Departments – not Cabinet Office – know best on agency oversight, says civil service chief John Manzoni

John Manzoni tells MPs that departments and their agencies should be seen as a "total delivery system", with departments best placed to decide the level of oversight needed​

By Matt Foster

19 Jul 2016

Decisions over the appropriate level of oversight for arm's-length bodies are best left to departments, civil service chief executive John Manzoni has said, as he acknowledged that the distinctions between different types of quangos are still "not particularly clear".

There are currently more than 450 non-departmental bodies – often dubbed quangos – in existence. Quangos carry out specialised tasks for departments – such as running the courts system or managing payments to farmers – and can also offer a level of detachment from ministers on issues where political interference is not deemed to be appropriate, such as in tax collection.

But a recent report by the National Audit Office public spending watchdog concluded that the arm's-length body landscape was still "confused and incoherent", with the NAO pointing out there was still no single list of all ALBs, nor an agreed definition of the different types. The watchdog said oversight of the organisations focused "predominantly on compliance and control", with some staff in arm's-length bodies confused about how their job related to the wider aims of their host departments.​

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In 2010, the Cabinet Office kicked off a major Public Bodies Reform programme in a bid to cut the number of quangos, and the department offers guidance to the rest of Whitehall on governance and oversight of their agencies. That included setting up a dedicated "sponsorship function" across the civil service, with specified officials in each department acting as the first point of contact for staff in their agencies.

Speaking to MPs on the Public Accounts Committee this week, Manzoni – who is also the Cabinet Office permanent secretary –  said he believed that efforts to cut the number of arm's length bodies had been "very successful", with 335 scrapped between 2010 and 2015 and spending cut by £3bn.

But he acknowledged that  efforts to improve governance had become "a little rote", and conceded that a centralising approach was not always appropriate.

"What they actually represent is an extension of the department’s delivery, so really we ought to be thinking about a department and its arm’s-length bodies as a total delivery system" – John Manzoni

"We have had a go at the sponsorship notion, but I have to say that I don’t think it has worked very well," Manzoni said, as he gave evidence alongside Ministry of Justice permanent secretary Richard Heaton, Department for Culture, Media and Sport perm sec Sue Owen, and her equivalent at the environment department (Defra), Clare Moriarty.

Manzoni, who joined the civil service in 2014, said he believed it was wrong for the Cabinet Office to have "defined sponsorship as a function in itself", with public bodies reform requiring "a different approach going forward" to cater for the "very different" functions carried out by the organisations.

"They range enormously in size, scope and responsibility. What they actually represent is an extension of the department’s delivery, so really we ought to be thinking about a department and its arm’s-length bodies as a total delivery system," he said.

"Therefore, rather than looking predominantly at sponsorship across all the departments, I would be more in favour of saying to each department, 'You tell me how you would like to govern and sponsor your arm’s length bodies. Determine what the governance of that looks like, against some principles that we can agree.'"

Manzoni said Cabinet Office-backed sponsorship courses, set up to train officials in the skills needed to take the lead on overseeing quangos, had been "paused at the end of last year", because they had failed to gain "traction".

"I actually think we will get more traction by looking down departmental axes and requiring the departments to determine what the appropriate governance is," he added.

"Mixed picture"

Manzoni was asked by Caroline Flint, Labour MP and PAC member, whether departments should be looking to take a "heavier-handed or lighter-touch" approach to overseeing their arm's-length bodies.

The civil service chief stressed that he believed there was no one-size-fits-all approach to quango governance.

"They are all actually quite different," he said. "Sometimes, massive activities are going on. I would say that sometimes our governance of that is not as strong as it could be, and sometimes it is over-strong for a particular reason that is important to a central department, but might not be so important to an arm’s length body.

Manzoni added: "It is quite a mixed picture, which is, in the end, why I believe that the predominant axis has to be down the department. We have to make sure that the departments are appropriately overseeing the activities."

Earlier this year, the Cabinet Office published fresh guidance to help departments make sense of the "unnecessarily complex" array of arm’s length public bodies, after a review found widespread confusion about the distinction between the three main types – executive agencies (EAs), non-departmental public bodies (NDPBs) and non-ministerial departments (NMDs).

The guidance included new definitions of EAs, NDPBs and NMDs, and said these three categories should be the only ones used in future, with the degree of freedom a body needs from ministerial control used as the “guiding principle” in deciding which type of body to set up.

Setting out the thinking behind that new review, Manzoni told PAC that the civil service had found itself with "a proliferation of arm’s length bodies" that were "called all sorts of things".

"We now, at least, have three clear categories of arm’s length bodies: executive agencies, non-departmental public bodies and non-ministerial departments," he told MPs. "Going forward, all public bodies will be placed into one of those three categories, and they are essentially progressively more remote from government in the order that I described them."

He added: "We can take a fresh look, because to some degree we do have a bit of a mixed landscape and as you look at it, it is not particularly clear."

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