service is not an agency, the Prison Service is an agency and
the Environment Agency is not an agency at all, in fact it is
a non-departmental public body". Dr Smith of Sheffield University
(Special Report, p 96) wrote: "Departments have created agencies
or privatised very differently. One of the problems is that there
is no standard, explicit definition of what services should be
in an agency, what should be privatised and what should remain
part of central Government."
161. Although there
is not much clarity about which type of body is most appropriate
for a given function, there are some distinguishing features between
the different types of body. Mr Michael Bichard, Permanent Secretary
of the Department for Education and Employment, was asked (QQ
1067 and 1068) about the difference between an executive agency,
such as the Employment Service, and a non-departmental public
body (NDPB), such as the Teachers Training Agency. His evidence
is quoted at some length because it well illustrates some of the
problems of classification. "Non-departmental bodies are
normally established by statute. They normally exercise powers
that are vested in them by statute. They are headed by boards
appointed by Ministers and they will be staffed by non-Civil Servants
and with their sponsor department under the Treasury agreement
they can normally set their own pay and conditions. ... an agency
would be established entirely administratively. It would have
powers delegated to it administratively and not by statute. It
would be headed by a chief executive who would be recruited now
by open competition but who would be a civil servant and who would
be responsible, in the case of the Employment Service, to the
Secretary of State. It would be staffed by Civil Servants who
would be subject to Civil Service pay and conditions so there
are some clear distinctions there. There are also some similarities.
They both perform executive functions. They both operate to some
extent at arm's length although one should not exaggerate that
in terms of an agency. They both operate on a day-to-day basis
normally without significant Ministerial involvement. ... An NDPB
is established by statute which fixes its role. It would normally
have a financial memorandum which would fix the terms of its grants
and its responsibilities and the responsibilities of the chief
executive of the NDPB, compared with me and the Secretary of State,
for example. It would have a corporate plan which would be agreed
with the department and which would on an annual basis set out
its priorities and it would have published accounts. The chief
executive would be an accounting officer. He would be appointed
by me and he would be provided with the normal guidance and training."
162. Mr Bichard went
on: "Now you could relate that [NDPB] framework to an agency
and say that there are quite a few similarities because an agency
of course would have a framework document which would clearly
set out the relationship between its chief executive and the Secretary
of State; who was responsible for policy advice and who was responsible
for operational advice. An agency would have a business plan or
in the Employment Service's case an annual performance plan with
targets and objectives. They would publish accounts in an annual
report and their chief executive would be an accounting officer
too. There are some similarities. I think the difference really
is that an NDPB is just that touch more independent than an agency."
163. Mr Turnbull gave
the Committee examples of cases where that extra independence
was helpful (Q 2173). He suggested that the public had confidence
in investigations carried out by the Health and Safety Executive
because the Executive was perceived as independent. Similarly,
a new quango, the Food Standards Agency, was about to be established
because the public did not believe that advice from the Government's
scientific advisers was independent.
164. The Committee heard
evidence from the Treasury Solicitor, Mr Anthony Hammond, that
his Department, which became an executive agency on 1 April 1996,
was unusual amongst agencies in that it had no parent department:
the Treasury Solicitor's Department is itself an agency (QQ 1140,
1142, 1147, 1148, 1218, 1219 and 1221). The Agency and the Department
are co-terminous, whereas in most cases distinct agencies have
been created from within departments, with the department remaining
as a core department. In relation to the Treasury Solicitor's
Department, the Treasury Solicitor is both the Permanent Secretary
and the Chief Executive, accountable to the Law Officers and operating
within a framework document agreed between him, the Attorney General,
the Treasury and the Office for Public Service. The Agency has
a Ministerial Advisory Board consisting of the Treasury Solicitor
himself, an independent member and the Permanent Secretary to
the Lord Chancellor. The Board monitors the performance of the
Agency and advises the Attorney General on it. Moreover, there
is an agency within this "agency-which-is-also-a-department",
namely the Government Property Lawyers. The chief executive of
the Government Property Lawyers accounts to the Attorney General
through the Treasury Solicitor.
165. Another example
of the complexities surrounding executive agencies is found in
the Department of Trade and Industry. The DTI has six executive
agencies which fall into three different categories. The Permanent
Secretary, Mr Michael Scholar, described (Q 1561) the differences
between them. "There is principally a difference in the way
in which financial control is exerted over the agency. The Insolvency
Service and Employment Tribunal Service are controlled on a gross
running cost basis ... they are on our Vote and their costs are
treated as though they were the costs of somebody in the headquarters
department. The Radiocommunications Agency and the National Weights
and Measures Laboratory are controlled as net running cost agencies,
that is to say, the receipts that they earn are netted off against
their gross costs. They appear on the Department's Vote, but we
control the difference between their costs and their receipts.
They are controlled on a net basis. The Companies House and Patent
Office are both trading funds and are similarly controlled on
a net basis, but they are not on our Vote. They are off the Vote
and their accounting officer is appointed by the Treasury. They
are one remove further from the Department than the net agencies.
Having said that ... I should make it perfectly clear that I am
the accounting officer for all six of the agencies. I carry a
responsibility for the financial integrity of the agencies, for
the way in which they do their business. They are part of the
Department. They are DTI Civil Servants, all of them, so I carry
responsibility as the Permanent Secretary for all of them".
166. In addition to
the six executive agencies, the DTI has a number of other different
kinds of body. Mr Scholar said (Q 1581), "We have non-departmental
public bodies which are sub-divided into two kinds: the executive
kind and the advisory kind. An example of the executive kind is
ACAS or the seven research councils which we fund. Then there
are twenty or so advisory non-departmental public bodies like
the British Overseas Trade Board, the Overseas Projects Board.
Then we have five departments: the Export Credit Guarantee Department,
the Office of Fair Trading and the regulatory departments [Ofgas,
Offer, Oftel]. Each of these has a different relationship to the
President of the Board of Trade, to our Ministers, the core Department.
Each of them is controlled in different ways". The principle
underlying these gradations was (Q 1587), "how far they are
away from Ministerial control. The agencies are very close to
Ministerial control. The people who work in the agencies are Civil
Servants. They are part of the Department. ... In many of the
non-departmental public bodies, they are not Civil Servants. They
do not work directly for Ministers." The Office of Fair
Trading is a separate Department of State (Q 1588), operating
under statute and advising the President of the Board of Trade.
The staff are Civil Servants. The staff of the Monopolies and
Mergers Commission, however, and of the Research Councils are
not (unless on secondment) Civil Servants.
167. Sir Christopher
Foster said (Q 98) that the types of quango and non-departmental
public bodies that exist "are so multi-faceted and various
that you cannot find, not even I think in Sir Leo Pliatzky's work,
a real attempt to try and adduce principles of classification.
It has defeated even a lawyer's ability to produce a satisfactory
classification. ... What has happened as these things have grown
like Topsy is that there have been times when one model, like
the commission, the public trust, the nationalised industry or
the NDPB, was the top example that parliamentary draftsmen or
the Civil Servants advising them lifted off the shelf. Then the
model changed."
The Committee's
Conclusions
168. This evidence
reinforces our earlier conclusion that there has been little or
no coherent rationale underlying the changes made in the Civil
Service in recent years. The Committee acknowledges that different
functions will always need to be carried out in different ways,
with different degrees of Ministerial or other control. Nevertheless,
in the absence of a codified constitution, it is particularly
important that the public should understand how the public service
works and what are the underlying strategy and guiding principles.
As it is, the evidence is that it baffles even some experts.
169. The Committee
entirely accepts that few aspects of public life in the United
Kingdom are easily susceptible to tidying up, but many of the
bodies we looked at are of fairly recent origin. It is not clear
which of the many types of body which now exist should be regarded
as an integral part of the Civil Service, bound by the Civil Service
ethos, apart from executive agencies, where those employed are
Civil Servants. Even in respect of executive agencies it is important
that their relationship to the core departments should be clearly
understood. Particular bodies should be constituted in particular
ways for particular, well-understood reasons. Above all, it should
be made explicitly clear in the case of each body which discharges
a public function how accountability to Parliament and to the
public is secured.
170. We conclude
on the evidence we have heard that the outcome of the changes
made over the last three decades has caused confusion. Given the
very large number and variety of public bodies which have come
into existence, we recommend that there should be a review to
establish some clear, easily understood common principles to guide
future developments of this kind.
The Effect of
the Agencies on the Structure of the Civil Service
171. The Committee considered
in some detail the effect which the introduction of executive
agencies had on the Civil Service. Witnesses were divided as to
whether it had broken up the unity of the Civil Service. Sir Richard
Wilson, then Permanent Secretary at the Home Office, thought that
it had not (QQ 933 and 934). He said, "I have seen various
things written occasionally which imply that in some way agencies
are some form of constitutional innovation. I do not see them
in that light. I see them as a management device within a Department
for giving managers of a discrete business the responsibility
for delivering particular outputs in return for a given sum of
resources. ... The staff of the agency are still Civil Servants
responsible to the Secretary of State of the day. ... I do not
see them as a fragmentation [of the Home Office] at all."
The Director General of the Prison Service Agency, Mr Richard
Tilt, described his executive agency (Q 1447) as "a helpful
management arrangement", adding (Q 1463) "I think it
is a way of running a public service, and it is quite an effective
way of running a public service".
172. Sir Robin Butler
echoed this, referring to the introduction of executive agencies
as a "management technique" (Q 2088). He said "I
see the agencies as being part of the core Civil Service".
173. Sir Peter Kemp
drew attention to the nature of the Civil Service before agencies
were introduced (Q 1284). He accepted that agencies had fragmented
the Civil Service, but argued that this was not substantially
different from what was going on before. The introduction of agencies
was a recognition of what was already the reality: "that
there were 100 or more activities going on within the machine
and all had to be handled separately".
174. Mr David Faulkner
wrote (Evidence volume, p 220), "The formation of executive
agencies is sometimes quoted as an example of the fragmentation
of the Civil Service. But unity was never much of a reality except
for the old administrative class, and fragmentation, to the extent
that it exists, or has increased, may be as much a product of
management practices which are applied more generally, and not
a consequence of agency status as such. Agencies vary widely in
their functions, their nature, the success they have achieved,
and the extent to which their successes and disappointments can
be attributed to agency status as distinct from other aspects
of their political and operating environment. It is difficult
to make generalised judgements about them and their special significance
as a management reform should not be over-estimated".
175. Lord Nolan took
a different view, suggesting that the introduction of executive
agencies (Q 1799) "was quite definitely a constitutional
innovation". He referred to (Q 1800) "the problems that
have arisen in the agencies' case in deciding who really is accountable
... for what has been going on in the prisons or the welfare service
or whatever it might be. I think that is of real constitutional
importance".
176. Dr Barry J O'Toole
of Glasgow University (Special Report, p 264) wrote that the Next
Steps and associated programmes such as the Citizen's Charter
and market testing had set in train a process which has led to
the fragmentation of the public service and the privatisation
of whole swathes of previously public business. In a unified Civil
Service a process of socialisation reinforced the idea of public
service, but now "Each service provided by or on behalf of
Government is a separate service. Loyalty is no longer to the
Crown but to the customer. Public service is not a collegial activity;
it is governed by personal incentives based on performance measurement.
In short, the prevailing ethos within the Civil Service has moved
away from public service towards one of private gain."
177. By contrast, the
Director General of the Prison Service Agency said (QQ 1456 and
1457) that the Prison Service, with its 40,000 staff working in
135 geographical locations, had always been something of a separate
service: "I think it is quite distinct from the Home Office,
although it remains part of the Home Office. I would not myself
place too much weight on the importance of agency status in that.
I think the Prison Service has always been quite separate from
the Home Office, mainly because the vast majority of staff work
away from London, work away from the Home Office, and have little
or nothing to do with the Home Office." Similarly Mr Michael
Scholar said (Q 1562), "The Patent Office had existed for
many, many years and people who worked for the Patent Office saw
themselves as working for the Patent Office rather than for the
Board of Trade or the DTI ... but the agency concept has usefully
concentrated that notion".
178. That agency staff
still identify with the parent department was clear from Mr Turnbull's
evidence (Q 2176). "The people in the agencies got very cross
when we started talking about DETR [the Department of the Environment,
Transport and the Regions] when we were only referring to the
central group, and they said 'We are as much a part of this Department
as you are', so now we have set up an agreement that if you use
the term 'DETR' you are referring to everyone, that is centre
and agencies and regional offices together, and if you only mean
the centre, the people that work in the policy division in Whitehall,
you call it 'DETR Centre'".
179. Some witnesses
perceived that the changing shape of the Civil Service resulted
from the cumulative effect of transferring functions without an
underlying scheme or rationale. The devolution of functions to
new bodies was followed by devolution to them of responsibility
for personnel matters, including pay and recruitment. The resulting
differences in pay and conditions of work between different bodies
in the public service introduced a further element of differentiation.
Mr Christopher Clifford of Nuffield College, Oxford referred also
(Q 346) to the increasing "spatial decentralisation"
of London-based central Government functions, giving as examples
the transfer in the 1980s of some of the work of the Department
of Health and Social Security to Leeds and some of that of the
Department of Employment to Sheffield.
180. Dr Clark echoed
these concerns about the emergence of differences of pay and conditions
between agencies and departments. "As we have delegated authority
and budgets to these Agencies ... [we] have created ... large
baronies. ... We have already got the Senior Civil Service, but
we need to find a more institutional way of ... getting ... some
comprehension and homogeneity across the top", he suggested
(Q 1851).
181. Ms Jenny Thurston
of the CCSU said (Q 1758) that in terms of personnel management
the most significant change in recent times had been the Civil
Service (Management Functions) Act 1992. The delegated authorities
which it had given to agencies, in which 77 per cent of Civil
Servants were now employed, had led to a fragmentation of the
very cohesive, co-ordinated Civil Service which had existed thirty
years ago when everybody was recruited through the Civil Service
Commissioners. Mr Cochrane said (Q 1762) that delegation had increased
the complexity of the Civil Service: "It has removed a lot
of the glue, if one can put it that way, that binds the Civil
Service together as a whole".
182. Dr O'Toole (Special
Report, p 265) also drew attention to the Civil Service (Management
Functions) Act 1992. He explained that the effect of the Act was
to make most agencies semi-autonomous, and that to all intents
and purposes most Civil Servants were now employed by them and
not by a unified Civil Service. One effect of this was to create
a barrier to flexible movement within the Civil Service. Another
was that private gain could be promoted at the expense of public
service where senior and middle managers were employed on individual
contracts which incorporated performance related pay. Even relatively
low grades also had elements of their pay based on merit and performance.
183. The Committee received
evidence that performance related pay was inappropriate in the
Civil Service for other reasons. Professor Hennessy (Q 1911) thought
that performance related pay, which had been introduced in 1988,
was "ludicrous. ...It was a profound misunderstanding to
think business practices could be imported wholesale". He
spoke (Q 1937) of the Civil Service as a republic of intellect
where people at all levels had a duty to speak truth unto power
and said, "If I thought that Deputy Secretary X was going
to work that much more effectively and zealously because of a
merit payment of £1,000 at the end of the year, I would be
deeply worried about Deputy Secretary X because that is not what
should get them out of bed in the morning to do a good job for
the state".
184. On a more positive
note, Professor Hennessy spoke (Q 1894) of the advantages of being
able to fit "the right person to the job regardless of their
place in the hierarchy. The hierarchy became less of a barrier
as time went on. It was not just that Sir Derek Rayner's suggestion
of cutting out or grade-skipping for the gifted or potentially
high-flying was accepted, it was the degree to which agencies
could redesign the Civil Service hierarchy or even remove it in
some cases for their own purposes. It meant that the reforms which
began post-Fulton, with reducing the number of classes-the famous
1,400 classes which existed before Fulton-was carried through
to considerable effect in the 1980s on the back of these other
changes and I think that was a considerable advantage".
185. In written evidence
(Special Report, p 18) Sir Christopher Foster and Mr Francis
Plowden said, "Whatever may be said about retaining a unified
Civil Service, the creation of executive agencies and the devolution
of much [personnel] administration to them and to departments
has resulted practically in a more fragmented Civil Service, which
will be reinforced by the recent privatisation of recruitment.
Given the size of the Civil Service and its increasing fragmentation
between departments and other units with separate identities,
the adverse consequences can be easily underrated."
186. Mr Michael Scholar
was asked (Q 1565) about the possible disadvantages of agencies,
and while emphasising that no such thing had happened in his Department,
he said that if things went wrong "you could get a distancing
from the core department. You could get a failure of communication,
a break-down in communication between the core department and
the agencies. You could get some change in the way in which people
in the agencies saw themselves".
187. Sir William Reid
said (Special Report, p 155) that however laudable, even desirable,
it may have been to delegate responsibility from the centre of
Government to departments and to the many different kinds of body
which now existed, each body now had to work out and operate its
own accommodation, staffing, pay, monitoring of equal opportunities
and health and safety obligations. "Management and accountability
have taken a lot of time away from the consideration, evaluation
and implementation of policy. It is incontrovertible that more
attention needs to be given to management and accountability but
the pendulum has swung too far. The result is that we have lost
the economies of scale and of administrative time which were available
when there were self-contained departments and national negotiations
on the core aspects of pay and conditions of service. I am not
persuaded that the advantages of the new agencies outweigh the
disadvantages."
188. Mr Alan Churchyard
of the Civil and Public Services Association (CPSA) (Q 797)
said that as a result of the delegation of responsibility for
pay "instead of the one series of pay negotiations which
was the historic original pattern we now have at the last count
120 different bargaining groups within the Civil Service".
He said (QQ 808 to 810) that in many cases agencies had had
to put substantial resources into setting up units to carry out
functions they previously did not carry out, such as bargaining
with unions on pay and other conditions, and that this must be
substantially more expensive than the previous arrangements. The
Prison Officers' Association said (QQ 1653 and 1660) that while
prison officers' pay was dealt with centrally, the devolution
of budgets to individual prisons meant that matters affecting
working conditions, staffing levels and promotion were dealt with
locally, which meant that instead of resolving one dispute at
the national level "you have 140 different disputes in different
rooms taking place throughout England and throughout Wales".
They added (Q 1673) that this led to an inconsistency in standards
between establishments, which in turn affected morale. Ms Jenny
Thurston pointed out (Q 1759) that while centralised negotiations
used to be carried out by some 40 people in the Treasury, over
2,000 Civil Servants had now been trained by the Civil Service
College in how to do pay negotiations and that delegated negotiations
led to significant increased costs.
189. On a more positive
note, Sir Richard Wilson drew attention (Q 967) to one effect
of the delegation of recruitment. "In the case of the Passport
Agency it is very interesting that because of the seasonal nature
of their work they are now inventing much more ingenious techniques
for their staffing needs. They maintain a core staff who are permanently
employed, but above that they have a number of people on fixed-term
contracts and they have another layer of people who are basically
casual employees on a seasonal basis. That way they are able to
cut their costs and they have achieved considerable results in
cutting their unit costs while maintaining a core of staff who
are loyal."
190. Mr Turnbull took
the view that delegation of recruitment to departments and agencies
was "actually a better way of running these services"
(Q 2220). He considered that there was no reason why the pay and
grading structure of the Coastguard Agency should be the same
as that of the Highways Agency, and explained that staff separated
by disparate pay and conditions could all belong to a single Civil
Service "in the same way that you can belong to the nation
and you live in different places and have different local allegiances.
The ethos as defined in the Civil Service Code is shared throughout
these bodies".
The Committee's
Conclusions
191. Agencies
were introduced against a background of privatisation, contracting
out, the creation of internal markets within Government departments
and the proliferation of non-departmental public bodies. If, despite
initial doubts as to their precise status, we accept that executive
agencies remain and should remain in all important respects an
integral part of the Civil Service as a whole, the distinction
between them on the one hand and privatised and non-departmental
public bodies should have been made much clearer at the time,
and it should be affirmed now.
192. On balance
the Committee accepts that the creation of executive agencies
has not, in a constitutional sense, recast the architecture of
the state-so long but only so long as accountability of Ministers
to Parliament for the work of executive agencies remains the same
as their accountability for any other aspect of their departments'
work (see paragraphs 299ff below).
193. Nevertheless,
the creation of the agencies has, in the Committee's view, contributed
to some structural division of the Civil Service. There is firm
evidence that the devolution to executive agencies of responsibility
for pay and conditions of work is contributing to a sense of disunity
in the Civil Service, and whatever the overall cost, the personnel
management cost is bound to be higher. The fact that the agencies'
budgets are subject to overall Treasury control means that in
practice it is unlikely that very significant differences can
develop between agencies, but the differences which already do
exist contribute to a sense of cultural fragmentation, and we
believe that such differences will continue to constitute a threat
to the unity of the Civil Service. Devolved responsibility for
pay and conditions has not fragmented the Civil Service yet: but
there is a need to take care to ensure that the new arrangements
do not fragment the service in the future.
194. We do not
believe the risks and implications of this division were properly
acknowledged or addressed as one structural change after another
was introduced. The changes of organisation could have led to
the fragmentation of the Civil Service. Indeed, some of our witnesses
consider that the Civil Service was fragmented by the changes.
We are not satisfied that, although divisions have taken place,
there has been what can really be called a fragmentation of the
Civil Service. Nevertheless, the real danger that such fragmentation
could happen should be considered before any further structural
changes are made. It is not safe to assume that a single strong
ethos and a sense of shared loyalty to a unified service can without
conscious effort be maintained across a wide range of differently
constituted and geographically dispersed bodies. Most private
sector organisations are well aware of this and devote considerable
effort and resources to maintaining their corporate identity and
fostering pride in it amongst their employees. Ministers and senior
officials need to do the same-as was accepted by our witnesses.
195. The Committee
recommends that the Minister in charge of the Office of Public
Service should be given explicit responsibility for maintaining
the unity and standards of the Civil Service and for monitoring
the effect on them of any structural change.
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