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In-person event

The death of the Audit Commission and other improvement agencies

Event to mark the publication of a new study about how improvement agencies rise and fall.

Margaret Hodge MP, Chair of the Public Accounts Committee, on stage at the IfG in 2014.
Margaret Hodge, chair of the Public Accounts Committee argued that the abolition of the Audit Commission means the NAO is the only organisation responsible for following the taxpayer’s pound across all the different organisations where it is spent.

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  • Margaret Hodge MP, Chair of the Public Accounts Committee
  • Anna Walker, Chair of Office of Rail Regulation, former chief executive Healthcare Commission and deputy-director general for Oftel
  • Lord Warner, former Minister of State at the Department of Health
  • Nicholas Timmins, Senior Fellow, Institute for Government and former public policy editor of the Financial Times
  • Chaired by Tom Gash, Director of Research, Institute for Government.

This event marked the launch of Dying to Improve: The Demise of the Audit Commission and Other Improvement Agencies, a new study written by Nicholas Timmins and Tom Gash. It examines the demise of three improvement agencies and identifies important lessons as to how these organisations can be set up to succeed.  Introducing the event, Tom Gash, Director of Research at the Institute for Government, noted that these questions are especially important in the lead-up to the 2015 election, as changes of government often see the end of a few of these agencies, and perhaps the creation of a few more.

Nicholas Timmins said that the announcement of the closedown of the Audit Commission did not attract much comment or objection. He set out a number of reasons why, despite this silence, the passing of the Audit Commission is significant:

  • Oversight of local authority audits will be fragmented, with responsibility split between the NAO and other organisations.
  • The independence of audit will be lost. Auditors will no longer have the support and protection of an independent body behind them – this may make them more wary of criticising the local councils who have contracted them to perform audit.
  • Standardised data is essential to allow us to compare and contrast performance across local government bodies. The Audit Commission could compel standardisation of data, and had the skills to perform these comparisons.

Drawing on the study of the Audit Commission and other improvement agencies, such as the National Policing Improvement Agency and the NHS Modernisation Agency, he set out a number of lessons:

  • There is a need for clarity between ministers and agencies on the role of these organisations – are they responsible for inspection, standard-setting, monitoring improvement, or regulation?
  • Agencies should avoid mission creep – they should focus on their central role.  There is also a question about whether improvement agencies should confine their role to policing minimum standards, or should seek to encourage improvement more generally.
  • It’s worth thinking hard before taking the decision to abolish an agency completely.  Some of its functions may be no longer relevant, but its role can be reshaped and reformed to counteract this. The NPIA was scrapped but many of its functions have since be re-housed elsewhere, suggesting that it still had a valid role

Anna Walker offered a number of observations about how both government and improvement agencies can increase their chances of success:

  • Clarity of governance is important – independence from government can be valuable, but you need to think about how to achieve this
  • Continuing dialogue with ministers and the Civil Service is very important, in both good times and bad
  • Stability is vital: agencies can’t deliver improvement and regulation if they are working under a cloud of uncertainty about their future
  • Improvement agencies must explain to clients (both those they regulate and those they carry out regulation for, such as passengers and patients) what value they add. In doing so, this can force the agencies themselves to think about how they can add more value
  • Agencies should beware of mission creep, but be ready and able to adapt to new situations as required

Drawing on his experience of working with the Audit Commission as a minister, Lord Warner argued that even though improvement agencies can mushroom in size and remit and consume significant resources, they can also play an important role in providing independent policy assessment. There is a need for independent bodies like the Audit Commission who can undertake policy analysis and present challenging reports and recommendations to ministers. This is particularly important in the health and social care sector, which will continue to be one of the largest areas of government spending – delivering value for money here will be a continuing challenge for government.

Margaret Hodge added that with the abolition of the Audit Commission, the NAO becomes the only organisation responsible for following the taxpayer’s pound across all the different organisations where it is spent. The NAO was set up to look at government departments and large projects – it doesn’t fit the new landscape of smaller, fragmented public service provision. 

She suggested a number of additional challenges that relate to the efficient operation of improvement agencies:

  • Government is not good at taking criticism, and can attack bodies that don’t match government priorities
  • Government often gives improvement agencies too much to do – the Care Quality Commission was responsible for overseeing too wide a range of areas for it to carry out this role effectively
  • Agencies too often mushroom and expand, and when they do it often leads them into trouble
  • Regulators can be captured by the industry or sector they are designed to regulate. Part of this problem is the ‘incestuous’ nature of many of these areas – with only a finite number of people and positions, individuals often move from industry to regulator and back again, leading to professional capture

Questions from the audience covered a number of topics, including:

  • What can be done to discourage ministers from attempting unnecessary structural reforms of improvement agencies?
  • What can be done to prevent ‘mission creep’ of agencies?
  • What advice the panel would give Labour on their stated policy of closing down Ofgem?

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