The so-called ‘bonfire of the quangos’ was a bit of a misnomer. While the government abolished 285 quangos – correctly termed non-departmental public bodies – it created 173 new public bodies. Of these, 66 were registered as companies.
There are several advantages for the Government in operating some functions through companies. Breaking-up a large department into smaller units can create greater clarity in terms of roles and costs. Their formation as companies can be a precursor to privatisation. Several companies spun-out of public bodies are now privatised – such as Dr Foster Intelligence, previously part of the Department of Health. In some instances, staff can be given an equity stake in the new company, such as MyCivilServicePension, producing incentives to improve performance and efficiency. On the downside, the use of arms length or privatised companies can reduce transparency and accountability.
Ronnie Patton, senior lecturer in professional accounting practice at Ulster University and a member of ACCA’s Public Sector Panel, says: “There is a likely closing of the gap here between the public sector culture and the commercial culture. This heightens the need for accountants in such roles who have commercial acumen. ACCA students and members would be well positioned to take up such opportunities.”
- There were 3,038 companies in government as at March 2014.
- 2,591 of these were academy trusts running schools.
- There were another 218 parent companies, of which 41 are dormant.
- 79 of these 218 were not referred to in the annual report of the sponsoring department.
- The parent companies control at least 229 subsidiaries (not including subsidiaries of subsidiaries).
- The Whole of Government Accounts identify just 69 companies.
Source: ‘Companies in Government’, the National Audit Office.