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Plans to reorganize central government will bring a range of functions currently at arm’s length closer to ministers, according to the National Audit Office. Moreover, the Cabinet Office and departments are on course to deliver cost reductions extending beyond the Spending Review period. However, a recent report raises concerns that government departments do not have a good enough grasp of the ongoing costs of functions being transferred to other parts of government or of the one-off transitional costs of the changes.

Through the Public Bodies Reform Programme, run by the Cabinet Office, departments are taking over the functions of 65 public bodies and transferring those of another three to local government. The Cabinet Office and departments will have secured the largest restructuring of public bodies for many decades if they succeed in making all the changes they propose. They are bringing many bodies’ functions directly under elected politicians’ control and are taking further action to strengthen ministers’ responsibility. They are also abolishing more than a half of their advisory bodies to strengthen ministers’ ultimate responsibility for policy decisions. Departments propose to abolish 262 bodies, by such means as mergers, transfers out of government and ceasing functions.

The Cabinet Office and departments also intend, through the Programme, to secure a reduction of £2.6 billion over the spending review period 2011-12 to 2014-15 in ongoing funding for administration in public bodies. A third of this (34 per cent or £0.9 billion) comes from just two changes: the closures of the Regional Development Agencies and the education body Becta. Annual estimated savings achieved by 2014-15 are likely to continue at between £800 million and £900 million.

According to the NAO, departments’ estimates of £425 million for the transition costs of these reorganisations are incomplete. The spending watchdog estimates that they will be at least £830 million. Departments will therefore need to find gross savings of around £3.5 billion if they are to meet the net savings target of £2.6 billion, after the costs of transition have been taken into account, from abolishing or restructuring government bodies.

A recent report also points out that, within departments, there is an insufficient grasp of the ongoing costs of functions transferred to other parts of government, accounting for £0.4 billion (or 15 per cent) of the £2.6 billion. Other parts of government will have to find savings elsewhere to pay for administering these newly acquired transferred functions. A third of all money spent by bodies in the Programme (£20.6 billion) will be subject to greater accountability to elected politicians, but most (£43.2 billion) will remain at arms-length. Despite greater accountability being the Programme’s primary intended benefit, only one of the six departments examined by the NAO had proposals for a well-defined, though basic, measure of success for it.

Amyas Morse, head of the National Audit Office, said recently:

"The Cabinet Office and departments will have successfully achieved the largest restructuring of public bodies for many decades, and provided clearer accountability to elected politicians for some spending, if they succeed in carrying through all the changes they plan.

"However, they are not doing enough to secure value for money. I would expect departments to have a better grasp of the costs of reorganising bodies and of carrying on functions that have been transferred."

Notes for Editors

1. Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained from The Stationery Office on 0845 702 3474.

2. The Comptroller and Auditor General, Amyas Morse, is the head of the National Audit Office which employs some 880 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.

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