GD 2021/0035
PUBLIC SERVICE REFORM: 1ST PROGRESS REPORT
Preparing for the Future
COUNCIL OF MINISTERS SUB-COMMITTEE January 2020
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GD 2021/0035
This report was produced by the COMIN Sub-Committee in 2019/20 including a ‘minority overview’ from Hon. Geoffrey Boot MHK, but its consideration and approval were interrupted like so many other things were in 2020.
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GD 2021/0035 FOREWORD
The need for governments and the wider public service to change and to reform their scope, structures and mechanics to adapt to changing circumstances is not new, and rather, it has been part of the world-wide discourse about public service for decades. The Isle of Man situation is no different. The Island’s Government and public service has been reformed and is changing. In recent decades this reform began by loosening the control of the Lieutenant Governor, and then included the creation and refining of the departmental system, and the strengthening of our Government’s core functions and consideration of the establishment of a Single Legal Entity.
In this administration public service reform has included the introduction of a Programme for Government, and enhanced use of Council of Ministers sub-committees, cross-government and transformation projects to deliver the Government’s objectives more smartly through honing the application of financial, human, physical and digital resources. More recently, I have announced that the Cabinet Office will be furthering efforts to place the customer at the heart of Government and One Public Service1 by developing a Smart Services Framework2 and a Government Services Strategy3 to enable improvements like “tell us once”, “one stop” information and signposting, “digital inclusion” and financial means assessment.
These efforts in the last three years, as well as those in recent decades and those outlined and recommended in this report, have been founded in the need for our public service - how it is designed and works - to be less fragmented and better positioned to deliver effectively and efficiently. But the evidence is that these reforms and change itself can no longer be achieved, or even planned, piecemeal. Thus this progress report with further recommendations.
In essence, to place the people of the Isle of Man at the heart of everything the public service does, providing people with the public services they deserve, we need to become smarter, more cohesive and more joined-up: we need to become One Public Service, with smarter Government. This document considers how we can achieve this goal.
One particular quote in the coming pages - written in the context of a review considering the possible corporatisation of the Island’s bus service - provided real colour to the report for me. This quote is: “Taking the next step to becoming an arm’s length company is only worthwhile if Bus Vannin was then left to be master of its own operations.”
1 https://www.gov.im/media/1367658/year-3-amendments.pdf
2 https://www.tynwald.org.im/business/hansard/20002020/t190618.pdf#page=61
3 https://www.tynwald.org.im/business/OPHansardIndex1821/4320.pdf#page=1
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GD 2021/0035 I conclude that the proposals set out in the pages that follow will succeed only if we can act as a national government, going beyond micro-politics and embracing a new approach to government, with politicians making policy and managers managing. As politicians representing the wider Manx public we have the chance to choose this new approach which can deliver One Public Service for our community and our Island.
I commend this report to the Council of Ministers, Tynwald Members and to the people of the Isle of Man. In doing so I acknowledge that the concepts and proposals contained herein do represent change and reform, but that’s what is needed.
An evolved role for politicians is suggested, and the proposal may need to be considered in the wider context of Tynwald reform, but – if the transformation is handled with care – this new relationship between people and their elected representatives can enrich our public service, our democracy and our community.
In closing I would like to thank the committee secretariat and committee colleagues for their diligence and sensitivity to the challenge of completing this investigation and proposal. This committee proposal is timely and can be instrumental in transforming the Island’s public service.
Chris Thomas MHK, Minister for Policy and Reform
January 2020
Signed by Chris Thomas, MHK (Chair) Clare Barber, MHK Hon. Geoffrey Boot, MHK Daphne Caine, MHK Chris Robertshaw, MHK Single Legal Entity Sub Committee, Council of Ministers
Signed February 2021
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GD 2021/0035 CONTENTS
FOREWORD ...... 3
1. INTRODUCTION ...... 8
2. EVOLUTION OF GOVERNMENT ON THE ISLE OF MAN ...... 10
3. RECENT PUBLIC SERVICE REFORMS ...... 13
Review of Government Regulatory Framework ...... 13
Executive Agencies, Department for Enterprise ...... 14
Independent Review of the Isle of Man Health and Social Care System ...... 16
Isle of Man Airport Review ...... 16
Review of Quarry Operations, Externalisation of the Bus Service & Review of Heritage Railways.. 18
Centralisation of Government Finance Teams ...... 18
Centralisation of Policy Resource ...... 19
Centralisation of Secondary Legislation Drafting ...... 20
Review of the Department of Home Affairs ...... 20
Devolved Financial Management (DFM) in education ...... 21
4. THE REFORM LANDSCAPE ...... 22
Introduction ...... 22
Arm’s Length Bodies ...... 22
Classification ...... 23
Discussion...... 24
Conclusion ...... 27
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GD 2021/0035 5. THE CASE FOR REFORM ...... 27
Proposal ...... 30
6. LEGISLATIVE REQUIREMENTS ...... 30
Statutory Boards ...... 30
Government Owned Companies...... 32
Other Legislative Reform ...... 33
Target Operating Model ...... 33
One Public Service ...... 33
Statutory Boards ...... 34
Government Owned Companies ...... 34
Proposals ...... 34
7. CONSIDERATIONS ...... 35
Services to the Public ...... 35
The Role of Politicians ...... 36
Separating Policy from Operations ...... 36
Future Political Roles ...... 39
Future Policy Function ...... 41
The benefits of One Public Service ...... 42
Staff Transfers ...... 43
Shared Services ...... 43
Proposals ...... 44
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GD 2021/0035 8. RECOMMENDATION ...... 46
9. Minority OVERVIEW ...... 48
BIBLIOGRAPHY ...... 50
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GD 2021/0035 1. INTRODUCTION
At its sitting in December 2016, Tynwald resolved:
‘Tynwald notes the work done to date by the Council of Ministers around the Single Legal Entity and connected matters, and requires that the Council of Ministers establish a Sub- Committee to investigate the merits and practicalities or otherwise of organising Government on the basis of a Single Legal Entity, reporting back to Tynwald with recommendations by July 2017.’
As such, the Single Legal Entity Sub-Committee was formed and began working to explore the possibilities of reforming the Isle of Man Government from a fragmented and silo- burdened organisation to One Public Service that is designed in a way that places the citizen at the heart of its activity.
After much research, discussion and deliberation, the Committee published an interim report in July 2017, which was laid before Tynwald and outlined four options for reform:
1. An incremental approach 2. Single Legal Entity with a Department structure 3. Single Legal Entity operating as a single organisation 4. Executive Agency Model
The Committee concluded that the most desirable option for reorganising government was to progress reforms on an incremental basis with the ultimate intention of moving towards a single legal entity. Specifically, the Committee recommended to the Council of Ministers that it should:
a) Progress incremental reforms to legislation in order to give greater emphasis and commitment to requirements for joined up working; and b) Introduce a Bill to provide for a Single Legal Entity Government so that, should it be in the Island’s interests at a future date for it to be implemented, it could be done so relatively quickly.
Thus, since the 2017 report, the focus has moved away from reorganising the Isle of Man Government as a whole into a single legal entity. Instead, incremental reforms to the structure of the public service that set out to improve its efficiency and effectiveness have gained renewed momentum. This has included the ongoing development of shared services, reviewing regulatory functions and investigating the introduction of agencies and other Arm’s Length Bodies for delivery of some public services.
In 2019 the Single Legal Entity Sub-Committee reconvened to further consider opportunities for improving the provision of public services through further public sector reform.
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GD 2021/0035 This progress report identifies these recent developments, explores the advantages and disadvantages of delivering public services in a different way, and sets out a case for doing so.
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GD 2021/0035 2. EVOLUTION OF GOVERNMENT ON THE ISLE OF MAN
Following a long period of evolution, by 1986 the Isle of Man Government consisted of 27 Boards of Tynwald whose membership comprised members of Tynwald and some non- Tynwald members. However, the Board system had become characterised by slow decision making a lack of cooperation and poor coordination.
As a result, pressure during the 1980s for the introduction of a ministerial system that allowed for a more decisive, efficient and effective form of Government resulted in the reorganisation and reduction in the number of the Boards of Tynwald. The transfer to a full Ministerial System was accomplished by the passing of the Government Departments Act 1987 and Council of Ministers Act 1990. This led to the establishment of nine Departments of Government and the reconstitution of the Executive Council as a Council of Ministers with a Chief Minister. The remaining Boards of Tynwald and some other bodies (which had not been moved into the new Departments) remained separate as Statutory Boards (as provided for by the Statutory Boards Act 1987).
To continuously improve and be able to respond to changing demographics, citizen needs and expectations of the general public the structure, scope or machinery of the Isle of Man Government has been kept under review. In 2006, the need for public services to be modernised and improved came to the fore in the form of a comprehensive report and recommendations that focussed on the scope and structure of the Isle of Man Government.
The 2006 report, acknowledged the progress that the Island had made since the 1980s but emphasised the need for continued improvement particularly in relation to:
a) Corporate Government – the need for greater working together across Government to address the perceived continuing silo mentality; and b) Separating Policy from Operations – the need to redefine and separate the roles of the politician and the manager.
In 2010, the Council of Ministers responded to the Scope and Structure Report by recommending restructuring Government. This resulted in dissolving six Departments and replacing them with departments that included: Department of Economic Development to co- ordinate the support and promotion of key sectors in the Island’s economy, and the Department of Social Care, which was made responsible for a cohesive social policy. While the number of departments remained constant at nine, there were substantial changes within the departmental structures and working practices as divisions were reorganised into new departments.
This is viewed as one of the first steps towards changing the culture of silo working.
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GD 2021/0035 Since 2010, there has been a programme of integrating common services throughout Government. This has included: finance, estates, fleet management, human resources and payroll, catering and information technology, with the intention of reducing duplication, improving operational efficiency and benefiting the taxpayer through economies of scale. However, while there has been undoubted value in the 2006 restructure, a 2012 Scope of Government report found that the departmental structure of government was allowing a silo mentality to survive, albeit with a stronger commitment towards inter-departmental cooperation than before.
As such, the Council of Ministers’ response to the ongoing need to improve how the organisation operates followed the principle that Government should be smaller, simpler and less bureaucratic. With this, work to identify alternative means of delivering public services and ensuring their sustainability and cost effectiveness has continued. For example in 2013 the Council of Ministers (in tandem with the work on alternative means of service delivery) considered wider issues surrounding the future sustainability of public services against a backdrop of a reduction of Government revenue. In order to progress the work of developing current and future priorities, the Council of Ministers identified a need to reform elements of the structure of Government so that it could more effectively deliver any changes and improvements necessary. This was progressed from April 2014, with the following outcomes:
1) The reduction of the number of departments from nine to seven4, by the amalgamation of most of the functions of the Department of Health and the Department of Social Care into a new Department of Health and Social Care, with the remaining function being transferred to the Treasury, and the dissolution of the Department of Community, Culture and Leisure, its functions being transferred to other departments; 2) The reduction in the number of Ministers from nine to eight, allowing for a Minister without portfolio to be dedicated to Policy and Reform and to lead the Transforming Government Programme; 3) The improvement in corporate working through the enhancement of the centre of Government by the creation of a Cabinet Office, incorporating the Chief Secretary’s Office and other offices providing key corporate services; and 4) The combination of the two Statutory Boards providing public utilities into a new Manx Utilities Authority.5
These changes, delivered in April 2014, were seen as the first phase, with the second being to examine options for further streamlining and improving service delivery as well as a more detailed review and reform of the departmental system of Government. During this first phase
4 Increased to eight when the Cabinet Office became a Department.
5 The report also recommended that the Council of Ministers should consider: opportunities for further reforming the criminal justice system; and the potential benefits that could be achieved by streamlining certain corporate services and regulatory functions.
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GD 2021/0035 of reform, Government has moved from an essentially departmentally minded policy review process through a corporate planning process to the new Programme for Government process established by the current Administration. The Programme for Government is now based on a national outcomes framework, introducing the concept of shared contribution towards shared objectives that deliver services and strategies that focus on the national interest and place greater emphasis on the citizen at the centre of decision making and activity.
The remainder of this report outlines the progress and options for delivering the next wave of public service reform on the Isle of Man.
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GD 2021/0035 3. RECENT PUBLIC SERVICE REFORMS
Since our report in June 2017, the need to address issues around corporate government and separating policy from operations has remained. Efforts to resolve or mitigate these issues have centred on implementing or considering reform across a range of public service functions. These are:
1. Review of Government Regulatory Framework 2. Executive Agencies, Department for Enterprise 3. Independent Review of the Isle of Man Health and Social Care System 4. SAVE Programme: a. Isle of Man Airport Review b. Review of Quarry Operations c. Externalisation of the Bus Service d. Review of Heritage Railways 5. Extension of shared services: a. Centralisation of Government Finance teams b. Centralisation of Policy teams c. Centralisation of Secondary Legislation Drafting 6. Review of the Department of Home Affairs
These efforts to reform the Isle of Man Government are explored in more detail below.
Review of Government Regulatory Framework
In 2014 Tynwald approved the Modernising Ministerial Government report. As well as outlining the formation of the Cabinet Office, the Department of Health and Social Care and the Manx Utilities Authority, the Report referred to a:
“…considerable number of regulatory and enforcement functions, some of which sit at arm’s length and others which sit within Departments. It has been suggested that further efficiencies and a more coherent regulatory regime could be provided if some of these functions were brought together as a ‘Fused Regulator’.”
Some progress has been made with the centralisation of many regulatory functions within the Department of Environment, Food and Agriculture and the inclusion within the Programme for Government of a commitment to further review regulatory functions. Work to build on the administrative merger of Department of Environment, Food and Agriculture, the Office of Fair Trading and the Road Transport Licensing Committee is considering proposals to reform the regulatory structure from a number of separate bodies into a hub of regulators.
An option under consideration is the creation of a new Statutory Board (the Isle of Man Regulatory and Competition Authority). It is anticipated that this process could involve:
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GD 2021/0035 a) Existing regulatory functions within the Department of Environment, Food and Agriculture - such as Environmental Health, Food Safety and Labelling, Environmental Protection, Animal and Plant Health, and Health and Safety at Work; b) Office of Fair Trading; c) Road Transport Licensing Committee; d) Regulatory registration, inspection and enforcement activities currently vested in the Department of Health and Social Care comprising:- a. Adult Care Homes and Adult Day Care Services b. Children's Homes, Child Minders and Child Day Care Services c. Nurse Agencies d. Domiciliary Care (home care and supported living) e. Hospices f. Offender Accommodation g. Independent clinics and Independent Medical Agencies h. Fostering and Adoption Services e) Enforcement of registration of tourist premises and the work permit system currently in the Department for Enterprise.
Other regulatory functions such as Planning, Building Control, theIndependent Monitoring Board, the regulation of schools and the Communications Commission could be included. The Board would be responsible for regulation and enforcement of activity, but responsibility for determining policy (including the setting of standards) would remain within a Department or with the Council of Ministers.
In our interim report in 2017 we recommended that any legislative change should allow for the transfer of regulatory functions to new delivery models and we repeat that proposal below. These regulatory functions should give the public confidence in the separation of politics from the regulation of Government activity.
Executive Agencies, Department for Enterprise
In the Department of Economic Development Review (July 2017) it was stated that:
“There was a point in time when the Department used an “Agency” approach to service industry liaison, promotion and product development, most notably in the cases of Isle of Man Finance and the Board of Tourism. However in recent years these functions were absorbed into Government, and today just over 30 staff and contractors provide services in support of around 30 separate sectors of our economy. There is a compelling argument to return to an agency-based business model because complexity across these sectors is vast and the people closest to the challenges and the ideas for growth are here on our Island, in our business sectors. The review concluded that there is real value in looking to implement an executive agency model that seeks to more formally harness these skills and knowledge through a clear governance structure that brings the necessary stakeholders together.”
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GD 2021/0035 It was recommended that the Department’s Business Development functions should move towards an agency-based model to work jointly with the private sector on a clearly defined and prioritised segmentation model. These Agencies have now operated for nearly two years and have brought together some 50 people from across the private and public sectors to make decisions on promotional spend, examine ideas for product development, and input into policy considerations. All four Agencies have successfully secured additional spend and have been able to reap the benefits of utilising expertise and specialism in helping better understand and develop enterprise areas and related plans.
In legal terms an Executive Agency does not offer any significant difference in relation to governance arrangements from that offered by a department. In practice, the Minister delegates certain of his functions to a non-statutory board within the department and this non-statutory board is then entitled to exercise those functions to the extent set out in the delegation. This means that the form of delegation can be used to ensure the required level of political scrutiny. Similarly, the Minister is able to rescind the delegation at any time and is not prevented from discharging functions directly even though they are also delegated.
This model is useful when there is a need to create a separation in terms of perception between the department and the Executive Agency. This separation may make it easier for a department to attract expertise or specialism from private sector in terms of the running of the Executive Agency. Were this model to be adopted, the functions set out in existing legislation would remain with the relevant department (but some of these functions may be delegated to the Executive Agency). An Executive Agency does not acquire a separate corporate identity and would therefore continue to contract in the name of the department.
There may be a need for some caution in the Executive Agency model, particularly in the capacity and maturity of the structure. For example, whilst the four chairs and private sector volunteers for these roles and have invested large amounts of their time, these efforts have been impeded by the lack of strategic plans. While ideas for improvement were quickly and enthusiastically developed, the scale of resource to support their delivery has been a consistent issue with all four chairs requiring more capacity and speed to aid project delivery. This has been a challenge as no additional funding was provided for the model – only for specific business case backed initiatives.
Consequently, as part of any further development of the Executive Agency model the transfer of budgets would be necessary to provide the capacity to deliver real initiatives at a faster pace. As such, the model should not only discuss ideas but have the scale and capacity to deliver upon them.
Another agency has been proposed in a report by PWC published in November 2019, an Urban Development Agency. This report advocates a corporate structure for the proposed development agency, a development corporation rather than a development agency (PWC, 2019, p.19).
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GD 2021/0035 Independent Review of the Isle of Man Health and Social Care System
The Independent Review of the Isle of Man Health and Social Care System, which was approved by Tynwald in May 2019, recommended a new governance model for health and social care. This model is now being developed with a view to it taking effect from April 2021. In recommending the new model, the Review said:
“At present, the DHSC sets the policy on health and care on the Island as well as taking responsibility for delivering and/or contracting others to deliver that care. There is a big advantage to be gained from freeing health and care providers to focus exclusively on the delivery of high quality, integrated care, based on clinical need, as opposed to any undue, external influence. Freeing the officers of DHSC to focus on strategic policy, regulation, overall finances and supporting the Minister and Members would allow greater analysis of data, trends and the opportunity for more insightful policy development. If policymakers become too involved in operational matters, it is almost certain to lead them to concentrating on apparently urgent day-to-day business at the expense of the really important strategic decisions.”
Accordingly it was recommended that:
“The setting of priorities and the development of policy in both health and social care should be separate from the delivery of services. A comprehensive governance and accountability framework should be established aligned to agreed standards and underpinned, where necessary, by legislation. A single public sector organisation, perhaps to be known as “Manx Care”, should be responsible for the delivery and/or commissioning from other providers of all required health and care services. Manx Care should be set up as an arm’s length body (perhaps a Statutory Board) and run by a Board appointed by Government and approved by Tynwald. However, importantly, it should be operationally independent of both Government and Tynwald. Manx Care should deliver services, outcomes and efficiencies against a formal clear mandate set by the DHSC, within a funding envelope agreed with the DHSC and Treasury.”
That the Review was approved unanimously by Tynwald is a significant development in the context of the continuing evolution of the Isle of Man Government. In supporting the use of an Arm’s Length Body for the delivery of the largest public service on the Island (in budgetary, people and asset terms) Tynwald clearly recognised that a fresh approach was required.
Whilst the implementation of the model and measurement of its success are some way off, the agreement to the principle is an important milestone, and something we bear in mind in our conclusions below.
Isle of Man Airport Review
As part of the SAVE Programme, Treasury commissioned York Aviation LLP to undertake a comprehensive review of the commercial operation of Isle of Man Airport with the overall
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GD 2021/0035 objective to identify a preferred business model, business case, and implementation plan. The primary objective, though, was to deliver cost savings.
York observed that:
“Airport management… have little freedom to act and are subject to direct political control. Whilst this has the benefit that decisions about the Airport can directly reflect the social and economic needs of the Island, it can result in a slower decision-making process and in decisions being taken that are not wholly commercial. Ultimately, airport management are not fully in control of all aspects of how the Airport is run and, hence, this inevitably weakens any sense of accountability for delivering profitable operations.”
Accordingly, they considered the advantages and disadvantages of alternative operating models and concluded that the option most likely to make a significant contribution to the Government SAVE programme was to pursue a corporate type business model through a separate arm's length company with appropriate government control, scrutiny and financial support (via subvention).
In reaching this conclusion, York identified a number of potential advantages of corporatisation, including:
a) More transparent information on costs, permitting more effective and efficient operational planning; b) The establishment of a more professional independent Board structure, bringing additional skills to support Airport governance, requiring greater access to management information, and holding management to account for financial performance; c) A better-defined role for Government politicians and departments, focussed on specifying strategic objectives, whilst freeing Airport management to make tactical decisions; d) Better incentivisation of management to improve performance by granting more control of costs and incomes.
The report was debated by Tynwald in July 2019 and support given to the principle of the creation of an Isle of Man Government owned arm’s length organisation to take responsibility for the operation of the Airport. A detailed implementation plan, governance structure and an operating model are to be returned to Tynwald for approval by no later than April 2020.
A further milestone in the continuing evolution of the Isle of Man Government.
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GD 2021/0035 Review of Quarry Operations, Externalisation of the Bus Service & Review of Heritage Railways
Independent reviews as part of the SAVE Programme have also been undertaken into quarry operations, the bus service and heritage railways. In each case it was concluded (albeit with some modifications) that the existing governance models should be retained and the services should remain part of the Department of Infrastructure.
In relation to the bus service, this conclusion appears to have been reached on the basis of the following premise:
“Taking the next step to becoming an arm’s length company is only worthwhile if Bus Vannin was then left to be master of its own operations, the network provided and fares charged. It is our view that with the level of micro-politics prevalent on the Island, with local issues being major factors, it is highly unlikely that an arm’s length company would be allowed to have the level of commercial freedom needed.6”
In respect of heritage railways, the reviewers (Systra) considered various options for alternative operating models (including privatisation, outsourcing or charitable status) although it appears as though the public corporation model was not considered.
In respect of quarries, Wardell Armstrong considered alternative models of operation, including letting of operating contracts to a third party, the creation of a government subsidiary and the creation of a joint venture company. The review concluded that because the operation of the quarries was cost effective and low risk, any adaptation to the delivery model would pose a risk to the supply chain and the programme of highway maintenance.
Centralisation of Government Finance Teams
The current structural arrangements for the provision of financial advisory services are determined, in the main, by the requirement for a Department, Board or Office to assign a Departmental Finance Officer, who exercises certain functions as per the requirements of the Financial Regulations. Traditionally this has been fulfilled by the Department employing a Finance Director (or equivalent) who has a number of officers undertaking a series of finance related functions.
Following the introduction of Finance Shared Services a number of finance staff from across departments were brought together to undertake transactional functions. Unlike the creation of HR shared services where all officers relating to the function transferred, the more senior staff remained within the Departments. This move, while creating the opportunity for greater
6 TAS Consulting Report - May 2018
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GD 2021/0035 resilience and efficiencies, is thought to have further fragmented the Government’s finance function through a lack of consistency of approach and over reliance on key individuals. This represented a risk to Government not only in terms of resilience and succession planning, but also in ensuring that consistent high quality advice and application takes place across all areas of Government. Whilst the existing arrangement does work in part, improvements in the quality of the advice and efficiency of delivery can be made. These improvements, which can be delivered through a single finance community, include: pooling of resources, increased access to specialisation, development of shared and best practice and better resource allocation.
With this is mind, it was agreed this year that a shared financial advisory service be created by transfer of existing finance roles and budgets from Departments. Treasury has recruited a senior accountant as Executive Director, Financial Advisory to provide leadership for the service and profession as well as agree service standards with departments.
Departments will retain access to financial advice through dedicated finance officers as part of a wider finance profession. Treasury will implement a standardised approach to the production of departmental financial reports and will agree the further business information requirements of each Department, and this will be documented within agreed Service Level Agreements.
Although this does not represent a change in governance model per se, it shows another move towards improving the provision of public services and strengthening the centre as advocated by our report in 2017.
Centralisation of Policy Resource
Almost all services provided by Government are covered by policy at some level. Policy is, in essence, the approach to be taken to address a particular issue; but more specifically can be seen as a set of guiding the principles for addressing an issue. In Government it is distinct from operations that respond to policies but are delivered in accordance with defined processes and procedures.
There are two key areas of tension in our current policy development approach:
1) Policy and operation can be mismatched - this may result in operations failing to deliver the expected policy goal or that operational realities are poorly addressed in policies. 2) Policies are prepared and implemented across Government with sometimes poor cross- reference, leading to a lack of a single overall strategic objective or even directly conflicting policy aims.
To alleviate these tensions and ensure that policy generation and development better reflect areas of national interest, a centralised policy unit will be established within the Cabinet Office. It is envisaged that the central policy unit will work closely with Departments and form cross-
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GD 2021/0035 Government working groups and, where appropriate, transformation teams. Each Department or entity would have a business partner within the team.
Centralisation of Secondary Legislation Drafting
Historically, there has been a split between primary and secondary legislation drafting processes. Primary legislation has been drafted by the Attorney General’s Chambers and secondary legislation has usually been drafted within the department or statutory authority responsible and then checked by Chambers, although Chambers have always drafted complex secondary legislation. Chambers has always provided advice on the actual process of drafting secondary legislation and runs a regular course on the topic.
The Attorney General’s Chambers recently suggested the centralisation of secondary legislation drafting. The rationale for this was:
a) Building resilience, because in many areas there is reliance on one person or a very small team; b) Assisting with prioritising secondary legislation (the prioritisation of primary legislation appears to be working effectively); c) Assisting with recruitment because being part of a larger team can avoid a drafting officer’s sense of isolation; d) Gaining experience in a number of different areas, and; e) The drafting of primary and secondary legislation becomes more integrated allowing for a better flow of information and knowledge between the drafters (of both primary and secondary) and the advisory team in Chambers which may improve the quality of policy-making and of the resultant legislation.
This proposal has been approved by the Council of Ministers and the centralisation process has now commenced.
Review of the Department of Home Affairs
A review is also taking place into the functions of the Department of Home Affairs. This review has identified that there is not a single view of public safety for the Isle of Man and while the three main agencies within the Department operate efficiently within their own divisions, there is little cross agency integration, particularly in relation to common services.
The review is exploring opportunities for integrating the Ambulance Service with other emergency services and the creation of a single borders team that could be comprised of similar functions from across Government (i.e. customs, immigration and port security). The options for improving how these agencies integrate as part of a wider structure include:
a) Expanding the remit of the Department by integrating functions from other areas; b) Transferring those functions from the Department into the Cabinet Office;
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GD 2021/0035 c) Creating an Executive Agency within the Cabinet Office to deliver operational law and order and public safety; and d) Establishing the role of Minister with responsibility for justice
The review is ongoing and as such, no policy decision has been made. However, it is a further indication of a shift to considering the use of operational delivery agencies more extensively for the delivery of improved public services.
Devolved Financial Management (DFM) in education
Devolved Financial Management (DFM) in education was to be introduced from April 1998 in three phases with the rationale being that development of local education provision should allow for secondary schools to have more say and direct control over their individual operational budgets. This would have allowed the Island to be more closely aligned to the Local Management of Schools in operation during the same period in England and Wales. The importance of this was that salary scales for teachers on the Island are analogous to those in the UK and include an allowance for financial and budgetary responsibilities and accountabilities.
The benefits of DFM include:
a) Enabling operational decisions concerning schools to be taken by local management; b) Empowering those making decisions to do so more rapidly and translating them into actions for the benefit of both students and the community; c) Continuing to raise standards for students through greater effectiveness of smaller units of management who are able to target their resources more parsimoniously and efficiently on areas of highest priority to the individual institution; d) Providing clearer delimitation of roles in the provision of high quality education to the population of the Isle of Man, with the secondary schools and the University College Mann being in clear control of the means to make first class provisions, whilst the Department of Education concentrates on strategic leadership, support services, arbitration and monitoring functions.
However, there are some drawbacks to DFM which include a perceived lack of transparency, the potential to create competition between schools, fostering autonomy in relation to governance and increasing costs. DFM was not fully rolled out across the Department, not least because numerous functions became centralised as part of the development of shared services from 2011 onwards. Nonetheless, the option exists to widen the scope of the existing ‘partial DFM’ model.
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GD 2021/0035 4. THE REFORM LANDSCAPE
Introduction
Since the 1980s, the traditional roles of Government in service provision have evolved as the changed economic and political environment has led to the need for institutional reform that questions what the scope of government is and what demands it ought to meet. A key element of this reform has examined the role of governments in the provision of services and challenged the notion that governments should provide these services simply because it was considered desirable or necessary for the government to pay for them (Borre and Scarbrough, 1998). As a consequence, these wider discussions on reform have inevitably led to an emphasis on the merits of improving public services via decentralisation, privatisation, de- concentration, delegation or devolution that transfer responsibilities from central government to other levels of governance (Smith, 2001; World Bank, 2009).
The need to improve service delivery by reducing waste, diversifying, and redirecting resources and services to the front-line is known and there has, “always been a diversity of organisational forms within the public sector” (Manning and Shepherd, 2009, p.1). However, it is also thought that it is in fact the organisation design or structures of government itself that have been the primary obstacle to achieving these improvements (National Audit Office, 2017). In order to overcome such structural obstacles, which are characterised by complexity and bureaucracy produced through multiple layers of administration, duplication, accountability and governance, and ultimately impact the population at large as well as how the citizen interacts with Government, governments have reshaped their systems of delivery by redistributing many of their responsibilities to agencies such as Arm’s Length Bodies where these bodies carry out a range of important functions, many of which are vital to coordinating governments’ strategic objectives and delivering valuable services to the public (OECD, 2015).
Arm’s Length Bodies
According to the World Bank (2009), at least thirteen OECD countries, including all Nordic countries (Denmark, Finland, Iceland, Norway and Sweden) as well as the majority of countries with Westminster systems (Australia, Ireland and the United Kingdom) utilise Arm’s Length Bodies (ALBs) for the delivery of public services. For example, in the United Kingdom there are approximately 301 ALBs delivering services ranging from quality assurance (Ofsted) and health services (NHS England) to specialist regulation (Civil Aviation Authority). Similarly, in the States of Jersey there are a large number of ALBs providing arts, tourism and citizens advice services (Jersey Audit Office, 2018).
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GD 2021/0035 Classification
There are at least 11 types of ALB7 and they broadly fall into five categories (Institute for Government, 2015):
o Executive agencies that are business units headed by a chief executive as part of a department. Ministers set policy under which they exercise executive functions, are responsible to parliament, but are not involved in their day-to-day running. o Non-ministerial departments that do not have their own Minister, are staffed by civil/public servants, but are accountable to Parliament through sponsoring ministers. o Non-Departmental Public Bodies (NDPBs) These have ‘a role in the process of national government’ but are not part of a government department. There are four sub-types: 1. Executive NDPBs perform executive, administrative or regulatory functions, such as museums and galleries (DCMS), NHS England (DH), the Environment Agency (Defra) or Health and Safety Executive (DWP) 2. Advisory NDPBs provide ‘independent, expert advice’ to Ministers, such as the Boundary Commission (CO) or Low Pay Commission (BIS) 3. Tribunal NDPBs have jurisdiction in specific fields of law, such as the Investigatory Powers Tribunal (HO) 4. Other NDPBs are largely made up of independent monitoring boards of prisons, immigration removal centres and short-term holding rooms at MoJ. o Special authorities, which can be created by legislation and are subject to direction by a senior politician. o Public Corporations (e.g. Channel 4, Civil Aviation Authority) that operate commercially and include government-owned companies, Joint Ventures, Public Private Partnerships and chartered or statutory corporations delivering public services within a remit controlled by ministers.
Common features of all are that they entail a degree of specialism focussed on a single or discrete service delivery area, their management is differentiated from traditional ministries where the minister is prevented from day to day involvement by legislative arrangements, and they combine accountability for the delivery of services, with increased autonomy and accountability (National Audit Office, 2016).
7 Advisory NDPBs, Executive NDPBs, Independent monitoring boards (‘other’ NDPBs), Tribunal NDPBs, Executive agencies, NMDs, Public Corporations, Independent statutory bodies, Special health authorities, Parliamentary bodies, Central Bank.
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GD 2021/0035 Discussion
At the core of all ALBs is the aim of making service delivery more effective for the public, improving the ability to take operational decisions independently of political considerations, or to help ensure that professional expertise is intrinsic in public policy making (Local Government Information Unit, 2012). As such, while they divide opinion, ALBs are seen as a more efficient and cost effective way of delivering public services and have always been found within governments because of the value that diversification of traditional government supplied services through these bodies can add (Wettenhall, 2005).
The benefits of using ALBs to deliver public services are found in their ability to introduce a degree of ‘check and balance’ within the policy making processes of government, the production of potential for savings and efficiencies, income generation, and a staff culture which can approach provision of services in a more dynamic and innovative manner (Talbot, 2013; Scottish Parliament, 2016).
As well as allowing policy making and service delivery to independently thrive, the use of ALBs is thought to encourage greater “managerial freedom” where managers, their systems and processes are free from civil service norms and thus are able to concentrate on delivering specialist functions rather than the priorities of the day within a given government department (Heald and Steel, 2018). As well as promoting a more focussed and expert approach to service delivery, ALBs have benefits associated with performance improvement and financial efficiency that are borne from reduced duplication, greater clarity of purpose and tighter accountability. As such, the ability to promote independent and credible decision making through the separation of policy from delivery, along with the exploitation of a range of skills and expertise allows for more dedicated, rigorous and adventurous service delivery which can be made without the undertow of concern for the existing service providers (Scott, 1996).
Overheads of ALBs are also thought to be relatively low in comparison with central government (Local Government Information Unit, 2012, p.6) meaning that budget is available for investment in the workforce. As appointments to ALBs (particularly in relation to leadership roles) tend to be based on skills and suitability (OSCR, 2015, p.2) this is thought to positively influence engagement, performance, innovation, and foster the conditions for success (Osborne and Brown, 2011). Furthermore, the positioning of ALBs in the system of government means that they have a unique ability to pursue operational effectiveness, efficiency and responsiveness. In addition, this ‘freedom’ and positioning allows for the introduction of “smart[er]” approaches” to acquiring and retaining talent as a result of the application and concentration of specialist skills that are required as the public expects greater productivity (Cabinet Office, 2017; McKinsey, 2017, p. 124).
The most commonly perceived benefits and rationale for ALBs are: 1) improve the performance of the public sector and 2) make public decision making more credible by separating it from direct political intervention (Laking, 2005). The separation of policy from delivery adds value because policy making and service delivery are distinct tasks, with both
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GD 2021/0035 benefiting from the additional attention it receives if it is not competing for attention with the other. This allows the deliverer to concentrate on the core business and the politicians or policy makers to focus on strategy and matters of critical national interest.
The ability of ALBs to force the separation of operational delivery from policy-making not only encourages clear boundaries between the executive and the legislature, but it also creates increased capacity for politicians to offer greater focus on dealing with matters of strategic and national importance. Next to this, as ALBs are operated by specialists or experts they can improve trust in operational capability, meaning that politicians are more likely to have confidence in the running of the service and thus are less likely to intervene (Public Administration Committee, 2010). Conversely, this separation also deals with the common argument where it is suggested that having policy and delivery together can result in situations where the interests of the organisation are served rather than those of the public (Niskanen, 1971; Zhou and Peng, 2009).
For the public, it is thought that because ALBs encourage service efficiency delivered by a skilled workforce that is separated from the ‘government machine’ they enable the focus to be placed on the citizen. For example, by allowing staff to concentrate on delivering services to the citizen, rather than be distracted by other ‘corporate’ matters ALBs “tend to be better at involving the public in decision making” because of the way in which their modern structures emphasise public involvement and forge citizen relationships through giving people greater control over their services (Local Government Information Unit, 2012, p.10).
While the use of ALBs will benefit staff and politicians the ultimate benefactor is the general public. This is because it is known that “eliciting employee commitment will lead to enhanced performance” (Armstrong, 2006, p.277) and as such, a more engaged workforce is likely to positively impact customer satisfaction, more effective and efficient services lead to increased value for money, which subsequently produces confidence and trust in a time when in leading economies (including the UK), “more people distrust government than trust it” (Institute for Government, 2019, p.8).
The use of ALBs has become prominent and varied, yet there are inconsistencies in how an ALB is defined with there being no legal definition of them in most of the countries where their use is prevalent (Scottish Parliamentary Corporate Body, 2015, p.4). The lack of an agreed understanding of what constitutes or classifies an ALB has led to questions about what governance and scrutiny arrangements are appropriate for their use. As such, in 2016 the National Audit Office (2016, p.5) characterised them as, “inconsistent, overlapping, confusing, and cluttered.” The National Audit Office (2016) also noted that while there are numerous opportunities and benefits to be gained from establishing such bodies to deliver public services, the success of such commissioner-provider relationships was being hampered by a lack of clarity about their purpose and accountabilities, disproportionate approaches to risk taking and unclear expectations on how ALBs both demonstrate, measure and maximise value. A similar review of ALBs in the States of Jersey also found that ensuring that good governance is being demonstrated, effective internal controls are in place and value for money is being secured were essential to the success of the ALB system, mainly because, “it is essential that
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GD 2021/0035 the organisations funded by the States are not regarded as out of sight and out of mind” (Jersey Audit Office, 2017, p.2).
Since Arm’s Length Bodies have increasingly become part of the governing landscape (Institute for Government, 2015) the manner in which government departments oversee and manage their relationships has received much attention. While ALBs were generally thought of as “instruments too useful to politicians of any colour to be discarded” (Hood, 1980, p.4) in 2010 the United Kingdom Government announced the introduction of Public Bodies Act (2011) which envisaged that out of 285 public bodies listed in the Act’s schedules, 58 Public Bodies Orders (PBO) would be laid before the Act to bring them to an end. However, in the five years since the Act came into effect, the “bonfire of the quangos has failed to ignite” with only 31 (53%) of the 58 PBOs originally intended having been laid before Parliament, (Hansard Society, 20178). Likewise, in Northern Ireland out of the 40 Public Bodies due to be ‘changed’ because of the then, “need focussed on service delivery and meeting the needs of the people who pay for public services” (Review of Public Administration, 2006, p. 4) only three were abolished with the rest remaining in one guise or another.
Nonetheless, given the clear benefits of using ALBs, they are known as “an important and useful part of the constitutional and managerial landscape” (Institute for Government, 2010, p.63). However, because their effectiveness and importance can be diminished by poor consideration of their scope, functions, accountabilities, governance and transparency, most reviews9 into their use are now recommending that departments seek to better understand the costs and benefits of different approaches [to operating ALBs] and develop and implement a guiding framework for effective oversight.
To assist in dealing with any issues of inconsistent governance and accountability and to learn from early adopters such as New Zealand, the UK Cabinet Office published a Code of Good Practice in 2017 which set out to instil a “total system delivery” approach (Foster, 2019) to working with ALBs that was founded on the four principles of purpose, assurance, value and engagement (Cabinet Office, 2017). This was followed by a Public Bodies Handbook (2018) which stated that when developing proposals on setting up an ALB it should be subject to the three tests and only taken forward if it meets at least one of them:
a) It performs a technical function, b) Its activities require political impartiality, c) It needs to act independently to establish facts.
8 https://www.hansardsociety.org.uk/blog/bonfire-of-the-quangos-legislation-fizzles-out#fn:2
9 See States of Jersey, Guernsey, United Kingdom, Northern Ireland and Ireland.
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GD 2021/0035 However, ensuring these criterion are tested and met are not the only criteria for successful ALBs. For most (Talbot, 2013; Heald and Steel, 2018) ALBs are likely to be successful so long as:
a) A definitive list of is created and maintained as to avoid large scale and resource intensive reviews after the fact. b) A clear distinction between what the agency should do (policy) and how it will do it (implementation) is made. c) Clarity relating to roles and clear communication channels are established. d) Effective corporate governance frameworks are in place to reduce the risk of confusion. e) Performance management systems are established.
Conclusion
Based on the above there are numerous benefits to be gained from using ALBs, however they are successful only on the condition that they are established with appropriate rigour and governance. According to the Institute for Government (2012, p.54):
“Getting arm’s length governance right is difficult but important. The arm’s length landscape is so varied that there is no one size that can fit all…and those need to be performed effectively and efficiently.”
5. THE CASE FOR REFORM
It is clear that an initial concentration of the Government reform agenda has been focussed on some of the issues we were considering in 2017. The concept of using Arm’s Length Bodies for the delivery of operational public services, has gained some momentum and there has been a move towards the extension of shared services within the centre of Government. This is evident from the developments described in Chapter 2 above, and in particular the approval
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GD 2021/0035 by Tynwald, at least in principle, to support the creation of Arm’s Length Bodies for Manx Care and the Isle of Man Airport and further centralisation of some activities (high level policy development, finance profession and secondary legislation).
As considered above, the separation of policy and operational delivery is a common mechanism for the provision of an agile, independent and performance focussed public service. Centralised policy making and service delivery at arm’s length are distinct tasks and each benefit from the additional attention received when not competing with each other for management. In view of recent reviews and evidence from elsewhere a policy and operational split could provide benefits, provided a robust framework for implementation is also adopted.
Wherever possible, services should be redesigned and optimised with delivery placed at arm’s length but subject to clear commissioning, shareholder and governance arrangements.
Whilst issues of policy, direction and governance are essential for the success of the organisation, many people see Government solely as a service provider. Departments delivering services directly to the public therefore have to concentrate on customers and services as well as policies and politics. Departments provide services to taxpayers but have to act in the best interest of the taxpayer; this may constrain their ability to meet some requests or to achieve certain standards. In order to make sure that whatever funding can be provided for an activity, Departments need to provide good value for money and to take steps to secure any income that can be earned. This type of function will operate under governance and procedure but may not be optimised for policy making.
Typically, senior staff in departments are expected to use their experience in managing service provision to draw up and promote the relevant policies. So long as policy is drafted after consideration of operational constraints and operations are delivered in line with policy objectives these roles need not be performed by the same person or the same department. Indeed, in operations with commercial activities many existing employees are experienced in delivering services in a private or arm’s length organisation. With clear policy direction, suitable governance and adequate resources the functions of departments could then be focussed on delivering good value services to taxpayers.
The Committee believes that consideration should therefore be given to extending the use of Arm’s Length Bodies and centralising corporate shared service functions in order to ensure that public services are delivered in more efficient and effective ways that meet the needs of the people of the Isle of Man.
In the Independent Review of the Isle of Man Health and Social Care System, the recommendation for the establishment of Manx Care as an Arm’s Length Body was accompanied by a recommendation that the Department of Health and Social Care would adopt a strategic focus with the following responsibilities:
Minister/Members
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GD 2021/0035 o Overall Policy Direction (with attention to public health advice) o Health and Care needs for the Island (with attention to public health advice) o Responsible to Tynwald for health and care service on the Island o Appoints the Chair of Board of Manx Care
Department Officers
o Support for Minister and Members o Liaison with other government departments o Policy Development o Registration and Inspection (including appointment of external inspection) o Creation of annual mandate o Agreement with Treasury and Manx Care of funding envelope o Maintenance and development of health and care legislation o Defining the agreed data set to be captured o Monitoring delivery of the annual mandate (including finances, quality, activity etc.)
These principles could be applied to other Government functions if and when they are moved into Arm’s Length Bodies. However, in the event that the establishment of Arm’s Length Bodies for service delivery became more widespread, and the centralisation of common services continued, there is an argument that the remaining functions of departments would have diminished to such an extent that their existence as separate legal entities could be called into question.
We examined this issue, albeit under the heading of Executive Agencies, in our report in 2017. We said:
“The establishment of separate entities for service delivery which are responsible for implementing policy decisions made at the “Centre of Government” might be worth pursuing. In the short term they could be established as per the UK [Executive Agency] model, operating within the existing Departmental structure. However, in the longer term, and if the model is successful, it might be appropriate to remove the existing Departmental structure, and replace it with a Central Government function as a single legal entity with operational service delivery agencies sitting on the outside. There may be merit in considering combining many of the functions of Treasury and Economic Development with those of the Cabinet Office, together with the policy development functions of other Departments, into a single cohesive whole called the Isle of Man Government. This would be a single legal entity, under the direction of the Council of Ministers, where Ministers are allocated portfolios for the development of policy linked to the Programme for Government.”
At this stage we are not formally recommending implementing this now, but believe this is a direction of travel or a target operating model that should be considered now. This is an approach that may be worth progressing in the future, dependant on progress made with the
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GD 2021/0035 extension of Arm’s Length Bodies in other parts of Government, which might include progressing reform on a Department by Department (incremental) basis.
It may be decided in future to convert the existing Executive Agencies in the Department for Enterprise into Executive Boards or to increase the scope and authority of the Executive Agencies (e.g. to formally delegate budgets in line with the DESC DFM model). If this happens there may be a case to transfer the remaining functions of the Department to other Departments such as the Cabinet Office and/or Treasury, where the Minister becomes a minister without portfolio, but with a broader policy remit (Minister for Enterprise) such as has existed for the Minister for Policy and Reform, since 2014.
A similar argument might apply to the Department of Home Affairs. It would be possible to create an Executive Agency within the Cabinet Office to deliver operational law and order and public safety, with policy making and corporate functions sitting within the Cabinet Office.
Proposal
The Committee believes that consideration should therefore be given to extending the use of Arm’s Length Bodies (for service delivery and regulatory functions) and centralising corporate shared service functions in order to ensure that public services are delivered in more efficient and effective ways that meet the needs of the people of the Isle of Man.
6. LEGISLATIVE REQUIREMENTS
Statutory Boards
In order to assist the reform process, incremental or wide-ranging, consideration should be given to the legislative framework for Arm’s Length Bodies, having regard to the classification of public bodies as described by the Institute of Government in Chapter 3 above, which is summarised below in a Manx context:
a) Executive agencies - IOM model is similar to UK. Agency is an administrative body within a Department acting under delegation from a Minister. b) Non-ministerial departments (NMDs) - see 3 below c) Non-Departmental Public Bodies (NDPBs) - The IOM equivalent to NMDs and NDPBs is Statutory Board of which two main types exist (those with political membership and those without). d) Special authorities – no obvious equivalent on the IOM
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GD 2021/0035 e) Public Corporations - the IOM equivalent is a Government owned company such as Isle of Man Steam Packet Company or Radio Manx Ltd
At present, no firm decisions have been made regarding the governance models for Manx Care and Isle of Man Airport but the classification above might suggest that the former should be a Statutory Board and the latter a Public Corporation.
It may be possible to create both of these Arm’s Length Bodies through the use and/or amendment of existing primary legislation. It is possible that Manx Care could be established using the vehicle of the Statutory Boards Act 1987 and Isle of Man Airport established as a Government owned company under the Companies Acts 1931/2006. These, of course, are matters being addressed by the respective transformation teams and it is not for this Committee to interfere with those processes. Tynwald will no doubt be given the opportunity to consider the legislative proposals in respect of Manx Care and Isle of Man Airport as part of the continuing development of each project.
However, the Committee believes that there would be benefit in clarifying existing legislation in respect of Arm’s Length Bodies established under the Statutory Boards Act 1987. At present, the following bodies are classed as Statutory Boards, as specified in Schedule 1 of the Act:
a) Office of Fair Trading b) Financial Services Authority c) Post Office d) Manx Utilities Authority e) Communications Commission f) Gambling Supervision Commission g) Public Sector Pensions Authority
The membership of these Boards varies:
o two boards (FSC and GSC) are without political membership, o one board (PSPA) includes 2 Members of Tynwald (one of whom serves by virtue of being the Chair of the Public Services Commission) o one board (Communications Commission) is chaired by a Minister who is the sole Member of Tynwald on the board, and o the remaining boards include a political chair and vice-chair, neither of whom are Ministers, although this is not prevented by statute.
The Boards which do not contain Members of Tynwald are established this way in view of their status as regulatory bodies requiring independence. However, there is no definition within Manx legislation to indicate whether a Statutory Board should or should not contain political representation.
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GD 2021/0035 The Independent Review of the Isle of Man Health and Social Care System recommended that:
“Manx Care should be set up as an arm’s length body (perhaps a Statutory Board) and run by a Board appointed by Government and approved by Tynwald. However, importantly, it should be operationally independent of both Government and Tynwald.”
This suggests a board membership excluding Members of Tynwald. Thus, it would mean there was a new ‘sub-category’ of non-political Statutory Board (service delivery organisation) in addition to that of independent regulator. There is a risk that this could add to what is arguably an already confused picture in respect of the composition of Statutory Boards.
Therefore, we believe there may be merit in amending the Statutory Boards Act 1987 to provide for two categories of Statutory Board, which could for example, be described as follows:
a) Political Board, and b) Executive Board
Schedule 1 of the Act could be divided into two parts to differentiate between Boards that retain political membership and those which do not by virtue of, for example, being an independent regulator or operational service delivery organisation. This would provide clarity in the event that more Arm’s Length Bodies for service delivery functions are created in future.
The requirement to develop amending legislation to make this change would not prevent Manx Care being established as a Statutory Board in the near future, but would mean that once the Statutory Boards Act is amended in due course, Manx Care could be classified as an Executive Board.
Government Owned Companies
A Government owned company can either be created by statute or under the Companies Acts 1931/2006. The main difference in establishing a company by statute (as opposed to creating a company under the Companies Acts 1931/2006) is that it is possible to transfer the functions currently with the relevant Department to a statutory company (via the legislation by which that company is established), whereas this is not possible in the case of a Companies Acts company.
Were a company to be enacted under the Companies Acts, the functions under the Act in respect of the commercial activity concerned would remain with the relevant department and the company would need to enter into either a management contract or concession with the department to set out the extent of its remit. An agreement similar to that for Sea Services would fulfil this requirement.
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GD 2021/0035 In terms of political scrutiny, this means that the Department retains strategic control of the commercial assets which would not be the case with a company created by statute.
The formation of a 1931 Company to operate the commercial activities with a Sea Service type agreement detailing the minimum service requirement would appear to achieve the balance between political accountability and commerciality.
Such an approach requires no legislative change.
Other Legislative Reform
In our 2017 report our recommendations included the following actions for incremental reform through amendment of the Government Departments Act 1987, Council of Ministers Act 1990, and the Treasury Act 1985, as appropriate, to:
a) Impose a statutory obligation on Government departments to form appropriate consultation and cooperation arrangements. b) Establish the role of Chief Secretary as Chief Executive of the Government to whom Chief Officers would be accountable on all matters. c) Give the Council of Ministers statutory powers describing its functions, including the requirement to determine priorities of expenditure and to consider financial and economic policy issues. d) Give statutory force to the Programme for Government based on national outcomes and indicators. e) Allow for the transfer of regulatory functions to new delivery models, if considered desirable.
For the reasons stated in our previous report we remain of the view that these changes should be progressed at the earliest opportunity.
Target Operating Model
If it was decided to pursue these changes more vigorously, it could lead to a classification system for Government along the following lines:
One Public Service
Beyond being an ethos of working together across the public service as One Public Service, this would be a single legal entity comprising the Council of Ministers as the legal entity, directly responsible for overall policy and resources together with corporate shared services and some administrative public service delivery functions (e.g. Income Tax, Social Security, and the Companies Registry). This would include most of the existing functions of the Treasury and Cabinet Office, together with policy and corporate service functions of all other departments. The One Public Service might also retain some specific departmental functions where it was considered appropriate to retain direct political oversight, which could take the
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GD 2021/0035 form of executive agencies. This might include, for example, the police service and highways services.
Statutory Boards
These would be separate legal entities which perform a technical function or its activities require political impartiality or it needs to act independently to establish facts. Existing examples include the Financial Services Authority (FSA) and the Public Sector Pensions Authority (PSPA). Under the legislative model proposed above, the FSA would be designated an Executive Board and the PSPA a Political Board, although these could develop. Future candidates for operation as a Statutory Board could include Manx Care, Schools and Colleges Boards and Department for Enterprise Executive Agencies.
Government Owned Companies
Functions which operate in a commercial environment and/or primarily draw their income from the customers using their services (with subventions where necessary) are candidates for change into Government owned companies, where each is also a separate legal entity. Existing examples include Radio Manx Ltd and the Isle of Man Steam Packet Company. As already stated, this approach is being explored for the Isle of Man Airport. It could also be extended to the likes of Bus Vannin, National Sports Centre and Villa Marina/Gaiety Theatre.
Proposals
It is therefore proposed that consideration should be given to:
1. Replacing the existing Departmental structure with a single national government (One Public Service) responsible for policy, resources, legislation, shared services, Executive Agencies and some operational delivery functions.
2. Implementing Executive Agencies and Arm’s Length Bodies (i.e. Statutory Boards and Government owned companies) for most service delivery and regulatory functions.
3. The Statutory Boards Act 1987 is amended to provide for two categories of Statutory Board, to clearly differentiate between Political Boards and non-political Boards (Executive Boards).
4. Government owned companies should be established under the Companies Acts 1931/2006 for relevant commercial activities.
5. A number of incremental amendments should be made to the machinery of Government legislation from the 1980s and 1990s, including a statutory obligation on Government organisations to consult, giving the Council of Ministers statutory powers better describing its functions, and giving statutory force to the Programme for Government based on national outcomes and indicators.
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GD 2021/0035
7. CONSIDERATIONS
Services to the Public
The need to improve how public services are organised and provided has been the subject of numerous reviews and reports over the years. The ‘golden thread’ connecting these reviews and reports is the need to ensure that the Isle of Man Government is structured in a way that supports the delivery of defragmented, value-laden, efficient and effective public services that meet the needs of the changing demographic of the Isle of Man. The external research has shown us that these structural or design issues are not unique to the Isle of Man and that pursuing an agency or arm’s length model for the delivery of public services has a number of benefits- particularly when it comes to dodging the slow decision making that plagued the Board system, avoiding the wasteful duplication of effort that Shared Services has set out to remedy and promoting the use of specialism and expertise for improving public services that we now see in the Executive Agency model being used by the Department for Enterprise.
The combination of being able to have freedom from the machinery of government, separate policy making from operational delivery and focus on delivering specialist functions and not be distracted by the daily priorities of a department mean that Arm’s Length Bodies are able to better consider service-specific operational issues with an increased emphasis on improved, dedicated, rigorous and adventurous delivery with the citizen at the heart of the service. This is not to say that our current model prevents such improvement, dedication and person- centred practice from taking place, but as Sir Jonathan Michael outlines in his review: some of the positive work being conducted in the public services cannot yet be leveraged because of these barriers to progress.
Our current system is in need of redesign to ensure that we are able to leverage expertise, specialism and dedication in improving how we deliver our services to the people of the Isle of Man. The evidence shows us that this is achievable via an arm’s length model where public services are improved not only because staff are able approach work in a more engaged and innovative manner, but because they can concentrate on delivering services to the citizen, rather than be distracted by other non-operational matters.
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GD 2021/0035 As well as the theoretical advantages, from a practical perspective adopting an arm’s length model can improve public services because:
a) Staff are able to focus on delivering services to the citizen, rather than lose delivery time or capacity by being distracted by other matters; b) They are considered to be more operationally effective; thus more likely to deliver value for money to the taxpayer; c) Rigorous performance targets and metrics included as part of the contractual arrangements mean performance can be tightly measured and value for money ensured; d) Reduced duplication, greater clarity of purpose and tighter accountability produce performance improvement and financial efficiency; e) Services are designed by specialists with expertise in the service area and not by generalist public servants; f) Quality is likely to improve through the establishment of communities of expertise and the sharing of best practice, meaning standards of service are improved (and maintained); g) An engaged workforce leads to personal investment in the service, improved quality thus reducing complaints and increasing public confidence.
The Role of Politicians
Separating Policy from Operations
As stated in the opening of this report, the concept of separating policy from operations is not new, and was explored at some length in the review into the Scope and Structure of Government in 2006.
We believe it is worth repeating what was said at that time:
“The Constituency Imperative
One of the features of Manx government is the degree to which it provides what might be described as local government services. The Island is a small community of less than 80,000 people. Many services which are delivered elsewhere at a regional level or by local government are delivered centrally on the Island for reasons of scale and efficiency e.g. education, fire services, social services, police services, town and country planning, refuse disposal, water supply and sewage disposal.
In larger jurisdictions with political parties, those parties promote themselves by pursuing national agendas aimed at securing the support of a whole country and most voting in national elections is based on those national agendas or inherited political loyalties. In the Island, an individual Tynwald candidate’s manifesto and focus is, to a greater degree, on the specific needs of the constituency and it is the extent to which the candidate meets or is expected to
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GD 2021/0035 meet those needs that is key. Constituencies are small and individual Members are close to their voters and extremely accessible. That influence is crucial.
The effect of Government being heavily involved in the provision of local government type services, the absence of party politics and the paramount influence of the constituency results in much Tynwald/Government time and energy being taken up with local government and constituency matters.
In addition, it may be the case that aspiring politicians who wish to work on behalf of their communities in the provision of local services will stand for Tynwald, rather than their local authority, as it is Tynwald which deals with those local issues and it is through Tynwald that local communities can be served. The broader national and international issues which require the serious attention of Tynwald and Government and which arguably are best tackled by elected members with different interests and a different skill set can suffer as a consequence.
The Politician as Manager
It was suggested to us by a number of contributors that Ministers often involve themselves excessively, within their Departments, in issues of management at the expense of concentrating on issues of policy. In making this suggestion contributors frequently added that particular Ministers might find it more comfortable operating at that level rather than at the level of policy or strategy. This allegation was made with sufficient frequency, and often by those who were in a position to speak authoritatively, that this appears to be a genuine issue.
Policy-making is a higher level of decision making than management and, as a generalisation, policy should be the province of the politicians and management the province of staff. Albeit that, at the margins, it can sometimes be difficult to determine what is management and what is policy.
A number of contributors, particularly some of those from outside of Government, tended to see the role of the Minister as being somewhat analogous to that of a non-executive director of a private sector company. Such a director would attend routine board meetings, help to determine broad policy and oversee the operations of the company and its executive, but would otherwise be at a distance from the company’s activities. To see a Minister in these terms, however, is legally and politically incorrect.
Section 3(1) of the Government Departments Act 1987 provides that “…the functions of each Department shall be exercised by the Minister in the name and on behalf of the Department.” The Minister is, in effect, the Department. All executive power resides in the Minister and he or she is the executive. In law all decisions are potentially made by the Minister; (subject to those departmental issues which may be outside his/her direct control because they are prescribed in Statute or subordinate legislation and subject always to the possibility of the Minister being directed by the Council of Ministers).
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GD 2021/0035 Politically too, the Minister is responsible and accountable. Tynwald and its Branches (and the press and wider community) will look to the Minister to speak for the Department in advancing the Department’s proposals and will expect him/her to be answerable for the Department’s actions and performance – however significant or trivial the issue. It would cut no ice for the Minister to argue that an issue was a managerial or administrative matter and that he/she could not interfere.
The situation is, no doubt, compounded by staff who, unclear about the boundaries of Ministerial responsibility or seeking to avoid personal risk and blame, excessively refer matters up for political approval; matters which are really within their own competence. But, it must be right that the Minister and his political colleagues should concentrate on the bigger, more strategic issues and delegate the lesser matters. And, more particularly, leave detailed management issues to be dealt with by staff.
Insufficient Emphasis on Policy and Strategy
It has been suggested to us that it is a corollary of the cultural elements that we have described as “The Constituency Imperative” and “The Politician as Manager” that insufficient senior Government time and energy is devoted to policy development and broader strategic questions. This lack of sufficient focus on the important issues was reported to us widely. One member of a department described the “whirlwind of work” which confronted Members and prevented adequate attention being devoted to the key tasks of strategy and leadership. Other contributors, with experience of the Council of Ministers, spoke about insufficient time being spent on the bigger more difficult issues, about agendas being cluttered with second rate matters, about Government reacting rather than planning and about short-term rather than long-term thinking.
It is clear that there is a widespread view that the top of Government is in need of focussing more on the top issues and unburdening itself of matters which could be dealt with at a lower political level or managerially, by the managers who are employed to do that work.
Separating Policy from Operations
Our fourth general theme is one which was put to us by politicians, by officers and by those from outside of Government. It was expressed in one of two different ways. Either - politicians are too much involved in operational matters or matters of detail, which should be left to the staff and they do not concentrate enough on matters of policy; or - politicians are too busy or have too many other commitments to be able to concentrate on the important matters of policy and strategy. These statements represent two perspectives on the same problem; and it is a problem.
This is an issue on which there is almost unanimous agreement: in principle policy-making is a higher level of decision making than management and is the province of the politicians. Operations are a matter for management. But, under operational conditions, this
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GD 2021/0035 generalisation tends to lose its edge. The hierarchy of decision-making which places policy- making above management is a continuum in which the edges between policy-making and management often blur to the point of disappearance. It can be difficult to determine at the margins what is management and what is policy. In practice, where the indistinct line between policy and management is drawn at present within a Department tends to be a matter of specific (or tacit) negotiation between the politicians and officers of the day, which results in a working understanding unique to that Department at that time. Inevitably, practice varies from Department to Department.
There is also, quite often, the separate but related question of drawing a distinction between the politician’s role as a policy maker within Government and his role as a representative of his/her constituents. Critically, it has been held that the politician’s role in Government should largely be confined to:-
the formulation of policies and plans; determination of priorities; provision of funding to execute policies and plans; ensuring the efficacy of management to deliver.
The clarity of the policy role should not be distorted by constituency considerations.
Self-evidently, if political resources can be redirected and focussed on the bigger issues of policy and strategy and away from matters of detail, the quality of Government will be improved. This issue, so clear in principle but less clear in practice, and on which there is such a consensus, needs to be addressed. If we can make proposals which can bring greater clarity to the respective roles of politicians within Government and management that should be welcomed by all those who brought this matter to our attention.”
Half a generation has passed since those words were written.
We believe that the sentiments expressed then are still valid now and we make no apology for repeating them at such length. Our proposals for reform would, we believe, go some considerable way to achieving the ambition expressed in 2006.
Future Political Roles
If there were a move to create One Public Service in the manner described in Chapter 6 above, it is envisaged that the Council of Ministers would collectively be the legal entity in the same way as for single legal entity for the whole of Government. In this case authority would be delegated from the Council of Ministers to individual Ministers to perform specific functions. That would include:
a) Responsibility for specific policy areas, in line with public service outcomes specified within the Programme for Government,
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GD 2021/0035 b) Direct political oversight of specific functions within the legal entity (e.g. executive agencies, shared services and retained administrative delivery functions), c) Political “sponsorship” and oversight of specific functions of Arm’s Length Bodies (e.g. Executive Boards and Government Owned Companies).
At present, Ministers are responsible for the ‘bricks and mortar’ of only the particular departmental functions they inherit on appointment. There is limited scope to work across organisational boundaries to achieve genuine joined up approaches to policy development and service delivery improvements. The creation in 2014, with unanimous Tynwald support, of the role of Minister of Policy and Reform was a first step towards seeking to do things in a different way. In the Modernising Ministerial Government report which advocated the creation of this role it stated:
“The Minister would, however, have responsibility to lead the implementation of corporate decisions of the Council of Ministers, with authority to transcend Departmental boundaries to ensure implementation of policies.”
In essence, in this report, we are proposing the establishment of eight Ministers of Policy and Reform, each charged with developing policies and strategies aimed at securing enduring strategic objectives that transcend random organisational boundaries.
Members of Tynwald who currently serve as Members of Departments would be appointed to the Government to support Ministers with these wider responsibilities broadly as they do now, albeit on the basis of fulfilling the following roles:
a) The formulation of policies and plans, b) Determination of priorities, c) Provision of funding to execute policies and plans, d) Ensuring the efficacy of management, Executive Agencies and Arm’s Length Bodies to deliver.
The establishment of the Council of Ministers as the principal legal entity for Government would mean that no single Minister would acquire excessive authority and the Chief Minister would continue to operate as the ‘first among equals’. The position of Chief Minister is the foundation stone of the ministerial system. The Chief Minister nominates and is able to recommend the dismissal of individual ministers; he allocates ministerial portfolios and chairs the Council of Ministers. He speaks for the Government within the Island and represents the Island externally. The post has significant influence over Government and its work and is pivotal in matters of collective policy. Until recently the post of Chief Minister has had few statutory powers. However, following the establishment of the Cabinet Office as a Department, the Chief Minister is the Minister for that Department. Since 2014 the Cabinet Office has grown significantly and taken on more statutory functions, although it began simply by merging the functions of the Chief Secretary’s Office, the Office of Human Resources, Government Technology Services and Economic Affairs Division.
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GD 2021/0035 In subsequent years the Cabinet Office has assumed responsibility for planning policy, safeguarding and numerous major Government initiatives which in the past might have been the purview of the lead Department. Examples include the current projects for the Airport and Health and Care Transformation. As part of the latter project it is planned to further extend the scope of the Cabinet Office to include Public Health.
One of the unintended consequences of this development is that the statutory authority and responsibility of the Chief Minister as Minister for the Cabinet Office is growing. There is a risk, if this continues, of achieving the exact outcome that some detractors of single legal entity were concerned about such as the undisguised attempt to centralise power into the hands of the Chief Minister and diminish the authority of individual Ministers.
If the principal legal entity for Government as One Public Service was the Council of Ministers, then such an outcome would be avoided.
Future Policy Function
In Chapter 3 we briefly described the proposed establishment of a centralised policy unit within the Cabinet Office with the aim of ensuring joined up policy development in pursuit of overall strategic objectives.
This is key to the success of our proposals for reform.
It will not be enough to simply bring together into a single team the existing civil servants whose focus is on Departmental policy making. In recent years we have seen the formation of transformation teams for corporate projects such as Health and Care, Climate Change, the Airport, Telecommunications Strategy, Planning Review and above all, the Digital Strategy. The continuing development of this strategy is the single most important element of public service reform. These projects have involved the drawing in (on a temporary or part time basis) of talented individuals from across Government to help design and implement policies and strategies for the future. But crucially, it has in some cases, also involved the procurement of external specialist support (such as Sir Jonathan Michaels and Professor James Curran) together with the external appointment of senior directors with experience of transformation elsewhere.
This will need to be a continuing feature of policy and strategy development as we prepare for the future reforms advocated in this report. It is accepted that to do so will cost money. But, if (as it will) it leads to the creation of a new public service that is more effective and more efficient, the seed money provided now will pay dividends in the long term.
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GD 2021/0035 The benefits of One Public Service
In today’s model, Chief Officers quite rightly respond to priorities set by Ministers and Members which are most often dominated by policy from the administration and the demands of Tynwald. The managerial environment this creates is one where it is all too easy for the job of improving performance to become secondary and often overlooked. This is compounded when the responsibility for the management of service delivery between Chief Officers and Ministers becomes opaque and confused. This phenomena is amplified when short term or tactical pressures become acute. The effectiveness of the Chief Officer-Ministerial partnership in managing political sensitivities is a key component of government’s credibility. Placing Chief Officers at arm’s length thereby altering this tension would inevitably increase the ability to respond to and manage political sensitivities.
Furthermore we need to consider ministerial overload. Demands from Tynwald, media, an increasingly active public on social media and in person demanding immediate information inevitably leads to overload. For most of them, management is not their specific forte nor do they regard it as their function. Improved management and performance improvement must be the responsibility of Chief Officers, who need space to work with Public Servants and work it out largely for itself. It is unrealistic to expect ministers to provide much else than give a broad policy overview in order for them to remain effective. Most Ministers would indeed be worried about overload and would welcome reduced managerial load provided that it did not of itself present political risk.
In order to achieve improvements through a real and sustained pressure on continuous improvement and value for money in delivery of policy and services; we must remove ministerial overload and task those with the financial and management acumen to effectively operate the service delivery organisations. But, in order to prevent ministers being exposed to political risk it will be essential to do so by giving minsters levers by which they can hold agencies and arm’s length bodies rigorously to account for what they deliver. This can be achieved in a well-defined.
Fundamentally the main strategic control must remain with ministers and the policy core. However once these policy objectives and budgets within the framework are set then the management require as much independence as possible to decide how those objectives are met. The crucial issue here is a formal understanding with ministers about the handling of sensitive issues and lines of accountability in ‘crisis’ or ‘point problems’. It is reasonable to state that providing management is operating within the agreed framework then it must be left as free as possible to manage within that framework. At this point it is the management and not the Minister that is accountable for any resulting failure with the Minister holding them publicly accountable.
This model changes the way ministers answer operational questions to Tynwald. Clearly Ministers are required to be responsible for policy but it is unrealistic to assume or even expect that they will have in-depth knowledge of every operational question. This in itself is the
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GD 2021/0035 primary driver of overload in the current model. It should be possible in the new model for Ministers to regard managers as directly responsible for operational matters.
Ministers should be confident that their policy goals will be more easily achieved and more importantly that they are able to devote more time to their main political tasks, thereby improving the quality of policy creation. Alongside the voting public, they will be able to focus on holding the management publicly accountable for service delivery.
Staff Transfers
One of the key challenges with the development of new governance models is the retention of personnel and maintenance of good industrial relations. Throughout the various change initiatives of recent years (e.g. Departmental restructuring and Shared Services) the transfer of staff on existing terms and conditions has been a common element and we would not envisage this being any different with the transfer of functions to Arm’s Length Bodies, including both Statutory Boards and Government Owned Companies.
The mechanisms for staff transfers already exist via the Government Departments and Statutory Boards Acts 1987 (for movements between Departments and Boards) and the protection of terms and conditions is routinely achieved through transfers of this nature. In respect of companies, departments can establish wholly owned companies to fulfil their functions and could use the provisions of Schedule 5(8) of the Employment Act 2006 and Section 11 of the Redundancy Payments Act 1990 to enable the transfer of staff.
Transfers on the basis of the same terms and conditions of employment can easily be achieved and the opportunity would exist to enable staff to retain membership of the Government Unified Pension Scheme. For example, Manx Radio (which is essentially a corporatised entity) pays a proportion of pensionable pay as an employer contribution, as agreed with Treasury in 2007, and its permanent employees are able to join the scheme. Similar arrangements could therefore apply to any other corporatised entity.
That being so, we are confident that within existing legislation, powers exist to protect terms and conditions of staff (including pensions) when transferring functions from a Department to a Board or delegating functions from a Department to a Government owned company. It is our expectation, that those powers would be used.
Shared Services
For the extension of Arm’s Length Bodies to be effective, without adding significant costs, there needs to be agreement on the use of services currently provided through centrally held budgets as shared services.
Since 2010 numerous services have been centralised for the primary purpose of creating financial savings. This has involved budgets and staff moving from across Departments into the area responsible for delivering the service.
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GD 2021/0035 The services currently provided include:
a) Government Technology Services b) Office of Human Resources c) Treasury Finance and Internal Audit d) Infrastructure Estates and Fleet services
In addition, the Attorney General’s Chambers can be regarded as a shared legal service although it, of course, pre-dates the 2010 reforms. It is appreciated that there are differing views as to the success or otherwise of shared services with some appearing to work better than others. However, the budgets for the services are held centrally and cannot, in most cases, be easily split to allocate proportional funding to a new entity. Many of the services are provided by a team of people who operate across a range of bodies and through shared contracts which cannot be divided. If each new entity had the ability to procure these services separately then it would likely increase the operating costs of Government as a whole.
Many organisations outsource the type of services provided by shared services. Therefore, with a customer focussed model and proper service level agreements the existing shared service model should work effectively with any new arm’s length bodies. The opportunity would also exist to seek to further centralise shared services under a single management structure to deliver further costs savings and service improvements. That being so, we advocate the continued use of Government Shared Services for any arm’s length bodies However, it is important to be mindful of the risk that a conflict may arise for shared services where a significant number of functions are delivered at arm’s length. If the policy centre of government directly oversees shared services, whose customers are at arms length, there will always be a suspicion that the arm’s length bodies will be ‘poor relations’ of the centre and that the centre will be able to prioritise their work. There needs to be independent governance of the shared services such that even-handed, fair and transparent processes determine the allocation of shared resources. It will also free up the shared service to operate a more diverse, customer focussed and commercially oriented set of services. It is correct that shared services should continue to be used rather than rely on the market due to their cost neutrality and combined market power. However, this means it is essential they are free to operate in a ‘commercially astute’ manner in order to be responsive to customers and become as efficient as possible.
Proposals
We propose that in considering the reforms described in this report, the Cabinet Office should develop an Action Plan which address issues such as:
a) a framework for assessing the type of Arm’s Length Body to be used for the functional areas under consideration; b) An analysis of operational functions within Government which might be appropriate for delivery at arm’s length; c) A framework for managing staff transfers to Arm’s Length Bodies, and
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GD 2021/0035 d) An assessment of the financial benefits that could be delivered by greater use of Arm’s Length Bodies.
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GD 2021/0035 8. RECOMMENDATION
The Sub-Committee should arrange workshops with the Council of Ministers and Tynwald Members to consider the following proposals:
1. The existing Departmental structure should be replaced with a single national government responsible for policy, resources, legislation, shared services, Executive Agencies and some operational delivery functions to facilitate One Public Service. Ministerial portfolios should be allocated on the basis of the achievement of public service outcomes specified within the Programme for Government.
2. The use of Arm’s Length Bodies and Executive Agencies should be implemented for most service delivery and regulatory functions in order to ensure that public services are delivered in more efficient and effective ways that meet the needs of the people of the Isle of Man. In the first instance this should involve the creation of an Isle of Man Regulatory and Competition Authority.
3. The Statutory Boards Act 1987 should be amended to provide for two categories of Statutory Board, to clearly differentiate between Political Boards and non-political Boards (Executive Boards) established for service delivery, regulatory or other purposes.
4. Government owned companies should be established under the Companies Acts 1931/2006 where the functions of the commercial activity concerned remain with the relevant Department and the Company enters into either a management contract or concession with the Department to set out the extent of its remit.
5. Certain incremental amendments should be made to machinery of Government legislation from the 1980s and 1990s, as follows: a. Impose a statutory obligation on Government organisations to form appropriate consultation and cooperation arrangements. b. Establish the role of Chief Secretary as Chief Executive of the Government to whom Chief Officers would be accountable on all matters. c. Give the Council of Ministers statutory powers describing its functions, including the requirement to determine priorities of expenditure and to consider financial and economic policy issues. d. Give statutory force to the Programme for Government based on national outcomes and indicators. e. Allow for the transfer of regulatory functions to new delivery models.
6. The sub-Committee should provide a final report for consideration by the Council of Ministers by no later than 31 March 2020, to include the following items: a. A framework for assessing the type of Arm’s Length Body to be used for the functional areas under consideration;
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GD 2021/0035 b. An analysis of operational functions within Government that might be appropriate for delivery at arm’s length; c. A framework for managing staff transfers to, and determining the employment structures of Arm’s Length Bodies, and d. An assessment of the financial benefits that could be delivered by greater use of Arm’s Length Bodies.
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GD 2021/0035 9. MINORITY OVERVIEW
The Single Legal Entity Committee has now been meeting for nearly 3 years. The initial report was laid before Tynwald in June 2017 and acknowledged that an incremental approach was the way forward and this has continued.
Within the committee we have had lively debate and the majority recently determined that we should rename the committee ‘One Public Service’ rather than continue to use ‘Single Legal Entity’. I would point out the public already perceive the government as a collagic whole. It is immaterial from a public perspective whether government is a Single Legal Entity; they view delivery and outcomes as key.
This report sets out a direction of travel but there is no evidence from other jurisdictions that this would enhance our public service offering, outcomes or value for money.
During this parliament’s term there have already been substantial changes to the way departments work either within or with each other. Following the incremental evolutionary principle some significant progress has been made, though there have also been examples of centralisation and rationalisations that have not saved money nor improved efficiency or outcomes and some have been reversed.
The much vaunted phrase ‘working in silos’, does I am sure occur, but that is down to the individuals and culture, which can persist in any organisation, however, it is organised in a legal sense. The quote “a bad system manned by good people will work and a good system manned by bad people frequently doesn’t” comes strongly to mind.
This administration has seen the introduction of a detailed Programme for Government, which all members signed up to at the beginning of this parliamentary term and we have seen reforms within departments, for instance DEFA has recently reorganised its directorate structure reducing the number of directorate heads from 9 to 5. DfE are experimenting with agency models (not yet proven), the Health Service Reform will result in Manx Care but this is only in its embryotic stages. In terms of other Single Legal Entity models it is difficult to draw comparisons with the Scottish parliament as this is so much larger and works over a large region and does not have the financial or civil service resource restrictions that we do as a small jurisdiction.
Jersey is an appropriate similar sized jurisdiction and made the decision just prior to its last general election to convert to a Single Legal Entity system which was implemented by the new administration over two years ago.
It would be inappropriate for me to attribute a comment, however having recently visited Jersey it is evident there are still many unresolved problems both at ministerial level and within their civil service, even to the extent that the Single Legal Entity has not yet been achieved
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GD 2021/0035 and there seems widespread discontent and disillusionment over the separation of policy from operations.
In a similar way the Isle of Man is a small jurisdiction and Ministers and their department members who are the policy makers must understand operational constraints, so from what I have seen in Jersey; divorcing them either physically or operationally will not improve outcomes or public perceptions.
I understand there remains discontent within Jersey civil service, with many officers unsure of their future two years down the line. It would seem fair to say there has been a radical centralisation of power away from politicians into the hands of the Chief Accounting Officer and his team, which from cursory inspection, has yet to improve outcomes.
The recommendation under 8 is radical, suggesting the wholesale reorganisation of our government structure including abandonment of the existing departmental system.
The department model we operate, is not perfect and continues to evolve, but the Department members along with their Minister form policy at Department level, which then feeds through to the Council of Ministers via the Council of Ministers Sub Committees. The developed strategies and policies are then presented to members for ratification in Tynwald or as new legislation to the relevant branches, where is undergoes further scrutiny and debate. Everything that flows from Council of Ministers is exposed to scrutiny by all members as some stage and as Council of Ministers do not have an in built majority within parliament, support has to be sought from outside of government.
Regarding other recommendations that involve exploring the use of arm’s length bodies and executive agencies, these can be explored without radical departmental deconstruction, however, we should be aware that in small jurisdictions it is difficult to find individuals who have both competency and appetite for chairing such bodies, whilst being completely unconflicted or bereft of some form of self-interest. Currently, we as the elected politicians are there to represent the public and the public expect us to be accountable and take responsibility for our actions, not abdicate this to third parties, accepting that there are necessities for independence in some regulatory functions.
Government owned companies do not necessarily improve efficiency or accountability, simply moving something into another entity can actually increase cost as there will be an additional burden of an independent board with associated administration yet members of the public will still anticipate political accountability. This is to a certain extent already reflected in the government’s ownership of the Steam Packet and the Isle of Man Meat company.
Recommendation 5 has five elements to it:-
1. Government is already accused of too much consultation but if this is to be formalised, then I wouldn’t object.
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GD 2021/0035 2. Establishing accountability to the Chief Secretary of the Chief Officers could simply be achieved by delegation by Ministers or a small amendment to legislation. 3. Is there a requirement to be so prescriptive, bearing in mind Council of Ministers are already adequately carrying out these functions. 4. There is no requirement to give statutory force of the Programme for Government, this is already scrutinised by members and individual elements can be scrutinised under the Standing Select Committees. Failure to deliver is a political consequence, not one that requires statutory force. 5. Regulatory functions are already transferable and this pre-empts any discussion of a regulatory hub.
I can agree that workshops should be arranged initially for the Council of Ministers to determine the appetite for such radical change. If the conclusion is to continue then Tynwald members should be involved and the results of these workshops taken into account, when preparing the next report for Council of Ministers.
We should also continue to monitor the Jersey model which is as near an approximation to ours, to determine whether there are going to be any positive outcomes; whether this is cost cutting, efficiency gains or better outcomes for Jersey as a whole.
It is fruitless advocating wholesale deconstruction of our present system without firm evidence that the resulting structures will deliver better government and public outcomes. Any decisions in this respect should be left to the next administration and not hurried through, as happened in Jersey, leaving the next administration to face the consequences; the uncertainty, fallout that comes with dissection of an existing structure and productivity drop until the new system is fully operational often many months or even years later.
In my view we already have much work to do as government and parliament to fulfil our Programme for Government objectives, rather than navel gazing that will undoubtedly detract from the task in hand.
Wholesale organisational change rarely addresses embedded culture. Continued incremental change allows experimentation and there have been examples of this where change has been reversed, whereas wholesale deconstruction of system that works would be hard if not impossible to reverse. My recommendation would be that we continue with the incremental/evolutionary process.
Hon. Geoffrey Boot MHK
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GD 2021/0035 Borre, O., & Scarbrough, E. (1998). The Scope of Government. Oxford: Oxford University Press. Cabinet Office. (2017). Partnerships between departments and arm’s-length bodies: Code of Good Practice. London: Cabinet Office. Cabinet Office. (2017). Public Bodies. Heald, D., & Steel, D. (2018). The governance of public bodies in times of austerity. The British Accounting Review, 50(2), 149-160. Hood, C. (1980). The Politics of Quangocide. Policy & Politics, 8(3), 247-265. Institute for Government. (2015). Whitehall Monitor. London: Institute for Government. Jersey Audit Office. (2017). Oversight of Arm’s Length Organisations. Controller and Auditor General. Laking, R. (2005). Agencies: Their Benefits and Risks. OECD Journal on Budgeting, 4(4), 8- 25. Local Government Information Unit. (2012). The Future of Arm's Length Bodies. Carnegie UK Trust. Manning, N., & Shepherd, G. (2009). Arms Length Bodies. Global Expert Team. Niskanen, W. (1971). Bureaucracy and Representative Government. Chicago: Aldine-Atherton. OECD. (2015). Delivering from the centre: Strengthening the role of the centre of government in driving priority strategies. OECD. PWC, (2019). Urban Development Agency Models. Retrieved December 1, 2019 from https://www.gov.im/media/1367580/urban-development-agency-models-20-november- 2019_reduce.pdf Talbot, C. (2013, June 22). In Defence of Quangos. Retrieved August 15, 2019, from http://blog.policy.manchester.ac.uk/whitehallwatch/2013/06/in-defence-of-quangos-2/ The official website for the States of Guernsey. (2018, March 9). Review to be carried out of bodies operating at 'arm's length' of government. Retrieved August 16, 2019, from https://www.gov.gg/article/164239/Review-to-be-carried-out-of-bodies-operating-at-arms- length-of-government The Scottish Parliament. (2016). Inquiry into arm’s length external organisations. Zhou, J., & Peng, M. (2010). Relational exchanges versus arm’s-length transactions during institutional transitions. Pacific Journal of Management, 27(3), 355-370.
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