Classification Of Public Bodies Guidance For Departments

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Public Bodies Handbook – Part 1Classification Of Public Bodies:Guidance For Departments

Introduction2

IntroductionThe Importance Of ClassificationAbout This GuidanceAdministrative classification will provide departments with the guidance and ability to createarm’s length bodies that fulfil their governance objectives within a clear, consistent andcomparable system. This system will lead to a simplified and more transparent public bodies’landscape, promoting greater accountability. It will provide a clear and intelligible map of thelandscape and aid public and internal understanding of relationships between public bodiesand government ministers. It will also promote efficiency and effectiveness, helping to drivestrategic reform of the landscape and the development of best practice models.This ‘Classification of Public Bodies’ document is departmental guidance from the CabinetOffice. It sets out the different categories of the UK’s public bodies, and:The Classification FrameworkThe system of administrative classification comprises the ‘framework’, and the ‘process’ ofapplying that framework to public bodies. This is the part of the classification system thathandles the application of the framework as public bodies are established, modified or closed.The framework is the supporting structure to administrative classification.The guiding principle underlying the framework is that the classification of an arm’slength body (‘ALB’) should be determined by the degree of freedom that body needsfrom ministerial control to perform its functions.It is made up of three categories of ALBs: Executive Agency, Non Departmental Public Body,and Non Ministerial Department. The framework establishes the differences between thesecategories and the relationship each has to its home or sponsoring department if it has one.provides a high level introduction to the early decision making process for establishing differenttypes of public bodies;summarises and provides a first point of reference on the main characteristics of each of theALBs that the Cabinet Office focusses on, as well as those of other forms of public bodies; andprovides information on the some of the now defunct or legacy forms of public bodies thatstill exist.This document is to be read as an introduction and high-level guide for establishing publicbodies. It should be read in conjunction with the rest of the Public Bodies Guidance Handbook,which will cover in more detail the actual steps required to setting up ALBs, and relatedissues. Part 1 of the Handbook provides guidance on the classification of public bodies andprovides definitions of the categories of public bodies that operate within the public sector.The main focus is on arm’s length bodies, though for context it also provides an overviewof public corporations, certain Parliamentary bodies, public bodies belonging to the DevolvedAssemblies, Local Government public bodies and some entities that operate within MinisterialDepartments. Whilst there may be other entities that perform a public or Government functionunless they fall into the above forms, they are out of scope, as are private sector entities. Itupdates and replaces the Categories of Public Bodies: A guide for Departments issued bythe Cabinet Office in April 2012.3

IntroductionPublic bodies are diverse, which means classification is not always a simple process. For easeof reference, and to help departments understand the different delivery models that exist, thisguidance sets out the main categories of public body. This guidance covers:The ALBs that are classified.Other non-classified central government and parliamentary entities.Department Specific, Devolved Assembly and Local Government public bodies.Public corporations.The information on bodies that are not administratively classified has been included to providean overview of the wider UK public bodies landscape. It does this in a way that allows forrelatively easy comparison between these different types of public bodies, by looking atthe sorts of factors that impact on their design and creation, then listing the key commoncharacteristics that make up and differentiate each category of public body.The Role Of The Public Bodies Reform TeamThe Cabinet Office’s Public Bodies Reform Team should be contacted by departments that wishto establish new ALBs. Early involvement of all relevant parties, including the department’s centralgovernance (or dedicated public bodies) team and the relevant HM Treasury Spending Team,is important to ensure that a body is classified correctly and in accordance with Governmentand departmental intentions for the body in question. This also allows scope for amendmentsto the governance and control arrangements to be considered before the public body is formallyclassified to a particular category of public body.4

IntroductionThe Public Sector & Its Public BodiesPublic SectorThe ‘public sector’ is defined by the Officeof National Statistics (‘ONS’) with referenceto the European System of Accounts 1995in accordance with EU requirements forGovernments to produce accurate publicsector finances and national accounts. TheNational Accounts (or Sectoral) classificationof entities as public or private depends on thelevel of government control over the generalcorporate policy of the entity being classified.This can be direct or indirect and may beevidenced by indicators that include:The ability to appoint those in control, or thosewho determine the policy of the entity; and / orA right to be consulted over such appointments,or to have a veto over appointments; and / orThe provision of funding accompanied byrights of control over how that funding isspent; and / orA general right to control the day-to-dayrunning of the body.Once the ONS has classified a body as publicsector (its general corporate policy is controlledby the government) it is classified to a particularsub-sector based on its characteristics. Thesesub-sectors are:Central Government:includes Government Departments and theirALBs: Executive Agencies, Non-DepartmentalPublic Bodies, Non Ministerial Departments,and any other non-market bodies controlledand mainly financed by them;Local Government:includes those types of public administrationthat only cover a specific locality and any nonmarket bodies controlled and mainly financedby them (see chapter 5); andPublic Corporations:market bodies controlled by either CentralGovernment or Local Government. Theseinclude any type of public entity that is a marketbody. Market bodies are defined as entitiesthat gain over 50 per cent of their income frompurely commercial activities (see chapter 6).More details on sectoral classification for thenational accounts are available from the ONSwebsite ess/index.html.Public BodiesA ‘public body’ is a formally establishedorganisation that is (at least in part) publicallyfunded to deliver a public or governmentservice, though not as a ministerial department.The term refers to a wide range of entities thatare covered as within the Public Sector. Thisdoes not include forms of public entity thatdo not require staff to carry out their functions,such as public funds or trusts.CharitiesIt is worth noting that some Public Bodies arealso classified and registered as charities bythe Charities Commission. This is a separatesystem of classification that applies toinstitutions that are established for charitablepurposes only and subject to the control ofthe High Court’s charity law jurisdiction. Thisis mentioned for information only, and is notwithin the scope of this document. Moreinformation about UK charities can be foundhere: kes-a-charity-cc4/what-makes-a-charity-cc4Arm’s Length BodiesThe main focus of this document and ofmost interest to departments are ‘arm’slength bodies’ or ‘ALBs’. These are a specificcategory of public body that are administrativelyclassified by the Cabinet Office. ALBs include:Executive Agencies (‘EA’), Non DepartmentalPublic Bodies (‘NDPBs’) and Non MinisterialDepartments (‘NMDs’).5

Chapter OneHow To Reach The Right Category Of Public Body6

Chapter 1 How To Reach The Right Category Of Public Body1.1 Determinant FactorsNew public bodies should only be created ifthere is a clear and pressing requirement, aclear need for the state to provide the functionor service through a public body, and noviable alternative - effectively establishingnew public bodies as a last resort. This isto prevent any unnecessary increase in thenumber of public bodies.Departments should consider whether theproposed functions are needed, and whetherthere are any alternatives to establishing anew public body (this requires at least a basicunderstanding of the various alternatives fordelivering new services or functions). Theseinitial considerations form the first part of thedeterminant factors that lead to the maintypes of public bodies available.1.1.1 Initial ConsiderationsThe following decision tree sets out a rangeof issues that departments should considerwhen setting up new public bodies. This isnot an exhaustive list and departments shouldthink creatively when considering how newservices or functions should be delivered.However, as a minimum, departments shouldexplore the following options as a precursor tochoosing the form of delivery for that function:Chart 1 Initial Questions On Setting Up Public BodiesIs the proposed public or governmentservice or function really needed, andshould it be provided by the state?Yes:RequiredFunctionIs there sufficient demand for this,and does it contribute to Governmentpolicy, committment or legalobligation?No: Consider WaitingUntil Actual DemandBefore Setting Up.Yes: ConsiderNext StepIs it unique or something sufficientlysimilar already being providedelsewhere?Similar: LinkTo ExistingEntityYes: ConsiderNext StepWill this entity operate commercially,covering over 50% of its cost fromcommercial activitiesCommercial: ProvidedBy Public Corporation(Chapter 6)Non Commercial:Look To ProviderShould the function be providedby Government (‘Gov’), Parliament(‘Parlt’), Local Government (‘LG’) ora Devolved Administration (‘DA’)?Gov: Provided By AnArm’s Length Body(Chapter 2) Or WithinDepartment (Chapter 3)Parlt: Provided ByEntity Set Up By& Accountable ToParlt (Chapter 4)LG or DA: ProvidedBy Entity Set Up By& Accountable To LGOr DA (Chapter 5)7

Chapter 1 How To Reach The Right Category Of Public Body1.2 Options Of Public Bodies1.2.1 Administratively ClassifiedGovernment ALBs:1.2.2. Non-ClassifiedGovernment Entities:1.2.3 Non-ClassifiedParliamentary Bodies:Once departments have considered the initialquestions contained within Chart 1, therefollow a series of options for each categorydependent on whether the entity receives over50 per cent of its funding from commercialactivities and then which part of the stateshould be accountable and administer thebody (the Government, Parliament, LocalGovernment or the Devolved Administrations.These are the main recognised categories ofpublic bodies within the UK. They are subjectto ONS National Accounts classification,as Central Government. These categoriesare the preferred method for delivery fordepartment sponsored public bodies(that do not have a majority income fromcommercial activities).These are some of the categories ofGovernment public bodies that are notcovered by administrative classification.They are included in this document toprovide a fuller description of the overallpublic bodies’ landscape. See Chapter 3 formore information on the following forms ofnon-administratively classified governmententities:While the majority of public bodies thatoperate within the UK are established andoperated by the Government, some are setup by and directly accountable to Parliament.See Chapter 4 for more information onParliamentary bodies.The main resulting categories of public entityare as follows:Each of the categories listed below arecovered in greater detail within subsequentsections of the Public Bodies GuidanceHandbook. See Chapter 2 for moreinformation on the following categories ofALB:Executive Agency – a public body that actsas an arm of its home department.Non Departmental Public Body – apublic body that operates separately fromits sponsoring department.Non Ministerial Department – a publicbody that shares many characteristics witha full department, but without a ministerand acts separately from any sponsoringdepartment.Offices and Taskforces – distinct groupswithin a department that are usually set upto deliver on a specific task or project.Working Groups – department specificteams of advisors usually civil servants,though can include external specialists;advice does not need to be independentof the department.Expert Committees – committees ofindependent specialists, administered fromwithin a department.Statutory Office Holder – post createdby legislation to carry out public functions.Department specific – public bodiesthat are uniquely classified by specificdepartments.1.2.4 Non-Classified LocalGovernment & DevolvedAdministration Bodies:Similar to Parliamentary bodies, theseare set up by and directly accountable toeither Local Government or the DevolvedAdministrations. See Chapter 5 for moreinformation on each.1.2.5 Public Corporations:Any public entity that is at least 50 per centfunded through commercial activities will beclassified by the ONS National Accountssystem as a Public Corporation. Theseare only included in this document forillustrative purposes. See Chapter 6 formore information on Public Corporations.8

Chapter 1 How To Reach The Right Category Of Public Body1.3 Category’s CharacteristicsEach of the three categories of ALB possesscertain characteristics (listed below) that areconsistent and comparable, meaning allexamples of a particular category will have thesame characteristics no matter what they door which department they are sponsored by.The individual category specific combinationof characteristics will form a unique list thathelp define (and contrast the differencesbetween) the categories of ALBs and someof the other forms of public bodies.These comparable characteristics are:Sources of Funding / Income:Examines the different public and privaterevenue streams available for funding publicbodies.Relationship to the Home Department:Covering oversight and accountability, bylisting the ability for departments to controlpublic bodies from a strategic, policy oroperational level, as well as addressing howthey are accountable and to whom.Setup and Position in Government:Looks at how public bodies are established,and where they fit within Departments.Duration:Covers how long a public body will operate for.Appointments and Management:Looks at how the public body is managedat a senior level and how that managementstructure is appointed.Status of Staff:Covers whether the staff are civil servants oranother category of public servants, as wellas how they are employed and their status.Financial Accounts:Examines where the public body’s accountsare prepared and published.These characteristics and the options for eachof them are fully covered in Appendix A. Theyare also presented in a comparative tablewhich lists the characteristics for most of thecategories of public body in Appendix B.9

Chapter TwoCategories Of Government Arm’s Length Body10

Chapter 2 Classified Arm’s Length Public BodiesThis chapter covers the three categories ofadministratively classified arm’s length publicbodies, which include Executive Agencies,Non Departmental Public Bodies and NonMinisterial Departments. The following sectionswill provide details on the determinant factorsthat lead to each category and the uniquepattern of comparable characteristics thattypify each of these administrative categories.The following decision tree lists the mainoptions for administratively classified ALBs.2.1 Choice Of GovernmentProvided Public BodyOnce departments have considered the initialquestions contained in the decision tree atChart 1, there follows a series of questions tohelp determine the best option for the publicbody. These cover:The appropriate level of departmental controlwhich will determine whether or not it shouldbe delivered or administrated by a departmentdirectly, or if independence is required; andIf independence is needed, category of ALBis best suited for delivery of the function byvirtue of the degree of freedom it requires fromthe Department in order to fulfil its function.Chart 2 Choices To Determine Categories Of Public EntityIs it necessary for the Governmentto provide the service or function?See Chart 1.Should the service be deliveredor administered internally withina ministerial department?What degree of freedom from theDepartment is required to fulfil thebody’s function?AdministrativeCategories available:Options, dependent on function:YesNo: Requires ExternalTechnical Expertise,& Political ImpartialityAccepts DirectFunding. Close Dept.Policy AlignmentExecutive Agency:Arm Of Department,No Separate LegalPersonalityNDPBYes: DeliveredInternally WithinMinisterial Department.See Chapter 3Accepts Grant In Aid,Can Levy Fund. SomeOperational ControlOver PolicyNon Departmental PublicBody: OperationallyIndependent Of Dept, UsuallySeparate Legal PersonalityNDPB WithAdvisory FunctionFunded from OwnEstimate. GreaterOperational andPolicy Control.Non MinisterialDepartment: DistinctFrom Dept., UsuallySeparate Legal PersonalityIndependentMonitoring Board11

Chapter 2 Classified Arm’s Length Public Bodies2.2 Executive AgencyExecutive Agencies are clearly designated(and financially viable) business units withindepartments which are responsible forundertaking the executive functions of thatdepartment, as distinct from giving policyadvice. They have a clear focus on deliveringspecified outputs within a framework ofaccountability to Ministers. While they aremanagerially separate, they are independentlyaccountable within their home department,which also reports to Parliament on theiragency-specific targets. Due to this closeworking relationship, executive agencies arepart of their department, and do not havethe same level of legal separation from theirhome departments that other categories ofpublic bodies often possess.Category Specific AspectsVarying in staff and budget size, varying inremit, though generally not wide enough tojustify NMD status, allows departments tomaintain strategic control and policy lead.HM Courts and Tribunals Service (‘HMCTS’)is an Executive Agency that provides courtsand tribunal functions for HM Government.Although there are some tribunals that operateas separate NDPBs, all new tribunal functionsmust be delivered within HMCTS and not asseparate NDPBs.ExamplesComparable CharacteristicsDeterminant Factors:Skills Funding Agency, Planning Inspectorate,Valuation Office Agency.Oversight / Accountability:Dept sets policy, minister accountable toParliament.to provide the service or function?YesSources Of Income:Included in home dept estimate.or administered internally withinExceptionsTrading Funds: Usually EAs that are speciallyclassified by ONS as public corporations.They are a means of financing the revenuegenerating operations of a Department orpublic body which takes them outside thesupply process. They are not separate legalentities and remain part of a Department(or are Departments in their own right).Trading funds are no longer an option forEAs. Existing funds will be reviewed in theordinary course of business and can bereclassified if necessary (see chapter 6).NMDs with EA Status: For a variety ofhistoric reasons the previous classificationsystem allowed a number of EAs to be dualclassified as NMDs. This resulted in a lack ofconsistency between NMDs, and possibleconflicts of governance. In future dual EA/NMD classification is not an option. ExistingEAs with dual NMD classification will bereviewed in the ordinary course of businessand can be reclassified if necessary.Setup & Position In Government:Part of home dept, established by homedept, sometimes under legislation but withoutseparate legal personality.Is it necessary for the GovernmentShould the service be delivereda ministerial department?ExternallyWhat degree of freedom from theDepartment is required to fulfil thebody’s function?”Duration:Permanent.Accepts Direct Funding. Close Dept.Appointments:Minister appoints CEO via a civil servicecommissioners appointment, and non-execchair.Administrative Categories available:Policy Alignment.Executive AgencyYesStaffing:Civil servants.No: RequiresExternal TechnicalExpertise, & PoliticalImpartialityAccepts DirectFunding.Close Dept.Policy AlignmentAccounting:Produce their own but consolidate with homedept.12

Chapter 2 Classified Arm’s Length Public Bodies2.3 Non Departmental Public BodyNDPBs have a role in the process of nationalgovernment but are not part of a governmentdepartment. They operate at arm’s lengthfrom ministers, though a minister will beresponsible to Parliament for the NDPBs.The category also includes NDPBs withadvisory functions, and IndependentMonitoring Boards (‘IMBs’ which arenow included as department specificbodies). They are also set out below, asthey can possess different characteristics.Category Specific AspectsPreviously, there was a distinction betweenExecutive and Tribunal NDPBs. However, asall new tribunal functions must be establishedwithin HMCTS, the Tribunal sub-category is notan available option. Legacy Tribunal NDPBswill remain in place, though for the purposesof this document they are not included, whichallows for Executive NDPBs to be referred toonly as ‘NDPB’.ExamplesComparable CharacteristicsDeterminant Factors:Arts Council England, Competition AppealsTribunal.Oversight / Accountability:Dept. usually sets strategic framework, ministeraccountable to Parliament.to provide the service or function?ExceptionsThere are three NDPBs that are also Crownentities, meaning they are not as separatefrom the Crown as other NDPBs. This hasvarious effects, such as allowing them toemploy civil servants.These are included here as an explanationof the landscape – but are exceptions to therule. As such new Crown NDPBs should notbe established in this manner.Their sources of income: included withinhome department estimate, usually deliveredas grant in aid (though with levy or charges),less likely to alternative fund raising. Theirstaffing: civil servants.Sources Of Income:From Dept. estimate, usually delivered as grantin aid; other sources can include levy powersand charitable donations.Setup & Position In Government:Established and sponsored by Dept. withown separate legal personality, outside ofthe Crown.Is it necessary for the GovernmentYesShould the service be deliveredor administered internally withina ministerial department?ExternallyHow much Independence fromthe department is required?Accepts Grant in Aid, Can Levy Fund,Some Operational Control over PolicyDuration:At least three years.Administrative Categories available:Appointments:Ministers normally appoint the chair and allnon-executive members, and are consultedon the appointment of the CEO.Options, dependent on function:Non Departmental Public BodyNDPBYesStaffing:Public servantsNo: RequiresExternal TechnicalExpertise, & PoliticalImpartialityAccounting:Produce own, consolidated within home Dept.13

Chapter 2 Classified Arm’s Length Public Bodies2.3.1 NDPBs With Advisory FunctionsCategory Specific AspectsThese NDPBs consist of external (non-civilservice) experts who operate in a personalcapacity to form boards or committeesto advise ministers on particular policyareas. They are often supported by a smallsecretariat from the sponsoring department,which also provides funding. They provideindependent specialist advice (free frompolitical control) to departments. There areother forms of advisory entity that exist,such as Expert Committees, that operatesimilarly but as part of their department (seeChapter 3).ExamplesAdvisory Council on the Misuse of Drugs,Boundary Commission for England.Determinant Factors:YesNo: RequiresExternal TechnicalExpertise, & PoliticalImpartialityComparable Characteristics(where different to NDPBs above)Oversight/Accountability:Dept. usually sets strategic framework,advice is impartial and apolitical, with ministeraccountable to Parliament.Sources Of Income:Included in Dept. estimate.Setup & Position In Government:Independent of but established by Dept.without separate legal personality.Appointments:Minister appoints members.Staffing:Committee of Independent specialists(supported by Dept. civil servants as asecretariat).Accounting:Do not produce their own – any incomeor expenditure forms part of the Dept.’saccounts,2.3.2 Independent Monitoring BoardsCategory Specific AspectsIMBs are statutory public bodies establishedby the Prison Act 1952 (and the ArmedForces Act 2006 for the sole military IMB) tomonitor the welfare of prisoners in the UK toensure that they are properly cared for withinPrison and Immigration Centre rules, whilst incustody and detention. They are responsiblefor the state of prisons (and some detentioncentres), including their administration andthe treatment of prisoners. Given the specificnature of IMBs they are better classed asDepartment specific (see Chapter 3).ExamplesHMPs Pentonville, Long Lartin and WormwoodScrubs.Determinant Factors:Comparable Characteristics(where different to NDPBs above)Sources Of Income:Included in Dept. estimate.Setup & Position In Government:Set up alongside new prisons, without separatelegal personality.Duration:Dependent on their home prison.Appointments:Secretary of State appoints board.Staffing:Unpaid volunteers as board.Accounting:Do not produce their own – any income orexpenditure forms part of the Dept.’s accounts,YesNo: RequiresExternal TechnicalExpertise, & PoliticalImpartiality14

Chapter 2 Classified Arm’s Length Public Bodies2.4 Non Ministerial DepartmentNMDs operate similarly to normal governmentDepartments in the functions they perform(though usually they are more specialisedand not as wide ranging in the policy areasthey cover). They generally cover mattersfor which direct political oversight is judgedunnecessary or inappropriate. They areusually headed by a senior civil servant asChief Executive, with an independent Chairand non-executive directors for the board.Some are headed by a permanent officeholder, such as a Permanent Secretary orSecond Permanent Secretary.Category Specific AspectsIn some instances NMDs report directly toParliament, instead of having a sponsoringMinister report on their behalf. However, asthis is relatively uncommon, the NMD optionis only rarely viewed as the best option whensetting up new ALBs. HM Treasury’s ManagingPublic Money guidance raises this issue ofpotentially limited accountability to Parliament.NMDs can sponsor their own public bodies(usually NDPBs).ExamplesComparable CharacteristicsHM Revenue & Customs, National CrimeAgency, Competition and Markets Authority,Serious Fraud Office.Oversight / Accountability:Sets own delivery policies, though Dept. canset the strategic framework, usually ministeraccountable to Parliament.ExceptionsThere are some examples of NMDs thatalso hold Executive Agency status, whichhas resulted in a lack of consistencybetween NMDs. Whilst in practice there isa dominant choice of governance structure,on paper there are conflicts between thetwo categories. As such this practice isto be avoided, and no future NMD shouldbe given dual NMD and Executive Agencystatus. Existing multi-classified bodies will bereviewed in the ordinary course of businessand have their classification reassessed ifand where necessary.Determinant Factors:Is it necessary for the Governmentto provide the service or function?YesShould the service be deliveredSources Of Income:Usually from own estimate; other sources caninclude levy powers.or administered internally withinSetup & Position In Government:Usually established by the PM as a Dept. in itsown right, with separate personality.What degree of freedom from theDuration:Permanent.Greater operational and policy control.Appointments:Sponsoring minister usually appoints boardmembers, though usually subject to preappointment scrutiny by parliament.a ministerial department?ExternallyDepartment is required to fulfil thebody’s function?Funded from own estimate.Administrative Categories available:Non Ministerial DepartmentYesNo: RequiresExternal TechnicalExpertise, & PoliticalImpartialityStaffing:Civil servants.Accounting:Produce own accounts.15

Chapter ThreeNon-Administratively Classified Government Entities16

Chapter 3 Non-Administratively Classified Government EntitiesThis chapter will cover the Government entitiesthat fall outside of the main administrativelyclassified categories of ALBs, (see Chapter 2).It is included for completeness and to provide auseful guide to some of the possible alternativesto ALBs. These are entities that, whilst distinctfrom regular department operations (and insome instances even staffed by external noncivil servants), are still administrated within aministerial department. As such they do notoperate at arm’s length to ministers.The following chart focuses on the questionsthat lead to these non-administrativelyclassified government entities3.1 Choices Of (Non-ALB)Ministerial EntityOnce departments have considered the initialquestions contained in the decision tree atChart 1, the following choices will determinethe best option for the ministerial entity.Will the function or service provided within thedepartment be:By the department’s civil servants (though itcan bring in external support), but as a discreteproject or taskforce; orBy external staff (public servants), as a discreteentity though not administered at arm’s length.Chart 3 Choices To Determine (Non-ALB ) Ministerial EntityIs it necessary for the Governmentto pro

See Chapter 4 for more information on Parliamentary bodies. 1.2.4 Non-Classified Local Government & Devolved Administration Bodies: Similar to Parliamentary bodies, these are set up by and directly accountable to either Local Government or the Devolved Administrations. See Chapter 5 for more information on each. 1.2.5 Public Corporations:

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