A variety of structural options have been applied to public service bodies, with varying degrees of involvement from the private sector. Table 9-1 shows the breadth of available options, ranging from Department of State to full privatisation.
| Reporting | Governance | Key facts | Examples |
Department | Minister | Minister | • Government department that reports directly to the Treasury |
|
Executive Agency (or Next Step Agency) | Minister | CEO | • Part of Government Department but budget and management are treated separately • Cannot set policy or make decisions about resources • Agency staff are civil servants | • Jobcentre Plus • Companies House • DSDA • Land Registry |
Trading Fund | Minister | CEO / Accounting Office | • Can be a department or part of a department • 18 trading funds are in operation • Duty to observe specific financial targets and government policy set by the Treasury • No separate legal status (from Department), but do have their own capital base and are able to make profits and pay dividends back to their owning Department • 5 TF's privatised (Royal Ordnance, Crown Suppliers, HMSO, Chessington Computer Centre, DERA) | • DSG (ABRO/DARA) • Met Office • Patent Office • Royal Mint • DVLA |
Government Owned Company | Shareholder Executive | Board of Directors | • Limited benefit over trading fund (unless on path to privatisation) | • Competition Commission • English Heritage |
Non-Departmental Public Body (NDPB) | 'Arm's length' from Minister | Sponsor department | • Not directly part of Government • 790 in total in 4 flavours (198 Executive, 410 Advisory, 33 Tribunal, 149 Independent Monitoring) receiving £34.5bn of funding from Government • Also known as Quangos | • Armed forces Museums |
Government Owned Contractor Operated (Go-Co) | a contract | Private sector | • Site and facilities of an organisation owned by the Government • Operations performed by a contractor | • NDA • AWE • National Nuclear Laboratories • National Physical Laboratory |
a contract | Private sector | • A Government service or private business venture which is funded and operated through a contract between government and one or more private sector companies | • Tubelines • NATS | |
Privatisation | one | Private sector | • Full transfer of ownership to the private sector • Often accompanied with regulatory regime | • QinetIQ |
Table 9-1 : Range of commercial options for bodies providing public services
Executive Agencies are part of a government department that are managed in a way that is designed to enable executive functions of the Government to be carried out by a well-defined business unit with a clear focus on delivering specified outputs within a framework of accountability to Ministers111. Whilst they remain legally part of a department, Executive Agencies are treated separately for managerial and budgetary purposes. This form of financing allows more flexibility for a body to manage its costs and to meet lower or higher than anticipated capital expenditure from year to year.
Further independence can be granted by changing the status of a government department, or part of a department (e.g., an Agency) to a Trading Fund. Trading Funds can be established wherever a customer/supplier relationship can be introduced which involves payments for goods or services provided112. Because Trading Funds are required to match income and expenditure, they are encouraged to adopt a more commercial approach. Under this structure, entities such as the as the Met Office and DVLA operate along commercial lines, with the expectation that they are to be self-supporting by generating revenue from their activities. They have their own capital base and are able to make profits, with dividends paid to their owning department.
Non-departmental public bodies ("NDPB") are typically public bodies that are not an integral part of a Government department and can carry out their work at arm's length from ministers.
At the other end of the spectrum there exists the option of full privatisation. Privatisation involves the transfer of ownership of a public body from government to the private sector. It is then answerable to shareholders and is forced to run along entirely commercial principals.
Public-Private Partnerships ("PPP"), on the other hand, are arrangements whereby a publicly owned facility or service is funded and operated through a partnership between the public and private sectors. In the UK, most PPPs are funded via Public Finance Initiatives ("PFI"), in which the private sector provides the initial capital investment in return for future 'rental' payments from public sector. This model is also frequently implemented in situations where it is believed that the private sector can bring superior management and/or operational skills to public services, and ultimately benefit to taxpayers. DE&S manages a number of PFI projects for the MoD.
The Government owned - Contractor operated ("Go-Co") model could be considered a form of PPP since it permits the Government to retain ownership of the assets of a department whilst introducing management skills from the private sector. Instead of injecting financial capital into a public sector organisation or project, the private sector injects intellectual capital. This structural model is widely used in the US, but is still relatively new in the UK. The way in which Go-Cos typically operate will be described presently.
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111 Executive Agencies: A Guide for Departments, Cabinet Office (Oct 06)
112 Guide to the Establishment and Operation of Trading Funds, Her Majesty's Treasury (Aug 06)