Good Budget-day news on quangos

March 24, 2010 5:12 PM

Buried in the sheaf of documents released with today's Budget is an interesting little policy document on quangos - everyone's favourite topic.

Unlike some of the other announcements the Government has snuck out today - such as the awful stats on NHS productivity - this actually contains some good news. Reveling in the catchy title "Reforming Arms Length Bodies", it is online here. (NB - As ever in this area there is a pernickety debate about nomenclature and definitions. They call them ALBs, the Cabinet Office call them NDPBs and have a different definition and so on.)

Essentially the paper has five key proposals:

  • Reducing the number of quangos by 120, saving £500m in the process.
  • Making them harder to create and requiring each to have a sunset clause.
  • Restricting taxpayer-funded lobbying and reducing duplication.
  • Increasing quango transparency.
  • Introducing new punishments for management failure.

Broadly, this seems to be a good set of ideas - many of which are TPA proposals which the Government is taking up, which is a great success.

Let's look at them one by one:

Reducing the number and the cost of quangos

The headline pledge is to reduce the number of bodies by 123. This is a good thing, though the language is very carefully chosen. They don't pledge to scrap 123 quangos, only to reduce the number by 123, which means many of the bodies are to be amalgamated. That is a good idea where possible, and does save money in back office costs but it doesn't make the really big savings you can get by simply stopping some activities outright.

The bodies they lay out for cutting or merging all look pretty sensible, too, if not earth-shatteringly radical. 52 of the total is obtained by "rationalising" the number of Advisory Committees on the Justices of the Peace. Similarly, mergers will take with the Courts and Tribunal service, the Meat Hygiene Service and the Food Standards Agency, and the various skills organisations.

Other proposals include the mutualisation of British Waterways, which the TPA has proposed for some time.

These proposals are certainly a start, though the saving - £500 million of the Treasury's stated ALB total of £80 billion - confirms our suspicions that this is a streamlining rather than a large-scale cut.

Making quangos harder to create and easier to scrap

As we have previously pointed out, one of the main reasons quangos are created is that they are politically and structurally convenient for politicians and Government departments. The report recognises this and also takes on board our warnings about repeated duplication of activities between quangos and departments.

As a result, the official guidelines on setting bodies up are to be tightened with the stated intention of making a quango "the last resort" rather than the first. Furthermore, the expectation will be that all legislation creating new quangos will feature a built-in sunset clause, requiring that the quango be re-approved by Parliament after a set period.

Of course, how these new rules will work in practice is yet to be seen. I'm sure if you asked Ministers last week they would assure you that they only ever create quangos when they are essential, even if the Treasury has now admitted that that isn't the case.

Restricting taxpayer-funded lobbying

It is particularly good to see the Government belatedly acknowledge the problem of taxpayer-funded lobbying by quangos, which we raised in a crucial report last year. Notably, the particular problems we identified are quangos using taxpayers' money to lobby for changes in policy and either to defend or even increase their own budget.

However, whilst there are new restrictions in today's document, the practice is not banned entirely:

"ALBs must not use public funds to employ external public affairs or other consultants to lobby Parliament or Government with the principle aim of altering government policy or to obtain increased funding."

There are two flaws here. First, this offers the massive loophole of allowing quangos to do continue such lobbying as long as they can manufacture a "principle aim" over and above it. Second, they will still be allowed to run PR and lobbying campaigns aimed at changing public opinion on political and policy matters.

This item is certainly a win for us, but it's a battle rather than the war.

Increasing transparency

The TPA has been a long-standing and enthusiastic advocate of greater public sector transparency, and quangos have thus far been one area where there's been a serious deficit. This starts to set things right, proposing increased financial transparency, full publication of senior salaries and - crucially - ties quangos in to following whatever standards are set for the wider public sector.

Improved Board accountability

As our report into quango board members recently showed, there are serious failures in the staffing and accountability of quango boards. Pleasingly, this report also seems to have had a positive influence on the Government.

They are to set out new rules and practices to recruit Non-Executive Directors more broadly, rather than relying on the quango merry-go-round that all too often comes into play at the moment.

Furthermore, the report proposes a rule to disqualify failed and incompetent Chief Executives and Chairs from future quango roles. They even raise the excellent idea of extending the Company Directors Disqualification Act 1986 to quango Chief Executives, Chairs and Non-Executive Directors.

In conclusion

This is not the final victory, but it's a big step towards it. In particular, today's report is ringing confirmation that our work on quangos has been well-targeted - it has been noticed and our ideas are starting to filter through.

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