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David Cameron: People Power - Reforming Quangos

Six weeks ago at the Open University I set out our response to the crisis of trust in politics, a crisis that was triggered by MPs' expenses, but is also caused by a deeper sense of frustration, a frustration that too often, people don't feel they have enough - or even any - control over the things that matter to them, and the things that affect their daily lives.

So we plan to change that with a sweeping and radical redistribution of power. 

From the state to citizens; from the government to parliament; from Whitehall to communities.

From Brussels to Britain; from judges to the people; from bureaucracy to democracy.

Through decentralisation, transparency and accountability we will take power away from the political elite and hand it to the man and woman in the street.  That is how we will help fix our broken politics and drag our democracy into the post-bureaucratic age. 

In that speech six weeks ago, I made a number of commitments, including:

  • Local control over schools, housing and policing.
  • The right to initiate local referendums.
  • Open primaries for parliamentary candidates.
  • Curbing the power of the whips in Parliament and the spin doctors in government.
  • Fewer MPs.
  • And transparency about our political process becoming the norm, not the exception.

In the weeks since that speech, I have been outlining these proposals in more detail.

Two weeks ago, I explained how we will reduce the state's control over the citizen - for example by scrapping ID cards and protecting the right to trial by jury and how we will increase the citizen's control over the state - for example by putting government information on schools and hospitals directly into people's hands.

Last week, I set out plans to bring greater transparency and accountability to local government, by requiring councils to publish all their data in a standardised and open format.

Today, I want to focus on one of the most important aspects of this whole debate about where power and accountability should lie in our democracy.  I want to set out the principles we will use to determine our approach to non-departmental government bodies - or quangos.

<h2>QUANGOS</h2>

The modern British state has developed into a complex entity as different governments have tried to achieve different aims. Over centuries, ministers assumed responsibility for state functions that hadn't been delivered before. But ministers didn't always trust the existing machinery of government to deliver these new functions. So more often than not, they asked someone else to do it by setting up a new institution separate to the existing machinery of government - a non-departmental government body, or quango.

Sometimes these quangos were established as whole industries, to provide a service directly: that's how the General Post Office was formed after the Restoration in 1660. Other times, they were designed to distribute money: that's how the University Grants Committee - now the Higher Education Funding Council for England - and the Arts Council were set up.  And at other times still, and particularly in the post-war twentieth century, quangos were formed as part of the attempt to co-ordinate economic activity.

So the Electricity Council was set up to represent the power industry to government, and government to the power industry and the National Economic Development Council was set up to co-ordinate economic development between the government, the CBI and the TUC.

This situation did not break down until the 1980s, when Margaret Thatcher steadily stopped government from trying to run large parts of the British economy and transferred nationalised industries into private hands.

As a result, there was simply no need for many of the organisations that had been set up over time by ministers, especially those set up as industries to deliver services, and those set up to co-ordinate nationalised industries.

But while the number of quangos in these areas decreased, the pressure for them in other areas actually rose. For a start, the newly privatised industries needed proper regulation - so organisations like OFTEL, the telecommunications watchdog, were born. And the drive for greater public sector efficiency led to the creation of Next Steps Agencies, like the Prisons Service, which were new quangos established to implement government policy.

As a consequence of these various historical factors, there are now at least 790 quangos in our country. In fact, some estimates suggest there could actually be more than 1,100 unelected organisations in our country paid for by the taxpayer to carry out aspects of government policy.  The influence of quangos can be seen in almost every part of our life.

They determine what we can watch on TV and online. They control what our children are taught in school. They tell us what medicines we can take, and what treatments we can receive. The growth in the number of quangos, and in the scope of their influence, raises important questions for our democracy and politics.

Questions of accountability - now vital in the light of the damaged trust in our political system.

Questions about public spending control - now vital in the light of the debt crisis.

And questions about sheer effectiveness - increasingly urgent as people see their taxes going up, but the quality of their lives going down. Let me examine each of these areas in turn.

<h2>ACCOUNTABILITY</h2>

First, accountability.

In a healthy democracy, the contract with the voters is simple. I voted you in.  You're responsible for what happens. If things go wrong, I'm going to make you answer for it. And if I don't like the answer, I'm going to vote you out. That is what accountability means.

The problem today is that too much of what government does is actually done by people that no-one can vote out, by organisations that feel no pressure to answer for what happens and in a way that is relatively unaccountable.

This is a big part of the reason why people feel so powerless in Britain today. They don't have enough opportunity to shape the world around them. And it leads to the anger, suspicion and cynicism that I described in my Open University speech.

I'm convinced that the growth of the quango state is one of the main reasons so many people feel that nothing ever changes; nothing will ever get done and that government's automatic response to any problem is to pass the buck and send people from pillar to post until they just give up in exasperated fury.

College principals at the end of their tether with the Learning and Skills Council.  Farmers driven mad by the Rural Payments Agency.  Independent bookmakers raging at the Gambling Commission and a massive hike in fees. These are just the latest three examples of many that I've heard at my own constituency surgery.

And all too often, when you put the questions to the Minister, the answer is pretty much a 'not me guv' shrug of the shoulders.  This really matters. There is a serious accountability problem with our political system. Any serious programme aimed at redistributing power from the political elite must address the role of quangos in creating this accountability problem and must include a serious plan to reform them.

<h2>CONTROL PUBLIC SPENDING</h2>

The same is true for any serious programme aimed at controlling public spending. This is now more important than ever when we're forecast to have the largest budget deficit in the developed world.

Our national debt has doubled in the past twelve years. It's set to double again to £1.4 trillion in the next four years.

And our public finances are in their worst state since 1945.

So we cannot ignore the fact that a significant component of the growth in public spending has come from quangos.  Official figures show that last year, the quangos we know about accounted for over £34 billion of public spending, and received a twelve percent increase in funding.

To put that increase in perspective, our armed forces - fighting an ever-ferocious and resourceful enemy in Afghanistan - got a three percent increase. But estimates suggest that when you take into account all official and unofficial unelected organisations in our country, the true cost could be more than £64 billion a year.

That's more than half the NHS budget and nearly ten times the international development budget.  The truth is we'll never get control of public spending unless we get control of quangos. Their casual attitude to public money is reflected in quango pay. Last year, sixty eight quango heads paid themselves more than the Prime Minister.

Of course we won't solve the debt crisis just by reining in quango pay. But we won't solve it without doing so either because proper public spending control means proper control of quango spending and proper control of quango spending has to start at the top.

<h2>PROGRESSIVE GOALS</h2>

So there are big questions about quangos' accountability, and their cost. But any serious analysis of quangos must also consider their effectiveness.

What impact have they actually had in helping to achieve the progressive goals we care about?
Just take the issue of training for young people - something which is essential in bringing about a fairer society, one where opportunity is more equal.

In 2001, the government transferred the responsibility for training to a new quango - the Learning and Skills Council along with a five and a half billion pound budget, at that time more than an entire government department, the then DTI.  The LSC became mired in such controversy that seven years and four attempts at a reorganisation later, the government announced its abolition, intending to transfer responsibility for education and training for 16-18 year olds back to where it came from in the first place: local authorities.

But instead of actually abolishing the LSC, there are in fact now eight new quangos with a part to play in directing training, the AACS, JACQA, NAS, NES, OFQUAL, QCDA, SFA and YPLA.

Meanwhile, the number of young people actually in training has gone down. And the number of young people without a job or training place has gone up. What a joke.

So it's not enough for us just to look at quangos in terms of their accountability and cost. We need to look at their effectiveness too.

<h2>CUTTING BACK THE QUANGO STATE</h2>

Of course there are some simple, immediate steps we can and will take.

We've already announced plans to publish a standard set of cost measures for different quangos.  This will make it easier to compare their efficiency, and put pressure on the worst to improve.

We will also publish online all public sector salaries over £150,000, so taxpayers can see whether they're getting value for their money. But the inefficiency; the fat cat pay; the bureaucratic excess - in many ways these are just symptoms of the quango problem.

We need to address the causes as well as the symptoms. And that means asking some searching questions about whether the many hundreds of quangos in operation today should exist at all - or at least in their present form. I believe a fair-minded consideration of the evidence can only lead us to one conclusion: that we do need to reduce the number of quangos in this country. But we've got to do it in a way that is responsible, and which recognises that there are circumstances where quangos have a useful and important part to play. 

So it would be far too simplistic for me to stand here and announce some kind of 'Bonfire of the Quangos.'  People have heard that kind of talk many times before, and seen little to show for it.

Instead, we need a more sophisticated approach.Yes we need to reduce the number, size, scope and influence of quangos.

But we also need to recognise that there are circumstances where functions of the state do need to be carried out independently of elected politicians. In developing our approach to quangos we have tried to be precise and specific about what these circumstances are, so we can evaluate existing quangos, and proposals for new ones, against criteria based on clear principles.

<h2>MINISTERIAL RESPONSIBILITY</h2>

Our starting presumption is a preference for democratic accountability over bureaucratic accountability. That means that wherever possible, we will expect ministers to execute their responsibilities through their departments.

I think this is what the public expects. They expect elected ministers to be responsible for the outcomes of their policies.

Are our armed forces properly equipped - or not?

Are more people finding jobs - or losing them?

Are education standards rising - or falling?

These are things politicians are elected to do and are held accountable for. In some areas, these responsibilities are best carried out directly by the minister, through established command structures.

In other areas, the minister best carries out these responsibilities indirectly.  Take, for example, the operation of our market economy. As individuals, we're free to create wealth and jobs for ourselves and each other. But it's the government's responsibility to set the framework within which the economy operates, to create the right rules, establish the right institutions and set the right cultural norms to make the market not just free, but fair.

And in other areas still, ministers can act best through a combination of the two - both direct and indirect action.  This is how the education system will operate after our reforms.

The direct action ministers will continue to take is taxing people and redistributing the money in the form of funding per pupil. The indirect action they will take is setting up a new system of school choice, so parents can take this funding to the school they want.

But however the minister chooses to act - directly, indirectly or through a combination of the two, there must be a clear, strong and direct line of accountability between him or her and the public. Ministers who have been elected on a mandate should act through departments of state and should be held accountable, at the subsequent election, for their success or failure in fulfilling that mandate.

<h2>DELEGATION OF POWERS TO QUANGOS</h2>

But it would be naïve to think that every state action can be undertaken by democratically accountable ministers acting through government departments. The political process has its limitations, and there are circumstances where it makes sense for ministers to delegate power to an independent body.

The overriding test for this should be clear: it is whether the execution of policy should be subject to political influence. Where it is not, it is right to keep execution at arm's length.  And there are three particular areas where the public would want reassurance that actions, decisions, or the provision of services are insulated from political influence.

<h2>TECHNICAL </h2>

The first is when a precise technical operation needs to be performed to fulfil a ministerial mandate. In these circumstances the public needs to know that people with the right training, professional knowledge and specialist skills are carrying out the work.

That's why we have the Nuclear Installations Inspectorate. It draws on professional scientific knowledge to make recommendations for the safety of our nuclear power stations so we don't suffer a catastrophic accident. It's why we support an independent Bank of England to set interest rates, not least because technical operations sometimes involve decisions that look way beyond the political time horizon.  And it is why we have OFWAT to regulate our water and sewage systems and determine a price cap so we all get the most fundamental utility at a reasonable price.

<h2>IMPARTIALITY</h2>

The second area where it may be right to delegate power to an independent body is when there is a need for politically impartial decisions to be made about the distribution of taxpayers' money. In areas like the arts and science, the public expects funding on merit, not favouritism.

Take, for example, Research Councils. Their purpose is to allocate research grants across a full range of disciplines, from the medical, biological and environmental sciences to the arts and humanities so that Britain becomes a centre for academic excellence. They get the best academics to judge each application on its own merits and award funding accordingly. It would be wrong to leave this to the political system, subject as it is to lobbying and short-term pressures.

<h2>TRANSPARENCY</h2>

The third area where there is likely to be a need for independent action is when facts need to be transparently determined. We have seen how information, once in a politician's hands, can be distorted to score a political point. A freeze becomes a zero percent rise. Cuts in capital expenditure become increases. Of course this has not been the preserve of any particular government, at any particular time.

So there is a role for independent bodies here. By determining nationally important facts clearly and transparently, they can help bring honesty and responsibility to government. That's why we need a fully independent Office for National Statistics that gives precise figures on important issues like productivity, violent crime and air quality. And it's why we need a new Office for Budget Responsibility that will produce the country's budget forecasts and a full audit of the national balance sheet.

<h2>MINISTER REMAINS RESPONSIBLE</h2>

So in these three areas: where there is a need for technical expertise; where impartiality is required, and where transparency really matters it is likely that our overriding test for quangos - that an action, decision or service should be protected from political influence - will be met.

In all other circumstances, any task undertaken by government should be carried out directly through a department of state and the apparatus of accountable government.

But I want to make one thing very clear. With a Conservative Government, any delegation of power by a minister to a quango will not mean a corresponding delegation of responsibility. I have said that our goal is democratic accountability, not bureaucratic accountability - and I mean it.  So even when power is delegated to a quango, with a new Conservative government, the minister will remain responsible for the outcomes.  They set the rules under which the quango operates. And they have the power to ensure that the people operating the quango are qualified to do the job.

So there will be no more hiding behind the cloak of quango independence: ministers, not quangos, must answer for the outcomes of their policies. That's what the public expects, and it is the lack of such direct accountability that has contributed so much to the sense of frustration people feel with the political system. But the public would also, I think, expect us to apply a 'reasonableness test'. I do not think it is right to expect a minister to take responsibility for relatively trivial mistakes by quangos under their control. 

For example, I would not expect a Conservative minister to take responsibility for a mistake by Her Majesty's Revenue and Customs in assessing an individual's income tax.   However, ministers must take responsibility for serious or systematic performance failures.   So I would expect the relevant minister to take full responsibility for any persistent and widespread failures of the tax credit system - like the ones which have seen billions of pounds wasted in recent years.  Those are failures of flawed policy and poor design, and minsters must not be allowed to shuffle off responsibility for that to a quango.

<h2>GENERAL IMPLICATIONS FOR QUANGOS</h2>

Applying this approach - ministerial responsibility for policy outcomes and a much tighter definition of the role and remit of quangos, adds up to a concerted agenda for quango reform.

There are a number of general implications.

First, by assigning quangos strictly administrative functions, we are removing them as actors in democratic politics and public debate. Consequently, the chief executives and other senior officers of quangos should be no more visible to the public than senior civil servants - and, typically, no more highly paid, either.  Furthermore, quangos should have no more need for a huge "communications department" or a "strategy", than has a high court judge. 

Second, no quango will have the power to stray outside the scope of its responsibilities, unless instructed to do so by ministers. Matters of national importance should be debated and decided in Parliament, not in the corridors of an unaccountable bureaucracy.  The days of quangos taking decisions in areas of contested public policy must stop - unless they are strictly told to do so.

And the third general implication of our approach for quangos is that they must operate wholly within the financial resources allocated to them by ministers. Their costs, just like any other item of government spending for which ministers are responsible, will be transparently available for the public to scrutinise. The days of explaining away waste by referring to the independence of the quango will also be over. Ministers will be responsible - and must demand the highest efficiencies.

<h2>SPECIFIC IMPLICATIONS</h2>

But of course the real focus of reform will be the specific implications of our approach for individual quangos. I have asked the Shadow Cabinet to review every independent public body that currently sits within their portfolio. For each one, they will be asking the key questions:

Does this organisation need to exist?

If its functions are necessary, which of them should be carried out in a directly accountable way within the department?

And which, if any, should be carried out independently, at arm's length from political influence?

If there really is a need for an independent quango, how can we make sure it is as small as possible, operating with maximum efficiency, frugality and respect for taxpayers' money?

That process of review will go on up to and beyond the election. But today, I want to give you an idea of the scale of change we envisage by setting out what our approach would mean for three specific quangos.

<h2>OFCOM</h2>

OFCOM is the regulator for the communications industry, and it's clear that it has an important technical function. It monitors the plurality of media provision for consumers. It licenses the spectrum in the UK. And it sets the charges and the price caps for BT's control of so much of the industry's infrastructure. OFCOM also has an enforcement function - ruling on breaches of the broadcasting code for instance. These matters relate to the operations of private companies in a commercial market and it is therefore right that they are free from political influence.

But Jeremy Hunt has concluded that OFCOM currently has many other responsibilities that are matters of public policy, in areas that should be part of a national debate, for example the future of regional news or Channel 4. These should not be determined by an unaccountable bureaucracy, but by minsters accountable to Parliament.

So with a Conservative Government, OFCOM as we know it will cease to exist.  Its remit will be restricted to its narrow technical and enforcement roles. It will no longer play a role in making policy. And the policy-making functions it has today will be transferred back fully to the Department for Culture, Media and Sport.

<h2>QCDA & OFQUAL</h2>

Next, the Qualifications and Curriculum Development Agency - or QCDA. This was established when the Qualifications and Curriculum Authority's powers over the curriculum were invested in the QCDA and its powers over the regulation of exams and tests were given to another new body, OFQUAL.

The QCDA carries out national curriculum policy work that is right at the heart of political debate and public controversy. For example, it was the QCDA, while it was still within the QCA, which decided that children did not need to learn about the most important events in British history. Michael Gove believes we need to re-think the way the whole system works.

On the one hand, responsibility for the national curriculum should be brought back into the Department for Children, Schools and Families, so accountable politicians can directly enact the promises they make.  In fact we need a much smaller, simpler National Curriculum that is not constantly being changed and which gives more freedom for teachers.

So the QCDA must go. But where does this leave OFQUAL?

Exam boards, working with academics and universities, must be free to design the exams based on the curriculum set.

And there is in principle a need for an OFQUAL, as it has important technical and transparency functions that should be kept free of political influence. Technical, because their job is to analyse a range of exams in a range of disciplines both from the past and across countries and ensure standards are being maintained. And transparency too, because they are there to provide honest and impartial figures on exam results so parents and future employers have confidence in the system.

So OFQUAL should remain. But it does need to improve.

For example, instead of looking at thousands of exams every few years, it needs a narrower focus, concentrating on a much smaller number of subjects so there is less tinkering, bureaucracy and expense. And it needs a governing body that is more representative of those people who have a real interest in maintaining a rigorous exam system - such as those working in academia and industry. It is essential that the role of universities is enhanced.

So with a Conservative Government, the QCDA will go, and OFQUAL will stay - but with important improvements.

<h2>NICE</h2>

The third and final specific example of our approach that I want to explain today is in health: the National Institute for Clinical Excellence. NICE assesses which drugs and treatments are clinically effective and cost effective for use in the NHS. Based on these assessments, individual doctors and hospitals then determine whether the drug or treatment is appropriate.

The decisions NICE takes are inherently technical, drawing on specialist knowledge about the range of medicines and treatments that are available.  More than that, these judgments have to be made impartially and objectively - balancing the interests of a variety of people who want access to particular medicines and where there are limited resources.

It would not be right to allow these extremely sensitive assessments to be made on the basis of anything but the objective evidence.  So Andrew Lansley sees an important continuing role for an independent NICE.

But as with OFQUAL, we believe there is a need for improvement.

To enable NICE to recommend good drugs that it currently rejects, we will introduce payment-by-results for drug companies.

Decisions should be based on what actually gets people better and we should pay the drugs companies according to their value to patients. NICE should be involved in this process, working with Government and drug companies not just to set fair prices for new medicines but also new pricing structures.

<h2>CONCLUSION</h2>

This is the kind of forensic approach we need if we're going to deliver lasting reform of quangos and make a real difference to the accountability of our democracy.

For every quango that exists, and for those that are proposed, we need to ask whether its role is really necessary, whether that role should in fact be part of the political process or whether it's right that it is independent of it.

The values underlying our approach are clear. We understand how frustrated people feel when they see big, bureaucratic, unaccountable government getting it wrong and offering no come-back. And we want to change that.

We want people to know that when Conservative politicians stand up and make promises, they're prepared to take responsibility and won't end up passing the buck.

We want people to know that with a Conservative government, they will have more power, more control, more say over the things that matter to them.

And above all we want people to know that change is possible; that things can be different; that they can make a difference.

This approach to reforming quangos is a vital part of that change of fixing our broken politics and of bringing real people power to every aspect of political life.

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