Tidying of the quangos? New guidance to help officials sort “confusing” arm’s-length bodies

Cabinet Office review prompts fresh distinctions between executive agencies (EAs), non-departmental public bodies (NDPBs) and non-ministerial departments (NMDs)

By Matt Foster

29 Apr 2016

Departments have been given fresh guidance for understanding the "unnecessarily complex" array of arm’s length public bodies, after research found that officials were often left confused by the wide variety of ALBs.

The coalition government set out a much-heralded “bonfire of the quangos” in 2010, with the latest data showing that, over the last parliament, over 190 public bodies were scrapped, and more than 160 were merged into fewer than 70.

But a Cabinet Office-commissioned report has concluded that the current classification system for non-departmental bodies is “not fit for purpose” and “difficult to understand”, with departmental officials still unsure of how the three main types - executive agencies (EAs), non-departmental public bodies (NDPBs) and non-ministerial departments (NMDs) - actually differ in practice.

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The review took evidence from academics, as well as from civil servants and stakeholders at a series of workshops carried out last year, and found that the government’s 2012 guidance aiming to clarify the distinctions was failing to make the situation less confusing.

“The characteristics listed for each category […] are not wholly comprehensive, consistent or comparable, so that the applicability of categories to ALBs is neither mutually exclusive nor collectively exhaustive; some ALBs arguably fit into more than one category and others fit none,” the report said.

“Perhaps unsurprisingly, therefore, in the workshops many stakeholders had difficulty identifying the characteristics of the different categories and expressed the view that in some instances the categories appeared interchangeable. 

It added: “The consistent flow of casework relating to classification and the undue amount of time spent by officials exploring alternative models before discounting them, is evidence of the practical impact of this confusion.”

The review also found that some public bodies were either unclassified or had been given more than one classification, leading to a lack of clarity about their status and independence from ministers.

“There was general agreement that exceptions, such as multi- and un-classified bodies, confused the landscape, undermined the classification system and should be eliminated as far as possible,” the report added.

The Institute for Government (IfG) think tank had recommended that the government introduce a new, more simple naming system for the organisations — but the Cabinet Office ultimately ruled this out, arguing that it would be too costly.

"Stakeholders had difficulty identifying the characteristics of the different categories and expressed the view that in some instances the categories appeared interchangeable" - Cabinet Office review

However, the centre of govermment has now set out new definitions of EAs, NDPBs and NMDs and said these three categories should be the only ones used in future. Meanwhile, the degree of freedom a body needs from ministerial control should be the “guiding principle” in deciding which type of body to set up.

The latest guidance (available below) says that executive agencies — such as the Skills Funding Agency — are “clearly designated (and financially viable)” business units inside departments which are asked to carry out specific functions of the department rather than give policy advice. 

Such EAs, which are staffed by civil servants, are described as having a “clear focus on delivering specified outputs within a framework of accountability to ministers”.

Further removed, but still falling under ministerial accountability, are non-departmental public bodies, which the new guidance says “have a role in the process of national government” but operate at arm's-length from ministers. These are staffed by public, rather than civil servants, and include Arts Council England and the Competition Appeals Tribunal.

Furthest from ministers, meanwhile, are non-ministerial departments, which are defined as operating in a similar way to normal departments, but carrying work “for which direct political oversight is judged unnecessary or inappropriate”. Examples included tax authority HM Revenue and Customs and the Serious Fraud Office. These organisations are usually headed by a senior civil servant.

As part of the tidy-up, the Cabinet Office says it will also look at reviewing the classification of arm’s-length bodies that are currently classed as trading funds. Trading funds are those public organisations, such as the Land Registry and Companies House, that generate more than 50% of their revenue from selling goods and services.

But the Cabinet Office says that in future, quangos “that should operate commercially will instead consider other commercial models and not apply for trading fund status”.

Launching the review’s findings and new guidance, Cabinet Office minister Matt Hancock said: “While public bodies have undergone significant reform, the landscape remains complex and confusing. A simpler landscape would promote transparency and accountability and lay the foundation for further transformation.”

The IfG’s Jill Rutter meanwhile welcomed the emphasis placed on “a principled and consistent approach to arm’s length bodies, for which we have long argued”.

She added: “We agree that this will be an important step in promoting transparency and accountability. The important thing now is that these principles are accepted and adhered to across government.” 

Classification of Public Bodies Guidance for Departments by CivilServiceWorld

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