Around the World in 80 ideas

Around the World in 80 Ideas

013: PUBLIC ADMINISTRATION
45: The next steps
Agencification of department functions

The problem: conglomerate departments

As the state took on more and more responsibilities, so the United Kingdom's civil service grew and grew. Departments became conglomerates, covering many different functions, but too big and too diverse to be managed properly. As a result there was no clear control, no incentive for civil-servants to make their own little bit of the department work much better, no entrepreneurial drive to succeed.

The idea: separate stand-alone functions

Under the Next Steps programme, launched in 1988, many semi-autonomous government bodies were created out of the agglomeration of departmental activities.

These so-called Executive Agencies were created with the expressed aim of improving the efficiency and performance of the civil service by giving them more autonomy and enough self-management power to set ambitious targets and re-engineer the process by which they they would meet them.

Example: a step in the right direction

Two-thirds of the UK civil service - almost half a million people - now work for executive agencies or similar bodies.

The new agencies were set up by each minister and given specific objectives and a financial budget. The chief executive was made responsible for the day-to-day work of the agency and held to account by ministers for their use of financial resources and their ability to meet performance targets. In other words, agencies were established to deliver specific services to the public and judged by their ability to satisfy their customers.

The Next Steps programme was also seen as an attempt to reduce the size and scope of big government in peoples' lives. Agency status, while not assumed to be an automatic bridge to the private sector, was perceived as a potential transitional stage on the way to ultimate privatization or abolition. Accordingly, a review procedure was established to identify whether they should be wound up or sold.

In all, over 130 agencies were created, covering a total staff of 331,000. Agencies transferred to the private sector include the Royal Mint, Companies House (where private firms are registered), the National Engineering Laboratory, Royal Parks, the Prison Service, the Laboratory of the Government Chemist, the Transport Laboratory, the Occupational & Health Safety Agency and the Recruitment and Assessment Services Agency. Even parts of the Defence Evaluation and Research Agency, with 11,200 staff and a turnover of over Ł1b, were turned into a private-sector operation, QinetiQ; while at the other end of the spectrum was Wilton Park Conference Centre, with a mere 35 people on the payroll. Other agencies were sold in management buy-outs, as in the case of the Building Research Establishment (see the chapter Freely Employed).

But a number of agencies were abolished because it was judged their work was no longer necessary. Examples include the Resettlement Agency and the Accounts Services Agency. Some were established as trading funds and given greater financial discretion from government. A number of these trading funds were subsequently privatized, including the Stationery Office and the Driver & Vehicle Testing Agency.

Assessment: stepping forward

This quiet revolution has dramatically improved efficiency, as reflected in the annual Next Steps Review. In particular, those agencies which deal directly with the public have had to become more customer-responsive and to change their ways of operating to provide a better, quicker service.

The Passport Office, for example, cut the waiting time for passports from three months to less than ten days, with same-day services available for a premium price (though it then blotted its record with a summer of lengthy delays while the agency was having trouble with a new computer system (while introducing child passports, and moving offices, at the same time).

Under the market testing initiative, designed to produce best value in government services, some agencies lost contracts in competition with private sector rivals.

However, pay rates have not been completely liberalized and it can be hard to recruit high-level staff. Some of the most energetic managers have taken all or part of their agencies into the private sector, where they can have greater flexibility over pay, incentives, and conditions, and can exploit new sources of income.

The issue of how to create and run executive agencies has been studied by many other countries, including developing countries - for example, the Adam Smith Institute has advised ministers in Jamaica and Ecuador.

Among developed countries, Germany has a system of delegation to agencies rather like that of the UK. But Sweden has been much more radical in separating agencies from ministries. For example, in July 1994, the justice ministry there was simply informed of a riot and fire damage in the Tidaholm prison: the prisons agency handled all the media enquiries, dealt with the riot, and made all the reforms thought necessary to prevent a recurrence. By contrast, the UK prisons-agency head was fired by the Home Secretary after two high-profile escapes.

For further information:

Each year the UK government publishes a Next Steps Review on the performance of executive agencies. The House of Commons has published several in-depth reports: see www.parliament.the-stationery-office.co.uk and www.publications.parliament.uk.
The National Audit Office has published a number of reports on agency performance: see www.nao.gov.uk.
For a discussion of the role of executive agencies seePirie, Madsen (1992) Blueprint for a Revolution (download PDF 167kb): Adam Smith Institute (London) www.adamsmith.org.