Most other countries have equivalents of the UK Government’s arm’s-length bodies – and have also found governance problematic. Contexts always differ which makes it difficult to assert that what works in one jurisdiction can be successfully exported to another. Nonetheless, there were some aspects of the way in which arm’s-length relations work elsewhere which looked
potentially applicable to the UK.
In some countries the arrangements are too different. In Sweden, for example, the equivalents of our arm’s-length bodies have a constitutional status that puts them on a par with departments as a unit of government.34 The decisions of agencies – which employ almost 50 times more people than their ‘parents’ – have a similar status as those made by a court of law, and the constitution protects their independence from government interference over any decision regarding the rights and responsibilities of particular citizens or organisations.35
For this report we looked at three potential learnings from countries who have bodies with a similar relationship to their government as the UK government has with its ALBs:
• enhanced accountability in New Zealand
• ministerial guidance in Canada
• new relationship principles in Wales
Finally, we also looked at whether any lessons could be drawn from the ‘commissioning’ model which the Government is keen to adopt for the provision of many public services.
1.Enhanced accountability in New Zealand
New Zealand has probably taken the new public management model further than any other country, with formal contracting processes between departments and their ministers. At the heart of New Zealand’s accountability arrangements is the system of ‘statements of intent’ (SOI).
These are statements of planned outputs by both departments and ALBs which are produced annually and presented to Parliament alongside the budget. They also look forward and identify potential strategic risks to the achievement of the organisation’s objectives. The headline statement of intent is underpinned by a more detailed output plan. The body is then held to account by the minister, the department, and Parliament for the achievement of the outputs to
34 Nikalsson in Government agencies: practices and lessons from 30 countries, Verhoest, Van Thiel, Bouckaert
and Laegrid eds. p.245 (2012)
35 Pollit, Talbot, Caulfield and Smullen, Agencies: how governments do things through semi-autonomous
39
which it has committed itself. This provides much sharper accountability than anything in the UK system and removes the risk of out-of-date memoranda of understanding, unplanned ALB evolution away from original intent and unchecked mission creep, as well as minimising perfunctory scrutiny and sign-off of business plans.
There is significant scope for ministerial input. The starting point for the statement of intent is a ‘letter of expectation’ sent by the minister to the ALB. There then follows a period of
negotiation, although the minister is limited on where he is able to give direction to the ALB by its statutory status. The New Zealand Treasury produces guidance on statements of intent – the key elements of that guidance are set out in Annex 2.
There are some drawbacks. One is fragmentation, with bodies focusing on delivering their own objectives rather than contributing more collaboratively to cross-government goals. A second is the lengthy ideal timetable set out by the Treasury, which runs to some seven months on an annual cycle. Third, we have been unable to find any systematic evaluation of the impact of the statement of intent process on the performance of New Zealand’s ALBs (crown entities). New Zealand is also not the UK, and so there may be dangers in over-extrapolating from a system which appears to work there. First, there is a much more contractual relationship between departments and ministers, which sets the context for departments having more formal contractual relationships with their crown entities. Second, New Zealand has a rigid taxonomy for crown entities which informs the nature of the relationship. Third, both the Treasury and the State Services Commission have much more powerful central roles in relation to both departmental and ALB performance than do our Treasury and Cabinet Office, and so they are able to set and enforce the operating framework.
2.Ministerial guidance in Canada
One of the things that is very notable in the UK is the lack of any formal guidance to ministers on their role vis-a-vis arm’s length bodies. The Ministerial Code and the Cabinet Manual are silent on ministers’ role and duties in respect of ALBs and simply refer them to individual framework documents. Ministers are given no training or induction and practice varies between departments, which matters since ministerial turnover between departments in the UK is so high.
In the early part of this century, Canada suffered a corruption scandal with its arm’s-length bodies, exposed by the Auditor General, which led to the establishment of an independent judge-led commission to look at ministerial relations with ALBs.36 The Gomery report
recommended that CEOs should be appointed by their boards and the boards themselves should appoint directors when new directors are required. Ministers, in short, should be removed from the appointments process.37 Alongside these developments which tried to prise ministers out of
36 This was the Gomery Commission, established February 2004. The first report was released 1 November
2005, with the second being published 1 February 2006, shortly after the Liberals suffered defeat in the federal election in part due to their alleged involvement in the Sponsorship scandal.
37 The new Conservative government passed the Federal Accountability Act in 2006, which incorporated some
– but not all – of Gomery’s recommendations. However, the government shelved the Act following
40
public appointments, the Privy Council Office (equivalent to the Cabinet Office here) produces explicit guidance to ministers on their role with what they call ‘portfolio’ bodies. This is
reproduced at Annex 3. This seems to be useful in giving ministers a more consistent starting point (although how many of them actually make it to Annex H of the document might be questionable).
3.Principles for relations with public bodies in Wales
One of the early acts of the new Welsh Assembly Government (WAG) after devolution was to bring a lot of functions which had been at arm’s length in-house (its own version of the public bodies bill). In 2010 it set up a review, led by officials in the Welsh Government, but working alongside ALB colleagues to draw up new operating principles for how the Welsh government would interact with its ALBs. The terms of reference spelt out the twin purpose of the review:
1. To develop appropriate governance structures and processes. These structures and processes should strike the right balance between control and allowing AGSBs (Assembly Government Sponsored Bodies) to operate independently on a day-to-day basis – as was the intention in setting up the bodies as arms length organisations.
2. To establish governing principles that engenders good working relationships between WAG and the AGSBs, with each partner enabling and supporting the other in the achievement of ministerial objectives. These relationships should be based on trust and open and honest communication to enable effective utilisation of the expertise of each organisation. The result of the review was a set of 10 governing principles to underpin relations with ALBs. These are reproduced in Annex 4.
The emphasis is very much on outcome management, board responsibility and strategic sponsorship, but with a right to intervene if there is poor performance. One particular point of emphasis is the status it gives to WGSB board members as “important figures in Welsh public life”. There is also a big emphasis in this document on the establishment of relationships based on trust – an issue that emerged very strongly in our interviews with chairs and chief executives.