Cabinet Office key to strengthening oversight of arm's-length bodies

21 October 2016

The Public Accounts Committee report says that the Cabinet Office must use its position at the centre of Government to ensure departments improve the way they manage business through arm's-length bodies.

Report findings

In a new Report, the Committee concludes that while there are examples of effective oversight, "there needs to be much more shared understanding of what works, with learning both within departmental groups and across departmental boundaries."

There are currently more than 460 arm's-length bodies—including NHS England and HM Revenue & Customs—spending around £250 billion a year.

The scale and role of these bodies vary hugely, from large executive agencies, such as HM Courts & Tribunals Service, to smaller non-departmental public bodies, such as the Gambling Commission.

Lines of accountability between departments and arm's-length bodies "unclear"

The Committee concludes that "for too long government has had no clear criteria" for determining what is best done by departments and what should be done through arm's-length bodies.

Unclear lines of accountability between departments and such bodies mean it is not clear who to hold to account, and departments do not consistently have the information they need to understand how arm's-length bodies are performing.

The Committee is not convinced departments' oversight arrangements are proportionate to the relative risks and opportunities presented by different arm's-length bodies and finds "existing oversight arrangements can introduce costs and bureaucracy, or duplicate existing governance arrangements".

Appointment process to arm's-length bodes "risks putting off good candidates"

It is concerned departments do not make sufficient use of the operational expertise of arm's-length bodies and people using services when developing policies.

The Committee also finds delays in the public appointments process create risks for effective governance, warning that the process to appoint non-executives to arm's-length bodies "is lengthy and burdensome and risks putting off good candidates".

In particular it finds "the Cabinet Office needs to use its position at the centre of Government to ensure that departments improve the way they manage their business through arm's-length bodies".

Chair's comments

Meg Hillier MP, Chair of the PAC, said:

"The Cabinet Office describes today's diverse network of arm's-length bodies as 'an accident of history'.
While this 'accident' may not have been preventable you would certainly expect any replacement system, designed from scratch today, to look very different.
It underlines precisely why the Cabinet Office must ensure these bodies—some of which are responsible for delivering large and vitally important swathes of public policy—are subject to consistent and effective oversight.
That must start with Government setting out clear criteria for how business is conducted, with clear lines of accountability on spending and performance. The public need to know who is spending money on their behalf, and why.
When the Government is clear this should involve arm's length bodies, it must do more to harness the expertise these bodies can bring to policy-making—as well as the feedback they collect on the frontline from taxpayers.
The Government cannot wash its hands of accountability simply by delegating its business and this Committee will expect to see the Cabinet Office taking meaningful steps to strengthen oversight in this area."

Report summary

Government departments now have more than 460 'arm's-length bodies', through which they spend around £250 billion a year.

Departments rely on their arm's-length bodies to deliver important functions and services to the public. Yet over the years there has been no consistent rationale for deciding what is best done through an arm's-length body and what is best done directly by departments themselves.

The Cabinet Office recognises that the resultant population of arm's-length bodies is "an accident of history".

Oversight of arm's-length bodies is "inconsistent"

The quality of oversight by departments of their arm's-length bodies is inconsistent. They do not always have the information to understand how their bodies are performing and it is not clear that oversight arrangements are always proportionate to the relative risks and opportunities of particular bodies.

While we heard some examples of effective oversight, there needs to be much more shared understanding of what works, with learning both within departmental groups and across departmental boundaries.

Departments are also missing opportunities to improve services by capitalising on the operational experience and know-how of their arm's-length bodies when developing policy.

There is no ‘one size fits all' approach to departmental oversight, but the Cabinet Office needs to use its position at the centre of Government to ensure that departments improve the way they manage their business through arm's-length bodies.

Further information

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