Dan Lewis: We need a Gordon Ramsay approach to the quangocracy

Dan Lewis is Research Director of the Economic Research Council and co-author of the The Essential Guide to EU Quangos 2009, recently published by the ERC and Global Vision.

What I really admire about Gordon Ramsay is his formulaic approach to dealing with a failing restaurant. It goes - every time - something like this: recoil at the terrible food, shorten the menu, get fresh ingredients, upbraid the chef with attitude, bark at the slackers, redecorate with tasteful fittings and furniture, invite in local celebrities for a panicky relaunch night, followed by an easing of tension, commercial success and well-deserved praise all round for Chef Ramsay.

I’m sure we could have a similar systematic attempt at reforming the quangocracy – the low-hanging fruit of our oversized state. No question, there will be some very rich returns from doing this - not just to the taxpayer, but above all to the consumer of public services that they provide. So how could we do it?

The questions all quangos need to be independently annually assessed on are:

• Do they duplicate work already performed in the public sector?
• Can their function already be performed by an existing body?
• Are they crowding out private sector activity?
• Are they in receipt of uncontested government contracts?
• Can their functions be contracted out competitively to a private company?
• Can they be relocated to a much lower cost location?
• Can they be privatised?

And then the governance issues:

• What productivity gain did the Chief Executive make in order to gain an above inflation pay-rise, who approved it – or have they just obtained a rising share of a bigger budget?
• Is there anyone sitting on the board of an agency who is in receipt of grant or contract to an organisation of which they are part?

Both of these would be a breach of the Nolan principles (which some allege happens all too often) but anyhow, the UK today faces two quangocracies – a fast-growing one in Europe and a much bigger one at home.

Reforming the EU Quangocracy

In The Essential Guide to EU Quangos 2009, jointly produced with Global Vision, Glen Ruffle and I dared to ask many of those questions listed above of the European Unions’s 36 quangos.

And most of the time, the answer to a great deal of these questions was yes. Alongside this we also revealed how much of their budget tends to go on staff (a depressingly high figure of on average nearly 50%), what the top 10 budgets were, which bodies had their own tax-raising powers from the monopoly provision of fees, that Belgium and Spain have the most agencies, and more.

As I wrote in the Yorkshire Post last week, one can’t have much faith in the EU’s capacity to reform – even faced with the worst recession since the war, the EU will almost certainly continue this cost-blind trend of agency creation. And as I opined in the Sunday Telegraph, the EU still thinks it’s in the 1970s. Moreover, the IMF forecast which said that Britain was going to have the worst slump will almost certainly be wrong – it’s getting very nasty in Euroland. Thank goodness we’re going into a recession with a weak currency and a low interest rate, because export-led eurozone economies like Germany are going to fall off a cliff, with Ireland probably first. Our projection meanwhile is that EU agency creation will likely continue and there could be as many as 70 by 2026.

Reforming the British Quangocracy

So reforming the EU quangocracy will be difficult, but that is manifestly not true of Britain, which has a vastly bigger quangocracy - around 800 and with much bigger budgets to boot - and presents a more ready target for reform.

This reform is all the more urgent because yet again, spending on quangos has rocketed. According to the Cabinet Office’s own figures, government spending on the UK’s executive agencies rose by 12% from £30.8 billion in 2007 to £34.6 billion in just 1 year.

Along with posing those questions asked above, going forward, we should also look at doing the following:

1. Establishing how many formerly or currently politically active people are there on the board and to which party they belong. I’m not saying that they would necessarily put party above country – but full disclosure is vital to the restoration of confidence in the political neutrality of quangos;
2. Establishing how many quangocrats are entitled to a Civil Service pension (probably a lot more than commonly realised) – although they are not Civil Servants - and make no longer available that offer going forward;
3. Implement compulsory google ads on all quango websites (tens of millions of pages) – an idea that Lord Forsyth kindly attributed to me in a Lords debate a year ago - and compulsory google books accounts for all their publications. All resultant income to be ring-fenced for repaying the national debt in perpetuity;
4. Full disclosure and ranking for each quango of website expenditure and the consequent number of impressions and visitors and downloads (suspect quite a few scandals here - government websites tend to be very expensive and ineffective, there may be some successes too, let’s find out!)
5. Automatic Parliamentary Accountability Hearings for any quango that has an above inflationary increase in the budget or in the salary of the Chief Executive – to be public meetings with the press invited;
6. Annual disclosure of each quango’s “cost per desk” to be ranked against all others.

Meanwhile, this Government has almost given up keeping track of the quangos. Is this symptomatic of how it has lost control of the public finances or has it taken the view that to do so is too embarrassing?

The latter would hardly be surprising since when the then Chancellor Gordon Brown promised a bonfire of the quangos back in 2005, all we got was a small conflagration of twigs, quickly extinguished by the activities of his fellow ministers - particularly Ruth Kelly - and his subsequent premiership. 

So how has this Government, which introduced the Freedom of Information Act, retreated from making quango information available to the public?

1. In 2004, the last annual hard copy directory of Quangos was physically published.
2. In 2005, this was downgraded to a pdf.
3. In 2006, the online database of which gave crude year on year figures was “discontinued”.
4. In 2006 the Government Financial Reporting Manual changed the accounting rules so that government spending on quangos or “grant-in-aid” is reclassified as a financing transaction rather than income. That made comparing year-on-year figures very difficult between financial years 2005/06 and 2006/07 and is part of the reason why the Cabinet Office chose not to do so the following year.
5. In 2007, the Public Bodies Team – the outfit responsible for keeping track of quangos – was disbanded without replacement. So consequently...
6. In 2008, the annual public bodies report for 2006/2007 was scaled back to a mere 30 or so pages from the more usual 400. Expenditure figures were only given for one quarter of the bodies, along with no individual data on any of the quangos as per previous years – data which we showed in our online quangos database for 1998-2006 – see here.

In 2006, the combined budgets of the quangocracy amounted to £167 bilion – well over 10% of GDP. And while £112 billion of this was on the sacred NHS, there are plenty of other vast efficiencies still to be exploited by a centre-right administration. Let there be no doubt, quangos present a tremendous reform opportunity for a future Conservative Government, should it be elected in 2010.

That’s why I hope very much that David Cameron, soon after taking office, orders that the Cabinet Office quickly restore a full annual quangos report in a clear and accountable break from the past.