Select Committee on Public Service Report



  227.    As the evidence set out has shown, one of the most significant developments in the 30-year period the Committee had under review was the reduction in the size and the scope of the Civil Service, with the transfer of many functions from the core of Government to the private sector, by sale or by contract, or to non-departmental public bodies or executive agencies with varying degrees of independence from the Government. The Committee therefore invited witnesses to consider whether there was an irreducible minimum of functions which must remain within the Civil Service; and if so what they were and why they could not be done elsewhere.

  228.    The Council of Civil Service Unions (CCSU) pointed out (Special Report, pp 242 to 243) that between 1979 and 1996 the number of permanent staff in the Civil Service had fallen from 735,000 to 494,000 (a decrease of 33 per cent over 17 years) and that a large number of services had been contracted out in a range of fields including security, reprographics, IT, publishing, maintenance, facilities management, training and many others. In addition many Civil Service bodies had been privatised as complete entities. The CCSU went on "... privatisations are no longer carried out under the guise of efficiency, if they ever were, but are the result of a relentless drive to reduce the size of the Civil Service. It is clear that the focus has switched irrevocably from simply identifying what could be privatised to identifying what, if anything, now needs to remain in the Civil Service".

  229.    The Council of Civil Service Unions went on to give an example of a reason to retain service-provision in-house. They drew attention (Special Report, p 245) to the need for the Civil Service to remain what they called an 'intelligent customer'. "Where technical services are involved, such as in defence procurement or IT, it is recognised that the contracting out of an entire function can leave the purchaser without sufficient in-house expertise to ensure that services are procured which meet the purchasers' needs. This may be in relation to tender specifications, the evaluation of bids or the management of contracts. Therefore, services may need to be retained in-house where there is a need to maintain such an 'intelligent customer' capability".

  230.    Sir Robin Butler, Cabinet Secretary and Head of the Home Civil Service, in his Newchurch Lecture delivered at Imperial College in April 1996 (and subsequently submitted to us in evidence but not printed here), addressed the question of what constituted the core of public functions. He observed that "The shift across the borderline between public and private sector provision in turn leads to the debate on whether there are natural limits to that process and indeed what is the core of public sector responsibility". Britain had no written constitution and had not attempted to define a list of core functions of the State. The term 'privatisation' was often used loosely to cover a wide range of different situations, which could be illustrated thus:

      (i)  The complete transfer of responsibility for the provision of a public service to private ownership (eg gas, electricity and telephone privatisation);

      (ii)  The privatisation of the means of providing a service (eg where the application of wheel clamps is done on behalf of local authorities by private firms);

      (iii)  The transfer to private operators of the use and management of assets which remain in public ownership (eg the production side of the Atomic Weapons Establishment at Aldermarston); and

      (iv)  The introduction of competition or quasi-markets while the Government retains ultimate responsibility.

  231.    Against that background, Sir Robin queried whether there was a core of activities which were, by their very nature, the essential responsibility of Government and which were inalienable- a line over which the privatisers could not cross. It seemed to him that there was a range of functions so inherent to Government, in the widest sense, that in its absence, Government could not be said to exist. The range must include:

      -  The making of laws

      -  The conducting of negotiations with other countries

      -  Ensuring that there was a system of law enforcement

      -  An independent judicial system for deciding criminal cases and civil disputes

      -  Raising revenue to finance the above activities

      -  Making appointments of officials to carry out the above activities.

"Without these functions one cannot be said to have a Government at all, but beyond these it is difficult to see what is inalienable. For example, we may feel that the defence of the realm is a core activity of Government, and yet many governments have used, and continue to use, mercenary armies. We may feel that the collection of taxes or the award of benefits is essentially a Government role and yet the Romans ran an empire in which the collection of taxes was farmed out".

  232.    In Sir Robin's view, in the absence of a written constitution, the one piece of legislation that we had to guide in Britain was the Deregulation and Contracting-out Act 1994, which provided for specific statutory functions to be performed by contractors rather than Ministers, Civil Servants, office-holders or local authorities, subject to orders made under the Affirmative Resolution Procedure by Parliament. "That Act does not allow contracting out to take place for a function if:

      -  To exercise it would constitute the exercise of jurisdiction of any court or of any tribunal which exercises the judicial power of the State

      -  Its exercise or failure to exercise it would necessarily interfere with, or otherwise affect, the liberty of any individual

      -  It is a power of the right of entry, search, or seizure into or of any property

      -  It is a power or duty to make subordinate legislation."

  233.    Sir Robin commented that "what may be transferred under the 1994 Act is the delivery of the function, rather than accountability for it, which remains as conferred by Statute. The implication of these exceptions is that there are certain functions (judicial, law-making, interference with liberty and entry or seizure of property), where overall accountability for the function without actually carrying it out is not enough, and it would be unsatisfactory for the Minister, local authority or office-holder to arrange for people who are not public servants to act on their behalf. In other words, Parliament set some limits to things for which Ministers remained responsible but which they could ask other people to do."

  234.    Dr Peter Barberis (Special Report, p 210) summarised the position as follows "Realistically, certain functions must or will probably have to rest within the public service. Types of function lie within one of three broad categories: those which can be entrusted only to the public service; those for which the public service seems, a priori, to have a special claim; and those for which its suitability is conditional upon 'outputs' as against other competitors".

  235.    In relation to the first of these categories of function, Dr Barberis wrote (p 211) that it would include "matters of high adjudication, dispensing the state's full authority; the judicial system, criminal and administrative, together with non-routine interpretation of state rules and regulations. This category may further embrace any function into which the intrusion of private or partial interests would negate the state's purpose or diminish its legitimacy. For some purposes there must be a body of people who remain above the fray and whose independence and integrity necessitate their being public servants". "Aside from this, there may be a priori reason or thinking that the public service is more (or less) appropriate for certain functions than non-public agents acting on behalf of the state. These are category two functions-for example where questions of consistency, equal treatment or procedural punctiliousness are important. These are among the traditional strengths of classic public bureaucracy. Conversely, where there is a premium upon speed, innovation and 'route one' solutions its claims have been less compelling".

  236.    Professor Hennessy said (Q 1891) "tax farming and prison farming are not a good idea. I have always thought that the state should keep to itself those functions where coercion is required. It has to be Crown servants under discipline".

  237.    The Council of Civil Service Unions responded at some length to the Committee's request for evidence on this issue. In its evidence (Special Report, pp 244 to 246) it said that it did not believe it was productive to try to identify a list of a minimum of functions which must remain within the public service. A better approach was to try to identify a number of features of key services which required their continued provision through public rather than private means. By examining individual functions against these features it was easier to understand both why the functions were already in the public sector and what reasons there might be for retaining them there. The CCSU elaborated on these features under the headings of the following criteria:

  -  the lack of alternative, competitive sources of external supply;

  -  consistency, quality and reliability of service delivery;

  -  efficiency and effectiveness;

  -  depth and range of expertise;

  -  retention of basic intelligent customer capability;

  -  accountability;

  -  integrity, impartiality and independence;

  -  confidentiality, security and political sensitivity;

  -  equality of treatment; and

  -  overriding public interest.

The CCSU believed that each of these criteria provided a justification for services to be provided by the public rather than the private sector.

  238.    In its 1994 White Paper The Civil Service-Continuity and Change (Cm 2627) the then Government affirmed its commitment to the "Next Steps process" of creating executive agencies, but also began to define a limit to that process. It said (paragraph 2.22) "The Government does not, however, envisage extending the formal establishment of agencies into areas of the Civil Service primarily concerned with policy. In these areas, the continued need for close Ministerial involvement in the work and flexibility in organisation and management to meet policy developments agreed by Ministers is not fully compatible with the clear delegation characteristics of agencies. For day-to-day support for Ministers on policy matters, policy divisions on existing lines will continue to be the preferred model, adapted by departments as necessary to deal with changing workloads."

  239.    The Committee received evidence from Sir Terence Burns that this intention had been borne out in practice. Speaking about the extent to which the work of the Treasury itself could or could not be done elsewhere, Sir Terence said (Q 1428) that the bulk of the Treasury's work was about public policy, and described the small groups of professionals in the Treasury "who are dealing with a particular item of work where in the main they will be shadowing what some other part of the system is actually engaged in terms of delivering services to the public and it is work which is at a high intellectual level, it is very fast-moving in terms of very quickly you are moving people from one topic to another topic at quite a rapid pace and I do not think it is work that is really ever going to be suitable for contracting out." He added (Q 1438) that "undoubtedly there is an irreducible core. With the kind of policy work that we do in the Treasury and the sort of work we do for Ministers, I just do not see it being contracted out and being done by outside agencies for Ministers." In relation to the policy process in Whitehall, Sir Terence said (Q 1439) "a lot of the people who are engaged in it are engaged in it because they greatly enjoy public policy, not because they are great managers. One of the things that having Next Step agencies has done is it has enabled us to get much better managers into the bits which need managing and to keep the people who are really outstanding policy advisers in the parts where their talents are also really exploited."

  240.    The importance of retaining a core of Senior Civil Servants to give advice was stressed by Sir Peter Carey (Special Report, p 224). He wrote, "The concept of loosening up the service and opening it to other influence is sound enough, indeed desirable. But it should be recognised that there are certain functions which do not lend themselves to experience imported from other spheres. There is an irreducible minimum (arguably already passed) of functions which not only should be retained within the public service but which must be left in the hands of those whose expertise it is. This expertise is the tendering of objective analysis and advice to Ministers, the preparation and implementation of legislation and the operation of the Whitehall machine through its complex Cabinet Committee structure".

  241.    Sir Brian Barder (Special Report, p 215) said that in considering whether a function was suitable for transfer outside the public service, the key question was Ministerial responsibility. The removal of public sector constraints might permit a function to be performed more efficiently and economically "but has to be balanced against dilution or loss of Ministerial responsibility and Parliamentary control. Current attempts to fudge this-Regulators and Chief Executives, partially answerable in some areas to Ministers and Parliament; the attempt to divorce operational from policy decisions-seem unlikely to prove durable. If a function is to be removed from the public sphere, the loss of Ministerial and Parliamentary oversight and control should be demonstrably acceptable to a broad consensus of inter-party and independent opinion."

  242.    Sir Robin Butler's evidence accords with this. He said (QQ 2077 to 2079) "If I was suggesting one criterion to you by which it ought to be judged as to whether something remains within the Civil Service, it is whether there should be direct accountability through Ministers to Parliament". He went on "It is a question of whether this is something that Parliament wants and thinks it appropriate to question the Minister directly on, and whether politicians should control it". He considered that it was for Parliament to define the matters for which Ministers should account to Parliament.

  243.    Mr Michael Scholar said (Q 1603): "I think the full test for privatisation is where the Government believes that the activity no longer needs to be carried out in the public interest by the Government or the public sector. If you privatise the activity you face the possibility that the privatised body will cease to carry out the activity, so clearly you must believe it would not be against the public interest if that happened." He said (QQ 1606 and 1607) that the core criterion for deciding whether an activity should remain within the public service was whether it should be controlled by Ministers. "If you think an activity should be controlled by Ministers who are answerable to Parliament, you are immediately confronted with a choice between having the private sector do it under contract or doing it yourself. If it is a matter which is very sensitive and which gives rise constantly to policy decisions, I think in that case you will be more inclined to conclude that it should remain as something done by the public service."

The Committee's Conclusions

  244.    The Committee concludes that beyond the most basic functions of passing laws and ensuring an independent judiciary there cannot be said to be an agreed definition of what functions must, as a matter of principle or of practicability, remain within the public service. In the absence of a codified constitution that is perhaps inevitable; but the question of the irreducible minimum remains important because many of our witnesses felt that the Civil Service had been undergoing a process of erosion. Since the erosion seemed to be proceeding rapidly, but apparently with no single fully articulated underlying purpose, the question naturally arose about where it might stop.

  245.    There is no doubt that some witnesses have felt that there was unease and concern about the changes which have been made in the Civil Service. It seems to us that the failure to draw a clear boundary around and explain the process of change has contributed to the uncertainty and feeling of insecurity alluded to by some of our witnesses. Nobody knew where the process would stop, or why. The absence of a clear scheme of underlying principle to explain and justify the changes added to the anxiety. These are matters which we have already raised in this Report (see above, paragraphs 158 ff).

  246.    The Committee acknowledges that it is far from simple to draw a boundary around the irreducible core of Government. To do it, it is necessary to consider what is the proper sphere of Government-a debate which has engaged both those who govern and the governed down the ages. It is nevertheless important that in a mature democracy it should be a matter for open and public debate and an issue in which Parliament should take a keen and vigilant interest. The question of what is the core of Government is as much a matter for the governed as for the governors. It seems to the Committee that it is desirable that the Government should produce its own concept of the irreducible core of functions which must be carried out by the core Civil Service, not least so as to allay the fear that there may be further erosion of the Civil Service in the future.

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