Delegation in Hard Times: The Financial Management of Arm's Length Bodies in the UK

• Date: 01 August 2016
• Author: Katherine Tonkiss
• Published date: 01 August 2016
• DOI: http://doi.org/10.1111/faam.12089

Financial Accountability & Management, 32(3), August 2016, 0267-4424

Delegation in Hard Times:

The Financial Management

of Arm’s Length Bodies in the UK

KATHERINE TONKISS*

Abstract: This paper explores the effectiveness of financial management tools

in regulating the use of resources by arm’s length bodies (ALBs) in a period of

fiscal stress. The paper presents research undertaken into the implementation of a

new financial management tool for ALBs in the UK since the 2008 financial crisis.

Drawing on conflict ambiguity theory, the paper shows how the effectiveness of such

tools is affected by deep-rooted tensions implicit within public governance. This gives

rise to micro-level conflict over the means of achieving fiscal regulation, underpinned

by macro-level ambiguity over the logic of governance pursued by the government.

Keywords: ambiguity, arm’s length bodies, control, independence, quangos

INTRODUCTION

In the context of fiscal stress brought about by the 2008 financial crisis and

subsequent economic recession, the question of how best to secure efficiencies

has become pressing for governments around the world, and is also a central

concern for scholars examining the impact of fiscal stress and austerity on

public governance and accountability (Peters, 2011; and Pollitt, 2010). Many

governments have favoured ‘cutback management’, a strategy of top-down

regulation of resource use to secure savings made necessary by tighter public

sector budgets (Caperchione et al., 2014; and Pandey, 2010). Yet implementing

such centrally imposed financial control measures is significantly challenging

in contexts where decades of delegation and contracting out have given rise

*The author is Lecturer in Sociology and Policy at Aston University. She is grateful to Ron

Hodges, Chris Skelcher, Matthew Flinders and Katharine Dommett for helpful comments

on previous drafts of this paper. She also acknowledges the support of ESRC grant ref.

ES/J010553/1 ‘Shrinking the State: Reforming Arm’s Length Bodies in an Age of Austerity’.

Address for correspondence: Katherine Tonkiss, Lecturer in Sociology and Policy, School

of Languages and Social Sciences, Aston University, Birmingham B4 7ET, UK.

e-mail: k.tonkiss@aston.ac.uk

C

2016 John Wiley & Sons Ltd 362

DELEGATION IN HARD TIMES 363

to complex networks of governance actors, multiple accountabilities and a

weakened role for central government (Almquist et al., 2013; and Flinders,

2004). This issue is illustrated particularly well in the case of arm’s length

bodies (ALBs; also called independent agencies, public bodies or quangos) which

spend public money to deliver key policy objectives but exist at ‘arm’s length’

from ministerial control and therefore have traditionally enjoyed far greater

autonomy than government departments are typically granted. In the context

of fiscal stress brought about by recession, governments have challenged this

autonomy by imposing more control over the use of resources by ALBs while

still retaining their arm’s length status (McCarthaigh, 2012; and Skelcher et al.,

2013).

The purpose of this paper is to explore the effectiveness of central government

financial management tools in regulating the use of resources by ALBs, in

order to deliver insights into how governments implement cutback management

strategies in complex governance environments. The paper focuses on the

implementation of a new financial controls framework in the UK, which

was introduced in 2010. It employs the conflict ambiguity model of policy

implementation (Matland, 1995) as a theoretical framework. This model, which

has been largely overlooked by the arm’s length governance literature, seeks

to expose and analyse the different and often conflicting perceptions of actors

engaged in policy implementation.

Through the analysis of extensive qualitative data, the paper shows that the

introduction of the new financial control tool in the UK reflects a new model

of financial management of ALBs, where the role of the core executive – and

in particular the Cabinet Office – is strengthened. However, this new model is

shown to have resulted in some perverse effects which limit its effectiveness.

These effects can be explained by micro-level conflict over the means of

achieving fiscal regulation within ALBs, underpinned by contrasting perceptions

of independence and accountability of ALBs which themselves stem from macro-

level ambiguity over the logic of governance pursued by the government. At a

broader level, therefore, the research suggests that the effectiveness of financial

management tools in regulating the use of resources by ALBs is influenced by

deep-rooted tensions between logics of public governance which come to the fore

during periods of fiscal stress.

THE DELEGATED FINANCE PROBLEM

Under the decentralising and deregulating logic of the new public management,

diverse actors and organisational forms were tasked with the delivery of key

policy objectives in order to maximise efficiency through innovative governance

and business-like management practices imported from the private sector. As

a result, accountabilities for the use of public funds became more dispersed

among these complex networks of actors, with a much reduced role for central

C

2016 John Wiley & Sons Ltd