The budget and review cycle for Quangos

Ministerial supervision of big bodies like the Environment Agency, Network Rail, and some Housing quangos is essential. Ministers are the only protector of the taxpayer and the consumer interest. As the government supplies much of their revenue as subsidy and much of their capital directly or with guarantees of borrowing Ministers can and should take an active interest in the performance of management. The managers of many of these bodies are paid well above the senior salary norm in the public sector. This is presumably because they are expected to perform better. In order to get any value for these much enhanced salaries it is vital the Minister as the taxpayer representative sets demanding targets and only approves high pay if performance is good enough.In the end in many cases the Minister hires and fires the CEOs and Chairmen, so has every reason to take a close interest in what they do.

I suggest the following major events in an annual review cycle with the Chairmen and CEOs of these bodies:

1. Approval of budget sums for the following year – consideration of past performance and bids for extra cash
2. Review of annual figures for year just completed, including full performance review against targets and value for money review of money spent
3. Corporate plan and forecast meeting to discuss what the state will be buying with the money approved for the following year, and target revision for that year
4. Mid year review if needed by either side. Government might want a mid year review if management figures are unsatisfactory, if there are customer and public service issues etc. Quango may want review if it cannot hit target, if it needs more cash etc

The extent to which the Minister needs to be hands on will depend on a number of matters. If the quango has a history of missed targets and poor customer performance the reviews need to be detailed and regular. If the Quango has a good track record at performance the reviews can be more relaxed but there should still be the minimum regular annual cycle. Saying thank you when they have done well is as important as demanding change when they have done badly. There will need to be more contact and special meetings if something the Quango is doing achieves high public salience, or if performance nose dives.

The aim should be to build a good relationship with the Minister as a kind of supportive shareholder. Unlike a shareholder, however, the Minister also has to directly represent the consumer interest. As many of these Quangos and businesses have strong monopoly characteristics the Minister has to keep prices down and standards up, as there is often no effective market to do that for him.

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31 Comments

  1. Nig l
    Posted July 22, 2017 at 5:30 am | Permalink

    Half yearly review and the way you put it I have a doubt whether that is the norm? I would expect more often than that with my big budget holders. Minimum Is a robust exception reporting system together reasons and action plan. Somehow I feel this doesn’t happen. Seems to me that you are trying to shake up the business of HMG. The need for these comments in a PLC would be non existent. No wonder so many projects leak/money is wasted.

    Every one of these Quangos should publish a quarterly performance update and an annual re report like a FTSE top 100 company.

    • Hope
      Posted July 22, 2017 at 10:39 am | Permalink

      Your proposal JR fails at the first hurdle, seven years in office shows that your ministers have not got a grip on the most important briefs, namely our safety and security. May and Rudd have failed. When can we expect changes? Criminals and terrorists literally allowed to walk in and out without question. Border Agency that cannot do its job, military starved of cash, left wing judicial system a complete mess, breeding ground for gang culture in prison, wasteful PFI still starving the services from being able to operate properly.

      You need to assess from a zero basis what use quangos are to add value, not bean counting or to implement EU directive and regulation by the back door. Second change selection procedures, quangos are left wing breeding grounds who only serve themselves or put themseleves before the service provided. For example, BBC. If the remuneration is as good as the private sector no need for it as a public broadcaster. It is way beyond its remit. No need for a TV tax in his day and age.

      Stop taxing us twice or three times for the same service. We do notice. Local authorities need radical overhaul. They ar not fit for purpose. Like the BBC full of left wing employees who put themselves first second and third before providing a service. The same for NHS managers, lots of tiers, lots of unnecessary bean counting jobs. Too few doctors and nurses.

      Today we read Hammond gets his way to have continued freedom of movement and an undefined transitional period lasting years! We did not vote for this how many more chances does May and her remaining cabinet want to change our minds? Why would May listen to the failed Cameron? He a achieved none of his key issues in office.

  2. Mark B
    Posted July 22, 2017 at 6:21 am | Permalink

    Good morning.

    The reasons why QUANGOS exist is because :

    a) they reduce government and ministerial accountability.

    b) provide well paid jobs for ‘friends’.

    c) allow the EU to control our country (eg the Environment Agency) bypassing national governments

    d) remove democratic oversight.

    We never had QUANGOS during the days of Empire or a Civil Service as large.

    • Hope
      Posted July 22, 2017 at 10:45 am | Permalink

      Cameron told us none of them should earn more than he PM. When is this going to start? Did the ministers miss the point when in charge of their briefs?

    • John S
      Posted July 22, 2017 at 10:49 am | Permalink

      I couldn’t agree more. Well said! It seems to me that many ministers are too bone idle to oversee these quangos.

    • Mitchel
      Posted July 22, 2017 at 12:39 pm | Permalink

      Stalin,at the 16th Congress of the Communist Party in 1930,told the assembly:-

      “We stand for the withering away of the state.At the same time we stand for the strengthening of the strongest state power that has ever existed.Is that “contradictory”?Yes,it is contradictory.But this contradiction fully reflects Marx’s dialectics.”

      At least Stalin was honest,unlike the “small state” Tories.

    • Lifelogic
      Posted July 22, 2017 at 1:04 pm | Permalink

      Exactly they also provide lots of pressure groups, always demanding ever more government and government regulation (and thus ever more taxation) almost everywhere.

  3. percy openshaw
    Posted July 22, 2017 at 6:32 am | Permalink

    Should we not review all the quangos and decide whether or not they are needed? The Environment Agency, with its bigoted opposition to dredging, did much to make the flooding of 2014 much, much worse. The Charity Commission, clearly dominated at the time by Labour interests, tried to make as much mischief as possible for private schools. None of these bodies is accountable; all of them have too much power and their personnel are massively over paid. It is time to restore their functions to various departments of state – which themselves should be slimmed down – and abolish either all or most of them.

  4. alan jutson
    Posted July 22, 2017 at 6:32 am | Permalink

    Perhaps we could stop paying bonuses to those who spend the foreign aid budget dreaming up extra ways to spend our money at the last minute just to satisfy budget spend.

    Indeed time to revisit foreign aid completely, as it seems to be completely out of control when so much help is needed by so many at home.

    • Hope
      Posted July 22, 2017 at 10:42 am | Permalink

      Three thousand more employed to waste our money at a cost of over six million pounds, before pensions and other employer costs!

  5. Bryan Harris
    Posted July 22, 2017 at 6:33 am | Permalink

    You mean that ministers should have a professional approach to managing these service quangos – Can’t but agree.

    An addition to your four points, I would include ‘5. Proof that the the quango is cost effective in that it provides services at well below the costs when managed by government directly’.

  6. Iain Gill
    Posted July 22, 2017 at 6:35 am | Permalink

    Ministers should focus on handing over as much buying power, and decision making, to individual citizens and consumers, rather than imagining that central control, even with the best central team possible, can ever do as well as thousands of individual choices in citizens hands can.

    Hence real buying power in the relationship with schools should be in the hands of parents, real buying power in the relationship with healthcare vendors should be in the hands of patients, real buying power in the relationship with landlords should be in the hands of state subsidised tenants, and so on.

  7. eeyore
    Posted July 22, 2017 at 6:44 am | Permalink

    An excellent post – but what can we poor bloody infantry do about it? This is properly addressed to the only person in Britain who can instruct Ministers in their duty, the Prime Minister. No doubt she will read it carefully.

    Read in conjunction with yesterday’s post, should we suspect that Ministers in this Conservative government have abandoned supervision of their departments’ budgets?

    Forty years ago Sir Humphrey Appleby advised Jim Hacker that a minister’s job was to secure departmental funding in Cabinet and to represent the department in public. Nothing else. Has Sir Humphrey won?

    Reply I am encouraging Cabinet office and Treasury to develop their work on productivity, quality and performance review and harness departmental Ministers to help

    • Lifelogic
      Posted July 22, 2017 at 12:47 pm | Permalink

      Indeed an excellent post. But do not expect anything sensible for worker on boards, gender pay reporting, the Taylor review of working practices, HS2, the absurd greencrap subsidies and Hinkley C enthusiast T May. She is just another daft socialist too.

      As JR says:- “Ministers are the only protector of the taxpayer and the consumer interest”. Alas so many Ministers do nothing of the sort. They either just act as PR people selling their department’s bureaucrats daft line or they are “persuaded” by rent seeking presssure groups of by MP acting as paid “consultants” or other vested interests to do the complete opposite.

      So the taxpayer and consumers are just robbed. Look at the greencrap, farming, many “charities”, the energy sector, trains , the appalling NHS almost anywhere for proof of this. Look at the absurd HIP packs which were (nearly) scrapped than goodness.

    • Lifelogic
      Posted July 22, 2017 at 12:55 pm | Permalink

      Sir Humphrey Appleby advised Jim Hacker that a minister’s job was to secure departmental funding in Cabinet and to represent the department in public.

      That is exactly what they do. Though very often they do far worse than this. Perhaps by pandering (paying off) vested interests and rent seekers. Perhaps under pressure from MPs acting as paid “consultants” or perhaps to help party coffers or to keep their personal post ministerial job prospects open.

      You can rarely be too cynical in relation to politics. Even I would not have thought someone would have said, in the aftermath 9/11, “a good day to bury bad news”.

  8. Ian Wragg
    Posted July 22, 2017 at 7:30 am | Permalink

    Bonfire of Quangos. Target date please.

  9. agricola
    Posted July 22, 2017 at 7:32 am | Permalink

    Why cannot ministers supervise the subject of their ministry, rather than have quangos as a responsibility cut out. To be fair many of the quangos were more answerable to the EU than a minister, environment for instance. Ministers could then control private contractors who can be got rid of on poor performance.

    There is a very good cost and efficiency argument for privatising the whole of the public sector from the NHS down. You might then get a realisation that Joe Public are customers, not an imposition on the way you run things. Customers can switch allegiance as any private business knows. Keeping customers happy is paramount to success. The minister would then be in place to ensure that it happened. The real plus would be a vast reduction in the state sector, which at present I would rate as unsustainable.

  10. Sakara Gold
    Posted July 22, 2017 at 7:39 am | Permalink

    Maybe we should include an annual review of whether the quango is actually necessary, as well as whether the taxpayer is getting value for money. There are literally hundreds of obscure quangos staffed by people completely unqualified to offer any technical input to their discussions, but who are known to be a safe pair of hands.

    I dispute the need for about 90% of the quangos that taxpayers currently pay for. The country could save billions if they were culled and their functions either returned directly to government and thus made more accountable, or staffed and operated by the private sector

  11. Epikouros
    Posted July 22, 2017 at 7:57 am | Permalink

    If Quangos were in the private sector subject to the same conditions of operation then yes your suggestions would be appropriate. They are in the public sector so different rules of behaviour apply so although your suggestions would improve them it would only be marginal and short lived. Government and the public sector suffer the handicap of being at the mercy of every vested interest except the one and the only one that matters. The consumer. It can be argued that voters are a major vested interest and are also consumers.

    However voters have this capacity to hold two completely opposite views at the same time and believe them to be compatible. Being that government and the public sector are omnipotent, omniscient and benign and at the same time decry the poor quality of governance and services they offer and the authoritarian manner by which they rule us and extract from us the resources they need to do so. Put simply the voter in us wants more government and public sector whilst the consumer in us wants none of it.

  12. Dave Andrews
    Posted July 22, 2017 at 8:19 am | Permalink

    Perhaps what is needed is a rule that any MP wishing to become a minister must be suitably qualified. An MBA springs to mind, or a degree in business management. Otherwise, new MPs without suitable experience could attend suitable courses and only be eligible for a ministerial position once they pass the standard.

    • Lifelogic
      Posted July 22, 2017 at 7:45 pm | Permalink

      Any person seeking to be an MP has already indicated, by this choice, that he/she is very likely to be totally unsuitable. Perhaps 20%, at best, are sound, honest, sufficiently intelligent, honourable and genuinely trying to do their best for the voters.

      The rest are at best career politicians more likely far worse – essentially rent/power seeking crooks or “consultants” in most peoples eyes.

      People who would sell their country and democracy to the EU for a good EU job offer or a tax advantaged salary, pension or large “consultancy” fee.

  13. The PrangWizard
    Posted July 22, 2017 at 8:42 am | Permalink

    I take it that as these comments are being made, the oversight and direction suggested is not being done. I ran budgets and it is dereliction on the part of Ministers if they just let things run without supervision.

    Some ‘department’ expenditures, because of the nature of the operation run routinely, but still need to be looked at just as regularly as those that don’t. Otherwise the people feel they are not being appreciated.

    Regular appraisals are essential, and frequent contact. It does require a lot of hard work, by Ministers in this case though, because they needs to know the patch in detail. Frequent reshuffles prevent this from happening. And does the civil service stand in their way?

  14. Bert Young
    Posted July 22, 2017 at 9:37 am | Permalink

    Johns’ comments show that he knows his finances ; I support his suggested approach . My only further reservation is the time scale of forward strategy . Whatever happens in the short term should never be a surprise if forward planning is a current practice in any business . Most organisations use a 5-7 year period of planning as a norm .

  15. Andy Marlot
    Posted July 22, 2017 at 9:52 am | Permalink

    “Ministers are the only protector of the taxpayer and the consumer interest.”
    Really? Since when has any minister or government as a whole had our interests at heart? Vested interests with lots of money rule this country, Quangos simply make the job of covering up the wholesale theft that much easier. The bigger the organisation the bigger the crimes.

  16. Cynic
    Posted July 22, 2017 at 10:11 am | Permalink

    It is questionable as to how many Ministers are capable of performing these tasks.

    • Lifelogic
      Posted July 22, 2017 at 7:56 pm | Permalink

      Especially with T May much of the talent – Lilley, JR, Reece-Mogg, Cash, Patterson … are all ignored. Perhaps they are not diverse enough. Ability and being proved right in politics rarely wins any advantage.

      Kwasi Kwarteng is sound and “diverse”. He would surely make a far better chancellor than the dire, tax ’til the pip squeak, Philip Hammond.

  17. ian
    Posted July 22, 2017 at 10:19 am | Permalink

    These people more than likely account for a lot of the air flight traffic each year, with there corporate mates to holiday abroad, and read & file their reports from the beach. In fact they spend so much time overseas they might have their wages paid into a offshore bank account as they are only hear two day a month for meeting, which last a few hours, and then back to the airport, which would not count as a full day for tax liability. Now if they had to work in a office from 9 to 5 with 8 weeks holiday a year you might have more control, but as they can do as they like, i do not think so.

  18. Pragmatist
    Posted July 22, 2017 at 10:21 am | Permalink

    “The budget and review cycle for Quangos”
    I shall have to take your word on these matters JR. The ins and outs are a mystery to me. Certainly not within my experience even as an onlooker: I depend on the media.
    Our media usually find an unknown professor to interview on such matters. With Hansard not providing accurate verbatim reports of MP-matters discussed in the House , it is difficult if not imposible to know what is ostensibly going on.

  19. Posted July 22, 2017 at 11:18 am | Permalink

    The first thing everybody should do is before any of them meet up is educate themselves on how should business be taxed so that business will make its greatest contribution to the common good?

    Beardsley Ruml, the Chairman of the Federal Reserve Bank of New York in 1946 told it as it is and 6 other Chairman since have told the public how the system actually works since we have left the gold standard.

    Yet. most governments since still don’t understand it.

    Here’s Beardsley’s speech at the American bar association.

    http://home.hiwaay.net/~becraft/RUMLTAXES.html

  20. Turboterrier.
    Posted July 22, 2017 at 9:50 pm | Permalink

    Surely the way to totally focus the minds of the Quangos and improve efficiency and performance for the minister and the country would be to issue new employment contracts with salary based upon Payment by Results. That will drag them kicking and screaming into the real world which the majority of your readers live in

  21. RDM
    Posted July 24, 2017 at 7:16 pm | Permalink

    The Welsh Assembly quango!

    (AKA Labours talking shop).

    Please review?

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    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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