NAO: Number of companies in government has grown by a third since 2010

NAO research finds there are now 218 companies in government, but over half are not listed in official sources

By Suzannah.Brecknell

15 Dec 2015

Government departments created 66 companies since between 2010 and 2014, brining the total number of companies owned or controlled by a department to 218, according to a report published by the National Audit Office.

These range from delivery bodies like HS2 Ltd through financial institutions such as Help to Buy, to service providers such as the Meat & Livestock Commercial Services, which authenticates abattoirs. 

Over the same period, the NAO says, the number of public bodies was reduced by 285. A public body is an organisation established and controlled by government. Some public bodies are companies, but there are also various companies set up by government which are not included in the Cabinet Office classification of public bodies.

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The report found that there is “no single, definitive source of information about the number of companies in government”. 

NAO research looked at three central lists of government companies as well as departmental accounts and data held by Companies House to compile a list of "companies in government", which it defined as companies which central government wholly and partially owned, or controlled. The NAO definition includes organisations set up as statutory companies and by Royal Charter. It also includes bodies not defined as being in the public sector by the ONS, but it does not include organisations owned by the NHS or local government.

 Of the organisations that the NAO defines as companies in government, 62% are not listed in an official source, and 36% are not included in departmental accounts.

The report also noted that transparency, accountability and governance systems for companies in government are complex.

For example, where there are clear approvals process for forming a public body, there are no specific approvals processes for forming a company. There is also “no central guidance on when a company is the most appropriate form of a new body,” says the report.

Jonathan Pearson, a senior researcher at the Institute for Government senior researcher, said the IFG shares the NAO's concern about a lack of clear guidance on this topic.

“Without a clear link between the form of an organisation and the function it performs, there is a risk that accountability, transparency and governance will suffer as organisations with very different roles and responsibilities become categorised in the same way,” he said.

The report also notes there is no central oversight function for companies in government, with management of the government’s corporate portfolio "conducted mainly at department level".

Central government guidance – such as the Treasury’s Managing Public Money document – applies to all forms of public body, whether they are companies or not. The NAO suggests that this means the “current accountability system does not reflect the differences between a public body that is incorporated…or not incorporated”.

For example, while Managing Public Money acknowledges that conflicts may arise between the responsibilities of an accounting officer and those of a company director, it “does not explain how to resolve them,” says the report.

Many of the bodies NAO defines as companies in government are also exempt from the regular review of non-departmental public bodies, since they are not categorised as public bodies.

The Cabinet Office, however, disputes the NAO’s findings on changes in the number of public bodies since 2010. The report says that 285 bodies have been closed or merged, including eight companies. Over the same period, it says, 173 public bodies were created, of which 66 were companies.

A footnote explains that the Cabinet Office believes these figures are “misleading” since they “aggregate figures for dissimilar bodies” and give “a distorted picture of changes to the service provision landscape”. It adds that the figures include public bodies and contracted services, some of which are provided nationally and some locally.

A Cabinet Office spokesperson said: “We have reduced the number of public bodies by over a third since the 2010 general election, saving over £2.6bn already and making the remaining public bodes more efficient, transparent and accountable than ever.”

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