A plan by the government to cut the number of quangos is unlikely to deliver substantial savings and could even increase costs unless there are major reforms to how arms-length bodies are run, a new report has warned.
Quasi-autonomous non-governmental organisations, which deliver services ranging from nuclear commissioning and teacher training to arts grants and national savings, are a prime target for public spending cuts, as the coalition government tries to slash the UK's £154.7bn budget deficit.
Critics claim that quangos, which account for about 13% of total government spending, create unnecessary bureaucracy and are unaccountable.
The coalition government has already announced plans to close the Qualifications and Curriculum Development Agency and also Becta, which advises schools on technology.
The government is holding a review to decide the future of remaining quangos, also known as arms length bodies (ALBs).
One of the arguments for closing quangos is the potential to save public money, but according to a report by the Institute for Government (IfG) – Read Before Burning – a cull might not create savings unless the government tackles "deep-seated problems" about how quangos are structured, run and regulated.
Any big savings will come from reforming the big quangos. According to the IfG, three quarters of expenditure by "non department public bodies" is tied-up with 15 large organisations, including the Learning and Skills Council, Nuclear Decommissioning Authority and Higher Education Funding Council for England.
"It will be here that the greatest savings could be found, rather than in the long tail of smaller bodies," says the IfG report, which is based on a year of interviews with quangos and analysis of their spending.
However, restructuring public bodies can be expensive. Scrapping quangos and incorporating their functions into government departments, may not create savings and could even add to government costs, the IfG says.
The IfG estimates that 51 reorganisations of central government departments and their quangos carried out between 2005 and 2009 cost a total of about £780m.
Some 85% of this cost was attributed to establishing and reorganising quangos.
"There is a cost attached to creating a new department and then disbanding it again," says Ian Magee, a co-author of the IfG report and a former chief executive officer of three executive agencies.
"It's fine to reduce duplication and get some economies from that but it isn't a numbers game. You don't necessarily achieve the savings that you want by saying, for example let's cut 100 of these [public] bodies."
The IfG report says that although many quangos perform a useful function, the complexity and differing structures of the organisations (there are at least 11 types of quango) is causing "duplication and policy coordination problems".
Perhaps more alarmingly, the report says that it found examples of "both micro-management and institutional neglect" of quangos, resulting in "low trust" and sometimes in "downward spirals of institutional conflict."
Reforms to quangos in order to make them more efficient and transparent
The IfG report calls for a series of reforms to quangos in order to make them more efficient and transparent. Recommendations include: performance reviews every three to five years for quangos spending more than £50m; ministerial "sponsors" of quangos should be briefed thoroughly on their quangos; and the government should publish a list of all quangos, details of their expenditure and lead officials sponsoring them.
Most quangos contacted by Guardian Public declined to comment on the IfG report.
But Christopher Banks, chair of the Public Chairs' Forum, which aims to improve the efficiency and of public services in the UK, and represents quango leaders, says he welcomes the IfG report.
"The report sheds light on some of the key challenges faced by ALBs and their sponsoring departments and makes helpful recommendations on how this complicated landscape can be improved," he says.
Alan Langlands, chief executive, of the Higher Education Funding Council for England (HEFCE) adds: 'We agree that there is a need for the government to scrutinise arms-length bodies." He adds that a recent external review of HEFCE by Dame Sandra Burslem judged it to be a "high-performing" organisation.
The Local Government Association (LGA) which has raised concerns over the number of quangos and their perceived lack of accountability to the public, declined to comment on the IfG report.
Last week, the LGA claimed that devolving power and budgets from public bodies including quangos and Regional Development Agencies to local councils and groups of councils could save up to £100bn over five years.