13 April 2017

Arm’s-length bodies exist to limit the politics in regulation and public services. But Susanna Smith, from the Public Chairs’ Forum (PCF) and Association of Chief Executives (ACE), shows how this can create tension between the people who run these bodies and the people who run the country.

The PCF, ACE, and Institute for Government (IfG) are reviewing the relationship between departments and arm’s-length bodies (ALBs). There are around 450 public bodies that spend almost £200 billion a year and employ a quarter of a million staff. How well these bodies work with Whitehall departments has a big impact on the effectiveness of government.

The balance between the Secretary of State’s accountability to Parliament for their department and the ALB head’s duty to deliver a service at arm’s length is challenging to get right: ministers know ALBs are autonomous for good reason, but they also know it’s their neck on the line in the press and in Parliament if something goes wrong.

In February the Cabinet Office published a new Code of Good Practice which sets a clearer framework for how departments and ALBs can form an ‘effective partnership’. The code follows recommendations from the National Audit Office and the Public Accounts Committee.

Former ministers, interviewed for the IfG’s Ministers Reflect series, provide interesting insights into their relationship with ALBs.

Code of Good Practice, principle 1: Purpose

“Partnerships work well when the purpose, objectives and roles of ALBs are mutually understood; reviewed on a regular basis; and clearly set out in relevant documents”

ALBs operate at a distance to deliver important services. While ministers must monitor ALBs to ensure they are working effectively, it is essential that ALBs are granted the appropriate level of autonomy from Whitehall to fulfil their purpose. John Penrose, former junior minister at the Department for Culture, Media and Sport, stresses the importance of “clear parameters, clear accountability and not meddling in the day-to-day… [of] what you hired them to do.”

Code of Good Practice, principle 2: Assurance 

“Partnerships work well when departments adopt a proportionate approach to assurance, based on arm’s-length bodies’ purpose and mutual understanding of risk”

ALB heads need to know when to involve their minister on issues and to provide regular assurance to departments that high standards are being maintained. Former Chancellor Alistair Darling offers a good example of this. He describes HM Revenue & Customsas playing an important function in “keeping ministers away from collecting people’s taxes”, but criticises the organisation for not informing him of the loss of customers’ personal data in 2007 for three weeks: the lost tax discs escalated into a major news story, for which Darling was held accountable in Parliament.

The CEO’s responsibility to provide regular assurance is important in generating confidence in the capability of an ALB to deliver its service without departmental interference. Penrose recognises that “if you’ve got good talented people running these organisations, you’re mad if you don’t give them space.” However, he adds a cautionary note: “if you have somebody who you have less confidence in… you can’t let them get on with it.”

Code of Good Practice, principle 3: Value

“Partnerships work well when departments and arm’s-length bodies share skills and experience in order to enhance their impact and deliver more effectively”

Francis Maude, former Minister for the Cabinet Office, describes how rapid rotation of civil servants is “damaging” and “totally random,” leading to a loss of deep knowledge and expertise. ALBs can provide continuity and expertise. For example, during the Fukushima Daiichi nuclear disaster, the Secretary of State for Energy and Climate Change, Chris Huhne, wanted someone “with the right scientific skills to review the crisis” and called on the head of the Office for Nuclear Regulation.     

The code also encourages departments to draw on the expertise of their ALBs in developing policy. This has proved challenging for some PCF and ACE members in the past.On the other hand, former Minister for Care and Support Alistair Burt found drawing upon this expertise difficult due to the high levels of autonomy granted to the NHS.

Code of Good Practice, principle 4: Engagement

“Partnerships work well when departments and ALBs are open, honest, constructive and based on trust”

Previous research by the PCF and IfG found trust and mutual respect central to an effective relationship. Regular engagement is an important aspect of building trust. Reflecting on his time overseeing the Serious Fraud Office and Crown Prosecution Service, Edward Garnier, former Solicitor General, highlighted that “in order to superintend, we had to know what they were doing”, which they achieved through regular meetings.

In the run up to the 2012 Olympics, Hugh Robertson, then Minister for Sport and the Olympics, also engaged directly with the heads of his sport bodies in a monthly working group. Likewise, former Housing Minister John Healey “set up a direct working relationship with the CEO of the Homes and Communities Agency” as a way to combat “some of the inbuilt delays and inflections that you sometimes see in a system of government.”

Next steps

While there are positive examples of where these principles have already been adopted, the new Code of Good Practice presents an opportunity to redefine the relationship between departments and ALBs. We will publish our first report on this work in June 2017.