The 'curse of the decentralising minister', said Nick Clegg, is 'responsibility without power'. But officials are also losing power - over budgets for which they remain legally accountable. Matt Ross reports on a growing tension.
For some years now, government ministers have been trying to plug the Palace of Westminster’s ears to the sound – as Nye Bevan put it when he created the NHS – of the “dropped bedpan in Tredegar”.
Centralised, Blair-style targets measuring public sector processes (metaphorically, the number of dropped bedpans) have given way to smaller baskets of outcome measures (the number of patients with clean sheets). But the coalition government’s approach to public services involves severing those puppet strings altogether: under the edicts of localism, outsourcing and transparency, departments are charged with handing to local service providers and communities both control over public services, and most of the feedback channels by which performance is monitored.
For many politicians and officials, this radical agenda could have worrying consequences. Accounting officers across government – mainly permanent secretaries – have a statutory accountability to Parliament for how public money is spent; they in turn insist that their accountable officers answer for their own budgets. Meanwhile, the Ministerial Code states:
“Ministers have a duty to Parliament to account, and be held to account, for the policies, decisions and actions of their departments and agencies.” And select committees are charged with using these accountability mechanisms to ensure that public money is spent wisely across government. If the shift to localism robs ministers and civil servants of direct control over how their departmental budgets are managed and deployed locally, how can they be held accountable for spending?
The coalition has not tried to pretend that its reform agenda won’t create tensions. “Ministers standing at the Despatch Box will continue to be held responsible for local decisions over which they no longer have any control,” deputy prime minister Nick Clegg told think-tank the Institute for Government (IfG) last year. “This will feel uncomfortable, to say the least: responsibility without power, the curse of the decentralising minister. Fear of this scenario has been an obstacle to decentralisation in the past.” The coalition, he made clear, has no such fear: “We know it is coming, and we are ready to stay the course.”
While much of the attention so far has been on how this tension may create problems for ministers, accounting officers are equally at risk. “If I was a permanent secretary, I’d be extremely worried that failures on the ground by bodies over which I have less influence will be blamed on the central department,” says Professor David Heald of the University of Aberdeen Business School, who recently gave evidence to the communities and local government select committee on public sector accountability issues. “The UK has a very centralised political structure, and it’s assumed that the centre is responsible,” he adds.
A new accountability architecture
As powers shift down to the local level, our current system of accountability through the centre of government will start to look outmoded; and as long as it remains unaltered, the accountability system will create centralising pressures that work against the localism agenda. Julian Wood, an IfG fellow currently working with his colleague Bill Moyes on a report on ministerial accountability, says that even as localism advances, concerns among the public, the media and MPs may create “pressure that means it’s tempting for ministers to intervene” in local decision-making.
Indeed, David Blunkett, the Labour MP and former minister, argues that such temptations are already undermining the coalition’s decentralising agenda: communities secretary Eric Pickles, he says, first decreed “that local authorities were responsible for their spending decisions, and then threatened them with legislation if, for instance, they cut the voluntary sector more than other services”. Blunkett believes that while the “pain” of implementing spending cuts has been decentralised, “the policies have been centralised: the Localism Bill includes 142 new powers for the secretary of state”.
In part, the government’s solution to this tension has been to short-circuit the system and make frontline service providers directly accountable to Parliament – an approach first adopted in 2003 by the last government, when health secretary John Reid told MPs that he would not answer for foundation trusts. But the prospect of trying to scrutinise an ever-widening group of frontline service providers is one that horrifies Margaret Hodge, chair of the public accounts committee (PAC). “We’re seeing a fragmentation of responsibilities: for example, there are 167 foundation trusts where the accounting officer will be directly accountable to Parliament, not to the Department of Health,” she says. “Likewise GP consortia, free schools, academies, directly-elected police authorities, local councils liberated from their accountability to the Audit Commission. This raises questions over whether we have the right structures in place to ensure that we can follow the pound.”
The government, Hodge believes, must “satisfy us that there are proper, practical accountability structures in place. It’s no good saying to the PAC that we’ve got to ensure accountability for all the hospital trusts. It just won’t work.” Her committee, she adds, doesn’t “want to be in a position where things start going wrong and everybody says: ‘It’s not me, guv.’ There are challenges here, and government has got to understand and respond to those challenges.”
Audit, all that?
Hodge also raises concerns that the National Audit Office – whose reports form the basis of PAC investigations – is not set up to oversee the finances of so many separate bodies. After the Audit Commission’s forthcoming abolition, she says, the NAO “will be the only body that will be able to report through Parliament on financial accountability and value for money, and they were set up to do this in relation to strong government departments and big contracts. Whether they’re appropriately organised to be able to exercise an effective role in relation to this hugely fragmented public sector is an issue I’m currently reflecting on.”
Professor Heald echoes Hodge’s concerns. The NAO, he says, “got much of its reassurance from the fact that the Audit Commission ran an audit regime over money spent locally”; the proposals for how that work is picked up in future, he adds, are “extremely vague”. And PAC member Ian Swales, a Liberal Democrat, told Treasury permanent secretary Nicholas Macpherson recently that there’s “a twin-pronged attack on accountability” as areas of public spending move out of the NAO’s remit while the Audit Commission disappears. “The audit of arm’s length bodies is going to become a bigger and bigger issue,” he said.
Making the picture still more complex is the growth in outsourcing, which means that public accountability will rest in some areas with public service providers and in others with those commissioning services from third parties. It is time, says Hodge, to tackle these issues: “We want to ensure that government understands our requirements as they develop their reforms. We usually look back, but this time we’re looking forwards.”
When accountability changes direction
In the opinion of Cabinet Office minister Francis Maude, any weakening of upward accountability through Parliament will be more than outweighed by strengthening delivery bodies’ accountability to service users and local communities. “This will be a different world, in which the principal accountability will not be all the way from the frontline to some committee room in Westminster and some desk in Whitehall,” he told the PAC in January. “It will be to the users of the services. That is the way it is designed to be and meant to be. That’s actually a tougher accountability, in many ways, backed up by serious transparency. I think that all of us will need to get our heads in a different place.”
This answer, however, worries Professor Heald. Take GP consortia, he says: the new system will empower doctors, but it’s not clear how service users will be able to hold them to account. And while the transparency agenda should push local service providers into publishing performance data, if that data doesn’t fit a common national format then “the information will become unusable”. Unless the centre has a clear national overview of comparable performance statistics for each area, he says, there’s “a risk that we’ll get surprise failures, without prior warning. Tearing up the reporting system at a time of big spending cuts and lots of institutional turmoil strikes me as extremely dangerous”.
Systemic, not systematic, accountability
Another solution to the problem of fragmenting accountabilities – the one adopted by the Department of Health in its NHS reforms – is to insist that top officials are responsible for creating a robust and effective service delivery system, while frontline providers are accountable for operating it. “The direction of travel is that the centre is held accountable for how well the system is set up, how well it works; but that accountability lower down is better aligned with those who really have the power,” explains Wood.
Even under this system, though, accounting officers may find themselves carrying the can for local failures. Heald warns that the Department of Health’s position “may have legal credibility, but I don’t think it has much political credibility. If there’s a serious failure in the health system, I think that will come back on the secretary of state and officials.” What’s more, Macpherson told the PAC that the health permanent secretary “will have to sign off the accounts for all of health expenditure, including arm’s length bodies like foundation trusts, which ultimately will come into those accounts.”
While accounting officer duties are delegated to the delivery body, he added, the permanent secretary “has got to satisfy themselves that the financial systems in that organisation are satisfactory. If they are not, they need to do something about it.” In other words, top officials are still legally responsible for devising systems that will ensure value for money and probity further down the chain; in the end, they could be held accountable for failures even in the most autonomous delivery arms of government.
Thinking ahead
One way to tie up these loose ends, says Wood, would be to pass laws setting out exactly how accountabilities are divided between the centre and the front line: after all, the government went through just such a process when powers were devolved to Scotland and Wales, and the NHS reform white paper suggests a similar approach. “The starting point is to say that people should be held accountable for the things which they do directly control,” he says, suggesting that legislation could introduce “statutory constraints on ministerial powers, and ensure that regulators have statutory independence and that there’s a clear failure regime”.
The Ministerial Code and House of Commons resolutions on ministerial responsibility could also be altered, he says; but in the end, there will always be grey areas. “You can’t have absolute precision about this,” he warns. “There’ll always be a debate about whether it’s an operational failing or whether the system itself was flawed – but you can do things that set a firmer foundation for that debate and leave less room for ambiguity and uncertainty.”
It might also be helpful to give select committees more resources and staff, says Wood, enabling them to scrutinise more delivery bodies. And NAO chief Amyas Morse has already told PAC that his organisation will have to “find ways to sample and reach down further [into delivery bodies] than we have done in the past”.
Ultimately, Wood suggests, we may have to rethink the whole system of civil service accountability. The current system “pushes responsibility back up to the top”, he notes – something that will become still more inappropriate “when you have a mix of public and private providers, some of which have accounting officer duties and others of which don’t”. One answer, he says, is to “focus accounting officer responsibilities through those commissioning services rather than the academies or foundation trusts or other bodies delivering them. That would be a big change, though – and there are arguments both ways.”
The man devising the plan
All of these questions are currently making their way towards the bulging red box of Sir Bob Kerslake, the communities department’s permanent secretary. Acknowledging the issues raised by the localism agenda, cabinet secretary Sir Gus O’Donnell told the PAC in January that he’s asked Kerslake to “go into these sorts of issues and look at the kind of things that are happening with localism, and look at the accountabilities issue and come back and report to me”. With the localism group of permanent secretaries, he added, Kerslake will examine the “sorts of solutions we are starting to come up with”.
Asked how the review is going, Kerslake tells CSW: “We’re trying to develop an approach to accountability in this new world.” This means considering value for money, service performance, and accountability to the citizen, he explains – but these are early days. “We’re not trying to formalise it, but to develop a sensible conversation about accountability.”
Kerslake hopes to report to O’Donnell this month, and the cabinet secretary has promised to pass the report on to the PAC in due course; but there is clearly a lot of work to do yet. The review must, for example, consider the whole area of data, Kerslake explains: “It might be about performance, or early warning data about where issues are emerging. The challenge is to come up with a model around data that gives those overseeing the system enough knowledge to know how things are going, without recreating an overly bureaucratic approach.” Kerslake acknowledges that these are pressing issues: “It is new ground being broken, with new models emerging about how delivery occurs,” he says. “Obviously we already have trusts and academies, but there are new models and a more substantial number of them.”
As yet, the warning signals being sent out by parliamentarians and commentators about accountability are nothing more than that; the tensions and risks within the system won’t begin to grow until the localising reforms really start to bite. But if Kerslake’s review doesn’t prompt politicians and top civil servants to get to grips with these issues, the localism agenda will be built on rather nebulous foundations. “If ministers are accountable without being responsible, the danger is that commissioners, providers and regulators may be responsible without being accountable,” Wood warned last November in an IfG ‘issues paper’: adding: “Alternative accountability mechanisms, such as increased transparency… may not provide for effective parliamentary oversight”.
There is, Wood concludes, a risk that “accountability gaps” may emerge for decentralised services – and that’s something that Margaret Hodge, for one, is not prepared to countenance. “It’s not acceptable to in any way undermine our ability to assess value for money,” she says. “That’s non-negotiable. It’s what we’ve been tasked by Parliament with doing, and we’re going to jolly well do it. We want data that we can use that enables us to check that value for money, or we’ll be producing highly critical reports – and I don’t think the public will wear it.”