Next Steps’ Agency Model in UK Central Government 1988-1998 With
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The ‘Next Steps’ Agency Model in UK Central Government 1988-1998 with Special Reference to the Benefits Agency Oliver James London School of Economics Thesis submitted for the PhD examination of the University of London Submitted November 7th 2000 for examination in 2001 1 UMI Number: U142930 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. Dissertation Publishing UMI U142930 Published by ProQuest LLC 2014. Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 I S • fa POl^CAL A ICfervaHeS Abstract The research explores three related questions about the ‘Next Steps’ agency model and agencification processes in the UK central state between 1988 and 1998. First, how did the creation of agencies, or agencification, work in the period and was the reform a substantial change? Second, why was the reform adopted and did agencies bring about benefits in the delivery of services? Third, what is the likely course of future developments in the use of agencies? The first question is explored in Part One. The agency model is identified as a set of institutions, or structures, for delivering public services proposed by government actors who developed the ‘Next Steps’ reform. The UK central state made extensive use of the agency model in the period 1988 to 1998. Over the period, 155 agencies were created. By 1998, 65 per cent of civil servants worked in 138 agencies. The ’Next Steps’ reform was predominately mitigated agencification, where there was already some separation of activities prior to the reform. This type of agencification accounted for 69 per cent of cases. There was pure agencification in 14 per cent of cases, in which the reform was an even more significant reorganisation; the case of the Benefits Agency was an example of this form of agency creation. However, in 14 per cent of cases, there was nominal change and the reform was largely a relabelling exercise. New function agencification was found in only 2 per cent of cases. The second question is explored in Part Two. The official justifications for the reform were fragmented and, at some points, inconsistent. The public interest model, based on official accounts, suggests that senior officials and politicians had the goals of delivering public services in an efficient and effective manner with maximum economy, expressed through minimising transaction costs associated with delivering services. Agencies promoted this goal in handling routine, executive activities rather than non-routine, policy activities. However, the public interest model does not seem to be consistent with disputes between parts of the central state, the bracketing of nominal changes with more significant ones under the overall ‘Next Steps’ reform banner, and use of the 2 agency model for non-routine policy work were inconsistent with the model. The performance of agencies did not match all the expectations of the public interest model. The institutional rational choice approach, through Patrick Dunleavy’s bureau-shaping model, makes a substantial contribution to understanding why the reform occurred. But the original model is inadequate for explaining the ‘Next Steps’ reform. The mark II bureau-shaping model overcomes the inadequacies of the original model and is an important theoretical advance. The model is supported by evidence about developments during the period. Senior officials in the departments saw their role primarily as policy work rather than the direct, hands on, management of executive activities. Entrepreneurial officials in the Cabinet Office Efficiency Unit had career incentives to come up with innovative organisational solutions to problems of public service delivery that were successfully implemented. They provided senior officials in departments with the agency model as a piece of bureau-shaping technology, enabling them to respond to politicians by passing on executive work to agencies. In departments with agencies, 70 per cent of senior officials ended up working in the parent department after the creation of agencies. The third question is explored in Part Three. The mark II bureau-shaping model suggests that bureau-shaping strategies will continue to be an important influence on reform in the future as will entrepreneurial officials in central units who have incentives to come up with new mechanisms for improving public services. The most likely future for most agencies appears to be continued use of the agency model with closure of implementation gaps. These developments are likely to be supplemented by additional mechanisms in agencies with moderate performance problems. In a few cases of very poor performance more radical changes are more likely. Partial dismantling of the agency model may occur in the Benefits Agency. 3 Table of Contents Acknowledgements p. 8 List of Figures p.9 List of Tables p. 10 List of Abbreviations p. 12 Introduction p. 13 Section One: The Official Account p. 13 Section Two: Gaps in Existing Academic Accounts p. 17 Section Three: Mapping Change Using the Agency Model and Explaining Change Using Institutional Rational Choice and the Bureau-shaping Model p.20 Part One: The Agency Model in UK Central Government p.25 Chapter One: The Agency Model, Agencification and the New Public Management p.26 Section One: The Agency Model p.26 Section Two: Types of Agency p.35 Section Three: Agencification and the New Public Management p.41 Chapter Two: Agencies and Agencification in the UK Central State p.48 Section One: The Creation of Agencies in the UK Central State p.48 Section Two: Types of Agency p.59 Section Three: Reforms Similar to Agencification p.62 Chapter Three: The Practice of Agency Working p.69 Section One: Task Separation, Freedom from Ad Hoc Intervention and Flexibilities p.69 Section Two: Regulation by the Department and Performance Targets p.79 4 Section Three: Relationships with Other Bodies p.85 Part Two: Explaining Agencification and its Consequences p.95 Chapter Four: The Public Interest Model p.96 Section One: The Foundations of the Pubic Interest Model p.96 Section Two: The Public Interest Model p. 104 Section Three: Evaluating the Public Interest Model’s Interpretation of the Reform Process p. 112 Chapter Five: Evaluating the Pubic Interest Model’s Interpretation of the Performance of Agencies p. 119 Section One: Economy p. 119 Section Two: Efficiency and Effectiveness p. 126 Section Three: The Effect of the Agency Model on Performance p. 137 Chapter Six: The Institutional Rational Choice Approach p. 155 Section One: The Potential of Institutional Rational Choice p. 155 Section Two: Rational Choice Models of Bureaucracy p. 158 Section Three: The Bureau-shaping Model p. 163 Chapter Seven: The Mark II Bureau-shaping Model p. 176 Section One:The Institutional Structure of the Central State p. 176 Section Two: Senior Officials and Politicians in Departments p. 179 Section Three: Officials and Politicians in Other Parts of the Central State p. 193 Part Three: The Future of Agencies p.205 Chapter Eight: Likely Futures for the Agency Model p.206 Section One: More and Better Use of the Agency Model p.206 Section Two: Use of Other Control Forms to Complement Agency Working p.211 Section Three: Dismantling the Use of the Agency Model p.218 5 Chapter Nine: Conclusion p.229 Section One: The Agency Model was Widely Used and Mitigated Agencification was Predominant in the Reform p.229 Section Two: The Reform Reflected Bureau-shaping Motivations Rather than Straightforward Pursuit of the Public Interest p.231 Section Three: Widespread Use of the Agency Model is Likely to Continue with Radical Changes Only in Cases of Very Poorly Performing Agencies p.234 Appendices p.241 Appendix 1: Census of Agencies Created Between 1988-1998 Classified by Bureau-tools Type with Year of Creation p.242 Appendix 2: Agencies Classified by Department with Year of Creation p.246 Appendix 3: Types of Agencification for Agencies with Year of Creation p.251 Appendix 4: Agencies Involved in Routine and Non-routine Activities by Type p.255 Appendix 5: Sections of the Parent Departments of Agencies Classified by Bureau-tool Type p.261 Appendix 6: Agencies Ranked by Written Parliamentary Questions per £m of Running costs 1995/96 p.266 Appendix 7: Box Plot of Percentage Change in Budget for 72 Agencies 1995/6 to 1997/8 p.269 Appendix 8: Box Plot of Percentage Budget Change for 72 Agencies 1995/96 to 1997/98 by Type of Agency (with Number of Cases) p.270 Appendix 9: Box Plot of Percentage Budget Change for 72 Agencies by Income Source: Non-trading (Grant Financed) and Trading (Charged Services) 1995/96 to 1997/98 (with Number of Cases) p.271 Appendix 10: The Formal Mark II Bureau-shaping Model p.272 6 Appendix 11: Radical Changes to Agencies 1988-98 p.274 Appendix 12: Interviews Conducted for the Study p.275 References p.279 Primary Sources p.280 Secondary Literature p.289 7 Acknowledgements I thank Keith Dowding and Patrick Dunleavy for their supervision of this thesis and their comments on other related work, particularly when I was starting the thesis and then as a temporary lecturer at LSE in 1994-95. They helped me to develop my thinking on ‘rational choice’ approaches to public administration and public policy. I hope this study draws on rational choice to explore research questions about ‘agencies4 in UK central government rather than being driven by the formal techniques of the approach, as critics of rational choice often suggest.