Centre of government ‘lacks proper data’ to monitor arm’s length bodies

National Audit Office warns department-level information deficit could impact Cabinet Office’s ability to drive efficiency and reform
National Audit Office Credit: Matt Foster

By Jim Dunton

23 Jun 2021

The Cabinet Office does not have the right data to properly support its oversight of the 295 arm’s length bodies managed by government departments, according to a new report from public spending watchdog the National Audit Office.

It said the fact that departments were not required to provide information about the risk profile of the ALBs they are responsible for made it difficult to carry out a risk-based review of the way the bodies were managed. 

The NAO said that as of 2018-19 ALBs were spending some £265bn a year and employing almost 300,000 people. It said the lack of data on their operations could impact the Cabinet Office’s ability to support the delivery of government programmes and drive efficiency and reform.

Examples of ALBs include the Disclosure and Barring Service,  Highways England and the the Natural History Museum.  One of the newest is the Trade Remedies Authority.

The watchdog also found that the way departments set up and monitored ALBs was inconsistent and that they often failed to consider alternative options to setting up an ALB. It said that in some cases a decision to proceed with setting up an ALB had been taken before a business case for the move had been considered.

Extent and nature of ALBs is ‘poorly understood’

Today’s report noted that the tally of 295 ALBs used by the Cabinet Office was itself open to question. 

The NAO said the Office for National Statistics had identified 830 bodies that delivered across central government of which the 295 were a subset. It said that the Cabinet Office had identified 463 ALBs in 2016, and that the decrease had been largely driven by the reclassification of bodies and “does not reflect a true reduction in the number of bodies delivering across government”.

“The extent and nature of ALBs is still poorly understood,” the NAO said.

The NAO added that although there were various delivery models that ALBs could follow, there was no central guidance on which delivery model should be used and inconsistency in how the Cabinet Office classified ALBs.

It said that while ALBs were split into three types – non-departmental public bodies, executive agencies, and non-ministerial departments, similar ALBs could have different classifications. 

The NAO acknowledged that variation was sometimes needed, but it said inconsistency reduced opportunities for both sponsor departments and the ALBs to benchmark performance or identify efficiencies.

NAO head Gareth Davies said the Cabinet Office needed to up its game if it was to maximise the potential to improve the way ALBs operated and the value for money they provided.

“Government relies on arm’s-length bodies to deliver essential polices and public services, but the inconsistency in the way they are set up and overseen by departments limits the opportunity for lessons to be shared across organisations,” he said.

“The centre of government needs to make considerably more progress in understanding the risks carried by ALBs, and work with departments and ALBs to ensure that guidance and good practice are followed.”

Meg Hillier, who chairs parliament’s Public Accounts Committee, said she had seen successive governments setting up ALBs with too little thought for the long-term implications.

“Different departments have set up different bodies with different powers and status without proper consideration of the risks, costs and benefits,” she said. 

“The confused landscape across government limits Cabinet Office's ability to oversee ALBs or properly monitor risk.

“Cabinet Office needs to work with departments to develop a clear picture of what functions need to be delivered and the best way to deliver them. This should be CO’s bread and butter.”

A Cabinet Office spokesperson said the department was grateful to the NAO for acknowledging that its management of ALBs has improved since 2016. 

“We know that there is more to do, and that’s why we are reviewing the governance and efficiency of these bodies through our new Public Bodies Programme,” they said.

“This programme will ensure that ALBs deliver for the public, with appropriate scrutiny and oversight.

"It will also provide a clearer focus on measuring performance and upholding rigorous standards of governance.”

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