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Bring up the bodies: the transformation of arm’s length relationships


Please note that this article first appeared on The Guardian website, and is available here.

For a large number of public bodies, the autonomy that they have traditionally enjoyed through their arm’s length relationship with government is being curtailed due to the imposition of a much tighter internal spending control system. This means that public bodies have lost some of the freedoms and discretion which they previously enjoyed, and suggests an important shift in the balance of power between government and public bodies.

The spending controls framework plays an important part in meeting the government’s objectives to reduce public spending across central government – in his budget last month, George Osborne highlighted the value of spending controls in promoting ‘rigorous financial management across Whitehall’.

The framework is applicable across central government, which is taken to include the majority of non-departmental public bodies, and sets out spending controls across 10 key areas:

  • Advertising, marketing and communications
  • Strategic supplier management
  • Commercial models
  • ICT
  • Digital service delivery
  • External recruitment
  • Consultancy
  • Redundancy and compensation
  • Civil service learning
  • Property

Treasury and Cabinet Office approval is required to varying degrees above approved spending limits; and there are also limits for lower level spending which are set at the discretion of individual departments (so-called ‘level 1′ controls). When applied to public bodies, these controls have significant implications in terms of the balance between autonomy and control in the ‘arm’s length’ relationship.

Spending controls have brought about a significant reduction in the discretion of the boards of public bodies to make decisions about their organisations and the functions that they deliver. Discussion at a recent Public Chairs’ Forum event highlighted a sense of obligation on the part of public bodies to innovate with fewer resources at a time of austerity; yet this stands in stark contrast to the centralising idea behind the controls framework. Public bodies must find new ways of delivering functions efficiently and effectively, despite having far less autonomy over their decision-making – a situation described by one participant at the PCF event as ‘micro-management by remote control’.

Departments, too, have had to adapt the ways in which they work with their public bodies. They have had to develop their sponsorship capacity and skills in order that the value of public bodies and the expertise of their boards, as well as the specific procurement expertise of their staff, is not lost as a result of this reduced autonomy. Operating themselves in a climate of significantly reduced resources, this has meant finding innovative ways of managing the sponsorship of public bodies to produce high-trust, low-cost relationships, and to allow scope for public bodies to develop more efficient ways of working despite the centralising logic of the spending controls.

These changes point to a subtle but important shift in the balance of power between government and public bodies. The Cabinet Office and the Treasury now assert far greater control over public bodies than has previously been the case. This ‘return of the centre’, mirrored in the Cabinet Office’s Public Bodies Reform Programme, has significant implications for how public bodies, as well as their sponsor departments, operate both strategically and on a day-to-day basis. In itself, this demonstrates that the perceived need for greater control, driven by a climate of austerity, is transforming arm’s length relationships.

Dr Katherine Tonkiss

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