Public bodies are subject to scrutiny by their boards, other government departments and agencies, ministers and parliament. This explainer describes how public bodies are scrutinised and held accountable for performance, as well as how they can be directed by ministers.
How is performance scrutinised?
Public bodies are held to account by their boards. All public bodies have a board, which is usually chaired by a non-executive member with extensive board experience. Boards will set the strategic direction and risk appetite of the body, make decisions on individual risks, and scrutinise executives’ decision making. 61 HM Treasury, Managing Public Money, Gov.uk, last updated 4 March 2022, www.gov.uk/government/publications/managing-public-money, pp. 22-23. A body’s audit and risk assurance committee (ARAC) is responsible for assuring the board as to the standard of governance and risk management within it. 62 HM Treasury, Audit risk and assurance committee handbook, Gov.uk, March 2016, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/512760/PU1934_Audit_committee_handbook.pdf Some executive agencies that are more closely aligned with their sponsor department may have a purely executive board, without non-executive members or their own ARAC, in which case the ARAC of the sponsor department will provide this assurance for them. 63 Cabinet Office, Executive agencies: a guide for departments, Gov.uk, 15 March 2018, www.gov.uk/government/publications/executive-agencies-characteristics-and-governance, p. 6.
A successful body must also retain the confidence of its ministers. Ministers scrutinise the performance of the public bodies in their portfolios through meetings with the chair and chief executive, and are supported in this work by the sponsor team in the department. This is the team of civil servants who manage the department’s relationship with a body, including monitoring its performance and keeping their minister and permanent secretary informed about how well it is delivering its objectives. Sponsor teams have specific duties to ensure bodies have adequate audit and risk control arrangements, and business continuity plans. 64 Cabinet Office, Introduction to sponsorship: induction pack for new sponsors of arm's length bodies, GOV.UK, 15 April 2014, www.gov.uk/government/publications/new-sponsors-of-arms-length-bodies, p. 18. In addition, departmental boards in sponsor departments are expected to include scrutiny of public body performance as part of their regular agenda. 65 HM Treasury and Cabinet Office, Corporate governance in central government departments: code of good practice, Gov.uk, April 2017, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/609903/PU2077_code_of_practice_2017.pdf, p. 27.
UK Government Investments (UKGI), the government’s ‘centre of excellence in corporate finance and corporate governance’, can at departments’ discretion perform the shareholder function for complex or commercial bodies on a department’s behalf. 66 HM Treasury, Framework document templates, Gov.uk, July 2022, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1060585/Framework_Documents_Guidance.pdf, p. 3. It currently plays this role for 23 bodies, including Channel 4 and Network Rail. 67 UKGI, UK Government Investments Annual Report and Accounts 2021-22, Gov.uk, 21 July 2022, retrieved 24 November 2022, www.gov.uk/government/publications/uk-government-investments-annual-report-and-accounts-2021-22/uk-government-investments-annual-report-and-accounts-… In these cases, UKGI will carry out many of the performance scrutiny functions that would otherwise have fallen to the department.
Overall performance and governance arrangements are reviewed on a regular basis in line with Cabinet Office guidance. 68 Cabinet Office, ‘Guidance on the undertaking of Reviews of Public Bodies’, Gov.uk, 26 April 2022, www.gov.uk/government/publications/public-bodies-review-programme/guidance-on-the-undertaking-of-reviews-of-public-bodies These reviews can result in bodies being merged or abolished, especially if they take place in the context of a wider public bodies reform programme. While most reviews only look at an individual body, the Cabinet Office also sometimes conducts ‘functional reviews’ looking at multiple similar bodies at once, which often aim to make bodies collaborate or share good practice better. 69 Armstrong H and Smith C, Public Bodies, House of Commons Library, 19 January 2021, https://researchbriefings.files.parliament.uk/documents/CBP-8376/CBP-8376.pdf, p. 18.
Like government departments, public bodies are also subject to scrutiny by the Comptroller and Auditor General (C&AG), who is the head of the National Audit Office (NAO). The C&AG chooses when to carry out value-for-money audits as part of their work programme, reporting to parliament on their findings. 70 NAO, Governance and transparency, NAO, [no date], retrieved 13 September 2022, www.nao.org.uk/about-us/governance/
Public bodies are subject to the general expectations of transparency in the public sector including, for example, freedom of information requests (although they should liaise with their sponsoring departments in advance of any disclosures that may affect them). Public bodies are required to publish annual reports and accounts, and also encouraged to hold public board meetings at least annually. 71 Cabinet Office, Public Bodies: A Guide for Departments: Chapter 8: Policy – Openness and Accountability, June 2006, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1107400/Public_Bodies_-_a_guide_for_departments_-_cha…, pp. 3-4. If public bodies are incorporated, then the relevant disclosures required in corporate governance legislation will also apply.
How are public bodies accountable to parliament?
Ministers are ultimately accountable for what happens throughout government, including in public bodies. As the ministerial code states, ministers “have a duty to Parliament to account, and be held to account, for the policies, decisions and actions of their departments and agencies.” 72 Cabinet Office, Ministerial Code, Gov.uk, last updated 27 May 2022, retrieved 28 November 2022, www.gov.uk/government/publications/ministerial-code The public body’s chair is responsible to the minister for ensuring that the actions of the body support the minister’s aims. 73 Cabinet Office, Introduction to sponsorship: induction pack for new sponsors of arm's length bodies, Gov.uk, 15 April 2014, www.gov.uk/government/publications/new-sponsors-of-arms-length-bodies, p. 11.
While ministers must account to parliament for the performance and “overall effectiveness and efficiency” of the public body, 74 Cabinet Office, Public Bodies: A Guide for Departments: Chapter 2: Policy and characteristics of a Public Body, June 2006, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/690946/Public_Bodies_-_a_guide_for_departments_-_chap…, p. 4. the principal accounting officer (departmental permanent secretary) is accountable for the management of public money delegated to the department, including spending by its public bodies. 75 Cabinet Office, ‘Arm's length body sponsorship code of good practice’, Gov.uk, 23 May 2022, www.gov.uk/government/publications/arms-length-body-sponsorship-code-of-good-practice/arms-length-body-sponsorship-code-of-good-practice However, while the ultimate responsibility lies with those in the sponsor department, public body leaders can still be called to account to parliament – usually the relevant select committee – for their decisions, 76 HM Treasury, The Accounting Officer’s Survival Guide , Gov.uk, December 2015, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/486677/AOs_survival_guide__Dec_2015_.pdf, p. 2. and are “personally responsible and accountable to Parliament for the use of public money”. 77 HM Treasury, Accounting Officer Appointment Letter: NDPB and Executive Agency Template, Gov.uk, last updated 17 May 2022, retrieved 28 November 2022, www.gov.uk/government/publications/accounting-officers-appointed-by-hm-treasury-july-2013, p. 1.
Non-ministerial departments (NMDs) represent an exception in that they don’t answer directly to a minister, although each has a ministerial department which maintains a ‘watching brief’ so their minister can answer for its business in parliament. 78 HM Treasury, Managing Public Money, Gov.uk, last updated 4 March 2022, www.gov.uk/government/publications/managing-public-money, p. 53. As a result, official accountability for what happens in NMDs is unclear. Partly because of this weak parliamentary accountability, the Institute has previously recommended that the government avoid setting up new NMDs.
How can ministers direct a public body to do something?
Ministers can ask a public body to do something through regular objective-setting or by asking its leadership to perform a specific task, subject to any operational independence set out in the body’s framework document. Often there will be an iterative process of discussion and advice, with an aim of achieving agreement on a course of action.
If the accounting officer of a body believes what they are being asked to do is improper, irregular, infeasible or doesn’t achieve value for money, they can request a ministerial direction. This is a formal instruction from a minister, via the departmental permanent secretary, telling the body to proceed despite an objection from their accounting officer. Any request for a ministerial direction should be discussed with the Treasury in advance and must be promptly disclosed to the public unless confidentiality is required. 79 HM Treasury, Managing Public Money, Gov.uk, last updated 4 March 2022, www.gov.uk/government/publications/managing-public-money, p. 19. Civil servants can give directions on the minister’s behalf, without reference to the minister, according to what is known as the Carltona principle – although a recent legal judgement has suggested limits to this. 80 Stanley M, Civil Servants, Ministers and Parliament, [no date], www.civilservant.org.uk/publications/Civil_Servants,_Ministers_and_Parliament/CSMP1-Contents_Background_History_Further_Reading.pdf, pp. 12-13.