Belfast Telegraph

Saturday 29 November 2014

Complex question of our quangos and accountability

The governance of the Housing Executive has become a major issue
The governance of the Housing Executive has become a major issue

The governance and operational flexibility of the Housing Executive is now too tightly constrained because, organisationally, it is deemed to be part of, and controlled by, government and subject to government financial rules which are an obstacle to improved arrangements.

The Housing Executive position raises a wider question. How much operational freedom and flexibility should different 'quangos' have?

These questions raise serious policy and operational questions. There are immediate challenges for institutions such as the Housing Executive, NI Water and the colleges of further education.

Each of these public serving organisations relates to an executive minister and, in differing degrees, they are accountable to and rely on the minister for funding support. Each of these organisations operates with an approved form of governance, usually with ministerial approval needed for some of the board appointments.

The degree of delegated operational decision making for quangos varies. In turn, the degree of delegation has implications for the application of government rules and procedures. One of the critical tests, affecting accountability and operational discretion, is whether a specific quango is assessed to be controlled by the Government.

To illustrate the tension of this distinction, the higher education institutions here exercise a sufficient degree of independent decision making so that they are classified as 'Non-Profit Institutions serving Households' which are not operationally controlled by government. In contrast, the Housing Executive (currently) is assessed as falling within the public sector and this then constrains a number of operational and financial features such as preventing the Housing Executive from financial freedom to borrow funds commercially.

The Stormont Executive has inherited a range of quangos with differing degrees of operational freedom. Events and policy debates mean that some of these public serving organisations now merit closer governance scrutiny.

If a quango is assessed as effectively part of government (or an NDPB non-departmental public body) its finances are regulated on the same basis as a government department. Funding decisions and allocations fall within the annual Exchequer budgetary process. Particularly, capital spending budgets are allocated from the Stormont capital budget

Conversely, as an organisation with greater accounting discretion, outside direct government management, there is likely to be some funding coming from sources other than government and likely to be some discretion on sourcing capital funds.

The Housing Executive illustrates these distinctions. At present it is deemed to be government controlled. It has borrowed capital, but from government sources. Rents and charges are government determined. To achieve useful financial flexibility, the Housing Executive needs to operate to a less controlled regime. Hence the argument that it should be transformed by giving it similar status to that currently held by Housing Associations.

If only because of the need for greater flexibility, there is a compelling need to restructure and reform the Housing Executive.

There are similar arguments for this type of change in other public bodies.

The current trading arrangements for NI Water are complex and confusing: it is a mixture of a government managed NDPB and a discretionary trading organisation. Logically, the NI Executive should give NI Water a clearer governance arrangement where, if taken out of government control, would be allowed to raise its own capital funds in the marketplace and release that extra capital for other infrastructure projects. Ministers need to end the present ambiguity.

Another public service where an important degree of operational discretion is commended is in the governance of further education colleges. In England, the rules have been changed by recent legislation and these colleges now have greater freedom and responsibility. In Northern Ireland, if the colleges are to build a major contribution to reducing the skills deficits, there is a need to consider something akin to the recent change in England.

Procrastination of these governance arrangements is unhelpful.

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