The decision of the Labour Government to effectively close down NHS (England) came as a surprise to many. Although Wes Streeting, the Secretary of State for Health and Social Care, had indicated he wanted to curtail NHS(E), outright abolition was not supposed to be on the agenda.
Most of the commentary on this decision has understandably focussed on the National Health Service implications. (Without, in most cases, mentioning this is only about the NHS in England.)
But the decision to abolish NHS(E) and especially the rationale given have much wider constitutional, governance and administrative implications which most commentary has ignored.
The ‘Agency’ Revolution?
According to its proponents, and many analysts at the time, 1988 signalled the start of a veritable ‘revolution’ in Whitehall. The publication of the so-called Next Steps report on civil service reform and Prime Minister Margaret Thatcher’s endorsement saw the launch of a major structural reform in how British government was supposed to work.
The classic model of a Whitehall department was one headed by a Secretary of State and other Ministers, who were mostly Members of the House of Commons with a few drawn also from the Lords. Supporting them were their equivalent Permanent Secretary and other civil servants, organised in a classical hierarchical bureaucracy. Ministries were often sub-divided into internal departments dealing with aspects of their work.
The basic ‘Next Steps’ idea was to separate the policy-making centre of Ministries from their execution (executive) functions. The latter would be ‘hived-off’ as executive agencies with their own chief executive and board, framework (effectively their constitution), strategic objectives and performance targets – all set by Ministers. The new chief executives of agencies would report directly to Ministers, outside the usual Ministry chain of command. But the agencies would have a great deal of flexibility over their internal management.
We will leave aside for the moment that this is not exactly what the Next Steps report actually recommended, or that many of Next Steps agencies subsequently set-up didn’t actually conform fully to the model described above.
It’s worth just dispelling a couple of myths about these Next Steps agencies, though. The first is that they did not cease to be part of the civil service. Agency staff were all, in most cases, still Crown servants. Nor, secondly, did agencies have any legal standing separate from their Ministry. They could be created, or abolished, at the whim of Ministers.
Between 1988 and the mid 1990s around 140 agencies were created and around three quarters of the UK’s 600,000 or so civil servants (at the time) worked in them.
Some were formal variants – for example the Ministry of Defence (MOD) had around 40 agencies and in many of the smaller ones the agency chief executive formally reported to senior civil servants, not Ministers. And there were informal variations – many small agencies operated in practice like the MOD ones, despite them being formally directly accountable to Ministers. Many small agency chief executives never met their ministers, who often knew little about what they did.
These agencies and the reformed governance model they embodied were promoted as ‘revolutionary’ by their proponents – not least Sir Peter Kemp, the former Treasury mandarin, who was seen as something of a gamekeeper turned poacher as the first head of the Next Steps programme in the Cabinet Office.
The separation of policy and operations embodied in Next Steps was not without its problems, though, despite its champions. One of the chief complaints from critics was that it undermined the constitutional principle of ministerial responsibility. Ministers, for example, stopped answering MPs Parliamentary Questions about what they considered ‘operational’ matters and referred members to the relevant agency chief executive instead.
This latter innovation hit a crisis point in the conflict between Home Secretary Michael Howard and Prison Service Chief Executive Derek Lewis in 1995 after some high-profile prison escapes. Howard blamed Lewis and sacked him, even though there was evidence that Howard’s own policies towards prisons were clearly flawed, as I pointed out in evidence to Parliament in 2005.
Another, less discussed problem was that the larger agencies – like Benefits, Employment, Prisons, Inland Revenue and Customs – tended to duplicate the policy-functions of their ministries. This caused duplication and often conflict between the agency-ministry policy-functions – a charge now levelled at the NHS(E) and the Department for Health and Social Care setup (30 years later).
The Agency-Quango State?
The idea of agencies wasn’t entirely new, or unique to the UK. There are several types of non-civil service public bodies in the UK that, more or less, mirrored the agency relationship with elected officials (ministers). The first are quangos, which is short for “quasi-autonomous non-governmental organisations”. Or as they are now more often known “arms-length bodies” (ALBs).
Quangos are “non-governmental” only in the sense they are not staffed by Crown (civil) servants and are separate legal entities to Ministries. They are “quasi-autonomous” in the sense that, like civil service agencies, Ministers still exercise considerable powers over them. But, unlike agencies, they have an existence and ‘constitution’ established in legislation. Nevertheless, from 1988 onwards the agency model was increasingly applied to what were called the executive (i.e. service delivery) quangos.
There are, secondly, a small set of public bodies that are within the civil service but not directly under the control of Ministers. These are called Non-Ministerial Departments. They are run by an appointed head and a board and, like quangos but unlike most other Ministries and agencies, they are established by legislation. The most famous and largest of these is HM Revenue and Customs (HMRC) and it’s two historic predecessors Inland Revenue and HM Customs (which were both also NMDs).
There are a third set of arms-length bodies – nationalised industries and utilities. Although these have greatly declined since the wave of privatisations in the 1990s and early 2000s, there are still some left and Labour seems intent on creating more (e.g. Great British Energy or the renationalised railways).
Nor is the ‘agency’ model unique internationally. The US federal government has long used an agency model for many of its public bodies. Because ‘ownership’ of these federal agencies is shared (and often contested) between the Presidency and the Congress they do not have elected political heads, although some of them are political appointees who are nominated by the President but have to be endorsed by the Senate.
Other countries such as Sweden have had a split between policy-making ministries and executive agencies for centuries. The UK itself even imposed such a model on Hong Kong when it was still a British colony in the 1970s.
This did not stop the UK ‘agency’ experiment being seen as a new model for governance in many countries. The late Christopher Pollitt and I edited a book trying to capture and understand this movement, Unbundled Government – a critical analysis of the global trend to agencies, quangos and contractualization (Routledge 2004). And in parallel Christopher and I carried out a more detailed research project looking at agencies in the UK, Sweden, Finland and Holland (Agencies – how governments do things through semi-autonomous organisations (Palgrave, 2004).
The Death of the Agency Idea?
In Britain there have been contrary trends in government attitudes and policies towards the whole idea of agencies and quangos. Mrs Thatcher’s governments may have initiated the Next Steps agencification programme for the civil service, but it also tried to cull the quangos and privatise state-owned industries. It also privatised some agencies.
The Blair and Brown governments saw the slow erosion of the agency model in the civil service, as many agencies were re-absorbed into their Ministries or reduced to a Potemkin-village like status – agencies in name only. There was certainly very little political support for the agency model.
By the time of the Coalition Government in 2010 many civil services agencies were already gone and the new government also embarked on yet another bonfire of the quangos. As usual, this was of little real effect save some damaging demolitions that are still being felt to this day – e.g. the culling of the Audit Commission.
The creation of NHS€ as the largest UK quango ever in the 2012 Health and Social Care Act was therefore somewhat counter-trend. It was very clearly established within the arms-length body framework established by ‘Next Steps’. And it’s abolition has been explained as bringing the health service in England back under ministerial control. As such, it is symbolic of the final death of the agency idea as espoused in the 1988 Next Steps report and by the supporters of the agencification programme that followed.
Sir Peter Kemp, the biggest champion of Next Steps, left the civil service in 1992 and subsequently complained the agency ‘revolution’ was being undermined. He claimed that the Whitehall “guards are in charge of the escape committee” in a pamphlet for the Social Markert Foundation (Beyond Next Steps: a civil service for the 21st century, 1993). He proposed even more radical changes.
Though the eventual death of the agency idea has taken a long time, in many ways the abolition of NHS(E) does mark its final demise as an idea for reforming Whitehall’s governance of public services. There is currently little indication of what Ministers in the current government would replace it with, but if we seek to understand this as part of a longer-term trend within government, we might come closer to the answer.
Colin Talbot.
Colin Talbot is Emeritus Professor of Government, University of Manchester. He also has relationships with the Cambridge Judge Business School and the Federal Trust. Colin has worked extensively with all levels of British government and public services, including being an advisor to two House of Commons Select Committees and appearing as an expert witness over two dozen times in both Houses of Parliament, the Scottish Parliament, and the Welsh Assembly. He has also advised more than a dozen other governments, from the USA to Japan.
The Constitution Society is committed to the promotion of informed debate and is politically impartial. Any views expressed in this article are the personal views of the author and not those of The Constitution Society.