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Smaller Government: Shrinking the Quango State House of Commons Public Administration Select Committee Smaller Government: Shrinking the Quango State Fifth Report of Session 2010–11 HC 537 House of Commons Public Administration Select Committee Smaller Government: Shrinking the Quango State Fifth Report of Session 2010–11 Volume I: Report, together with formal minutes, oral and written evidence Additional written evidence is contained in Volume II, available on the Committee website at www.parliament.uk/pasc Ordered by the House of Commons to be printed 20 December 2010 HC 537 Published on 7 January 2011 by authority of the House of Commons London: The Stationery Office Limited £0.00 The Public Administration Select Committee The Public Administration Select Committee is appointed by the House of Commons to examine the reports of the Parliamentary Commissioner for Administration and the Health Service Commissioner for England, which are laid before this House, and matters in connection therewith, and to consider matters relating to the quality and standards of administration provided by civil service departments, and other matters relating to the civil service. Current membership Mr Bernard Jenkin MP (Conservative, Harwich and North Essex) (Chair) Kevin Brennan MP (Labour, Cardiff West) Nick de Bois MP (Conservative, Enfield North) Michael Dugher MP (Labour, Barnsley East) Charlie Elphicke MP (Conservative, Dover) Paul Flynn MP (Labour, Newport West) Robert Halfon MP (Conservative, Harlow) David Heyes MP (Labour, Ashton under Lyne) Greg Mulholland MP (Lib Dem, Leeds North West) Lindsay Roy MP (Labour, Glenrothes) Mr Charles Walker MP (Conservative, Broxbourne) Powers The powers of the Committee are set out in House of Commons Standing Orders, principally in SO No 146. These are available on the Internet via www.parliament.uk Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at http://www.parliament.uk/pasc. The Reports of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in a printed volume(s). Additional written evidence may be published on the internet only. Committee staff The current staff of the Committee are Clive Porro (Clerk), Ben Williams (Second Clerk), Paul Simpkin (Senior Committee Assistant) and Su Panchanathan (Committee Assistant). Contacts All correspondence should be addressed to the Clerk of the Public Administration Select Committee, Committee Office, First Floor, 7 Millbank, House of Commons, London SW1P 3JA. The telephone number for general enquiries is 020 7219 5730; the Committee’s email address is [email protected] Smaller Government: Shrinking the Quango State 1 Contents Report Page Summary 3 1 Introduction 5 Definitions 5 Our inquiry 6 2 The Government’s review 7 Additional test? 10 Review process 11 Consultation 11 Applying the tests 13 3 Future Reviews 17 Reviews and the Public Bodies Reform Bill 18 4 Managing the transition 20 Role of the Cabinet Office 22 Business Plans 22 5 Sponsoring Public Bodies 24 6 Accountability 27 Accountability or cost savings? 27 Accountability and the review process 29 The primacy of accountability? 29 Cost savings 30 Increasing accountability? 30 Doctrine of ministerial accountability 30 Will it work? 31 Other forms of accountability 32 The Executive Agency model 34 Accountability to Parliament 35 7 Opportunities for wider reform 36 Public Bodies and the Big Society 36 Public Body Activities 39 Lobbying 40 Reform of the public bodies landscape 41 8 Public Bodies Reform Bill [Lords] 45 Progress in the Lords 45 9 Conclusion 47 Conclusions and recommendations 48 2 Smaller Government: Shrinking the Quango State Appendix A: Transition Guidance 53 Formal Minutes 57 Witnesses 58 List of printed written evidence 58 List of additional written evidence 58 List of Reports from the Committee during the current Parliament 60 Smaller Government: Shrinking the Quango State 3 Summary The Coalition’s Programme for Government stated that it would “reduce the number and cost of quangos.” To achieve this the Government conducted a review of all public bodies to identify those which it felt were no longer necessary. The review focused on whether a body’s functions were necessary, and if it thought they were, whether it had to be delivered at arm’s length from Government. This review was poorly managed. There was no meaningful consultation, the tests the review used were not clearly defined and the Cabinet Office failed to establish a proper procedure for departments to follow. It is important that the Government learn lessons from these mistakes as it has indicated that future reviews are likely to be run in broadly the same way. To ensure their effectiveness future reviews should not be conducted in a similar way. The Bill giving the Government the power to bring about these changes was equally badly drafted. It is being significantly re-written by the House of Lords and we intend to issue a further detailed report on the Bill once the Lords have finished their scrutiny. Now decisions have been taken as to which bodies to abolish or reform, the Government faces the much larger challenge of successfully implementing these reforms; any organisation would struggle with changes on this scale. The Cabinet Office needs to prepare and issue clear guidance on how to manage this transition. We have developed, with the National Audit Office, our own guidance which draws on lessons from past reorganisations. We encourage departments to use this to assist them in managing the transition process. The Government’s stated intention for the review was to increase accountability by bringing functions previously discharged by public bodies back in to central departments, thus making ministers directly responsible for the decisions taken. We sympathise with ministers’ desire to be able to influence decisions they will ultimately be held responsible for; but the Government has failed to recognise the realities of the modern world. Stakeholders and civil society play an important role providing challenge and criticism to public bodies on a day to day basis and it is easiest for them to perform this role when they have a clearly identified body to engage with, not a homogenous central department. There is a way to meet both demands: set these bodies up as executive agencies - this provides a clearly identifiable organisation for stakeholders to engage with, while leaving ultimate responsibility with the Minister. Departments are not clear about how they should interact with the bodies they sponsor; failing to strike the right balance between oversight and independence. The Cabinet Office should issue clear information on the proper relationship between departments and public bodies. One reason for this lack of clarity is the complexity of the public bodies' structures; non- departmental public bodies, arm’s length bodies, quangos, public bodies, executive agencies, non-ministerial departments, and independent statutory bodies all clutter the landscape. We recommend that the Government gradually implement a simplified system 4 Smaller Government: Shrinking the Quango State so that it is clear to everyone who is responsible for what, and how much input it is right for the Government to have. Finally, we think that this review represents a missed opportunity. The Government should have reassessed what function public bodies are needed to perform and transferred many more of these activities to charities and mutuals. Doing so would have helped explain more clearly its vision for a Big Society, giving these organisations the ability to provide more government services. It should also have used the review to get control of some activities of public bodies that provide questionable benefit to the taxpayer, most notably the use of public funds for lobbying and public relations campaigns. Smaller Government: Shrinking the Quango State 5 1 Introduction 1. There are currently over 900 public bodies in the United Kingdom. They perform a range of tasks from regulating industry to providing guidance and protection to consumers. Some advise on senior appointments while others act as stewards of national assets, promote changes in public behaviour or provide expert scientific advice to Government. A number are responsible for the distribution of large amounts of taxpayers’ money in the form of grants to business, universities and research bodies. As the Institute for Government’s (IfG) recent report notes “they [public bodies] are fundamental to the effective running of the British state”.1 2. Nevertheless, there are a number of long standing concerns about public bodies – or “quangos” (quasi-autonomous non-governmental organisations) as they are often less affectionately known. Such concerns normally focus on a combination of three complaints: the cost and perceived “wasteful” spending by these bodies; a sense that they are unaccountable for decisions that they take; and the regulatory and bureaucratic constraints that they impose on the rest of society. 3. The Coalition’s Programme for Government stated that it would “reduce the number and cost of quangos.”2 The emergency budget announced significant reductions in the number of public bodies and savings of £500 million.3 Since then the Government has conducted a review of all public bodies to identify further reductions. It has also introduced the Public Bodies Reform Bill [Lords] to give it
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