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An independent review of 'arm’s length bodies' (ALBs) has found that 'quangos' are operating in a confusing environment that neither government, the public nor ALBs completely understand.

Read before Burning, a year-long study by the Institute for Government finds that while cuts &efficiencies in ALBs are certain and may well be justified, making decisions about how and if they should operate in future must be taken alongside fundamental reform or risk more confusion about their role and value in the future.

Lack of clarity about what they do, how and to whom they are accountable leads to "duplication, policy coordination problems and difficulties achieving the right balance between freedom and control of ALB’s", the report says.

This effects the quality of the relationships between government departments and their 'quangos' - the report found examples of both "micro-management and institutional neglect".

The report suggests a complete reorganisation of the way ALBs are classified to bring at least eleven confusing categories down to just four. It recommends regular set reviews and more transparency to ensure that their value and purpose are clear so that decisions about their future are based on accurate information.

Successive governments have focused on simply cutting the number of bodies, however 75% of NDPB spend is tied up in just 15 bodies, and most of that is passed on to third parties, so this exercise is not one that will necessarily result in savings.

The report argues that more fundamental reform is needed to ensure value for money and effectiveness in the future.

Executive Director of the Institute Lord Bichard said:

"We need a sensible, balanced conversation about arm’s length bodies and the pros and cons of their distance and independence from executive control.

"It is in all our interests to be clear about what their roles and responsibilities are, since ALBs will remain a vital part of the state. The current discourse has been characterised by more heat than light, this report aims to change that and help ensure that the right decisions are made about their future."

As some ALBs face cuts, others remain and new ones are created – OBR and IPSA are recent examples and demonstrate the need for arm's length government.

But questions about their relationship to government, their accountability and transparency should be asked when the ALB is created in the first place. The report recommends that select committees scrutinise the creation of every new ALB.

Co-author of the report Sir Ian Magee and former Whitehall second Permanent Secretary and former agency Chief Executive, said:

"The government’s current review of ALBs is an opportunity to ensure decisions about their future are taken with much-needed reform to improve their transparency and accountability and to help restore the public's trust and confidence in this important part of government. Our reforms aim to put those ALBs that continue to carry out important functions on a stronger footing in the future.

"Today we publish our recommendations for clearing up some of the confusion around ALBs and we have published a ‘taxonomy’ to clarify roles and responsibilities which will make for more effective government and therefore help increase public confidence and understanding of them."

Departments also have to play a stronger role supporting and sponsoring ALBs, the report says. Civil servants working in sponsor teams need better training to manage this important relationship.

To address deep-seated concerns as well as address the public's concern about value for money and accountability of arms length bodies, we recommend:

• It should be harder to set up ALBs, by giving Parliament a new role when bodies are set up  and to ensure that they are subject to regular scrutiny, both inside Whitehall and by the NAO.
• Better management of ALBs in Whitehall and more attention to training both those who work in ALBs and their departmental sponsors.
• We want to increase public confidence in ALBs by promoting greater transparency and giving the public more confidence in the impartiality of the appointments process.

To remove the current confusion in the landscape the report recommends:

• Sweeping away the oxymoron of the term that is non-Ministerial departments. They do have ministers but are not necessarily part of a department. 
• There are over 950 ALBs, the report recommends treating the long tail of some 450 advisory bodies as departmental advisory committees instead of putting them in the ALB group.
• Putting an end to the confusing language of executive non-departmental public bodies (who get much of their money from and whose Boards are appointed by government departments).
• New classification to relate form to function. In their place we would have four categories instead of the current eleven:
  1. Constitutional bodies who would answer to Parliament, not Ministers 
  2. Independent Public Interest Bodies (regulators, standard setters and watchdogs of government activity) who need to be protected from Ministerial interference and Departmental Sponsored Bodies who perform functions on behalf of a department – but have some discretion and where it makes sense for staff not to be departmental civil servants.
  3. Departmental sponsored bodies – bodies that discharge core functions on behalf of one or more departments, but where there is benefit in giving discretion to a body over those decisions whether on grant-giving or enforcement.
  4. Executive Agencies would remain. The benefit of this would be Ministers and Chairs/CEs would know what freedoms come with what status – and make clear who is responsible for what.

Key Recommendations

• ALBs are approved by the centre of government and subjected to scrutiny by the relevant select committee and by the Public Administration Select Committee.
• When new ALBs are established, 'sunset' clauses are included, defining the expected time when the new body should undergo a GAP Review (see below) and/or be disbanded.
• Introduce Governance and Performance (GAP) Reviews, to be conducted every three to five years for all ALBs spending over £50 million. Smaller-scale exercises, 'GAP health checks', should be conducted for all ALBs spending less than £50 million.
• Effective sponsorship of ALBs from Whitehall. Departments and ALBs should ensure that ministers, ALB appointees and those moving into sponsorship roles receive appropriate briefing, induction and mentoring.
• The National Audit Office should, with appropriate resources, increase thematic reviews of functions such as grant allocation and benchmark ALB efficiency, in order to promote best practice across ALBs and sponsor teams.
  Measures are also required to increase transparency and build public confidence. Here we propose that:
• As recommended by PASC in 2001 (PASC 2001), government should provide a complete, up-to-date list of all ALBs, alongside details of their expenditure, their relationship to government, the names of the lead officials responsible for sponsoring them, and links to their websites (building on the work of Directgov).
• OCPA should conduct a research exercise every three to five years to investigate whether direct or indirect political influence is operating in the public appointments process.
• ALBs should publish transparent information on their role, relationship to government, funding and performance in a standard format. This format should include information on:
  • Who the public can complain to about the decisions of the body.
  • Who set up the ALB (legislation or other), and who appoints and can dismiss those in charge.
  • Sources of income for the ALB and arrangements for approval of the budget.
  • The salaries of the senior management team.
  • Results of GAP Reviews and information on when they are next due to be reviewed or audited.
  • Whether they are subject to external oversight by any other bodies etc.

More information