Closing quangos: lessons from Ofcom and the Hearing Aid Council
The latest government cull of Arm’s length bodies (ALBs) may be different in scale and speed from anything we have seen in the recent past – but there are many useful lessons out there on how to navigate through the minefield. In particular it pays to learn from those who have already been through it.
Bodies may close but the functions they undertake may remain crucial. Government has to guard against the inevitable blight that hits condemned organisations so essential services do not suffer as a consequence of rationalisation and change.
The work of the Financial Services Authority going to the Bank of England might come into the category of issues where high risks are attached if staff turnover leads them to take their eye off the ball on financial regulation.
Elsewhere the Government has given commitments that changes in structures will not affect the outcome the body supports. For instance, that the abolition of the UK Film Council will not lead to a loss of support for filmmaking in the UK. Interested parties will be watching closely to ensure this promise is kept.
Learning from experience
Most Departments will be grappling with the same set of issues, many of which will come down to management of people through a period of uncertainty. The Hearing Aid Council recently went through such a process and produced a neat short guide of things to watch out for based on their experience (PDF, 193KB).
The publication neatly encapsulates, within 10 headings, the steps to take and pitfalls to look out for. These range from the more intuitive end (staff and stakeholder management) to those that hint of problems that are more opaque (relating to the structures and responsibilities of public bodies).
For government accounting, closure throws up problems as bodies have to account for assets held and report to Parliament on their final accounts. As a matter of record, data has to be managed and transferred and there are responsibilities to archive and register public information.
Those of us who have been through the process of managing such a change recognise the Hearing Aid Council’s lessons. As 10 headings for a project plan it would be a good start.
I was involved in the closedown of all the legacy bodies whose functions formed Ofcom. This was a complex transaction involving two Departments and five ALBs with differing constitutional status.
There is a good commentary on the Ofcom experience produced by the National Audit Office. The experience showed the strength of good clear arrangements for transfer of staff, dealing with potential redundancies and supporting organisations through change.
Problems to watch out for
Experience also shows that closing organisations exposes a web of existing contracts and a complex set of responsibilities for public financial management. This is often difficult to navigate through, particularly if many bodies are closing at once.
The financial issues at stake can lead to some surprising costs, particularly as assets and liabilities are disposed of and transferred to unwitting Departments.
With Ofcom, there were ongoing leases for office buildings, IT equipment that needed to be disposed of and set up costs for the new organisation that ran to a shade under £80m. £18.5m of this was for liabilities on the leases of vacated buildings.
Departments and ALBs need to look carefully at all of their contractual obligations. Even if plans are for a merger, current assets such as IT or buildings may not transfer easily.
Conclusion – learn, plan ahead and prepare for costs
It would be sensible for everyone involved in Government to look through the Hearing Aid Council list and NAO report on Ofcom before they embark on a process of closure.
Better still, the Government should look to coordinate this process centrally so effort is not duplicated many times over. Clear guidance on all the issues faced should be provided. Most of all, government needs to ensure there is an absolute focus on continuity of service in critical areas.
Most of those undertaking this process will have no prior experience and it would be sensible to rationalise effort by managing more closures through central teams rather than through individual sponsorship teams.
In the meantime, any government department that has psychologically drawn a red line through budget figures for their threatened ALBs should go back and check it has added money to those budgets for the next two years to cover the unexpected costs of closure.
- Read our report on Arm's Length Bodies: Read Before Burning: how to increase the effectiveness and accountability of quangos
- The IFG Blog: When is an agency not an agency?
- Guardian Public article on the Hearing Aid Council's report: Lessons learned: the hard way