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RN Quangos and Governance of the SQA

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					Research Note

RN 00/81 29 September 2000

QUANGOS, AND GOVERNANCE OF THE SQA

The purpose of this note is to provide some background information to the issue of the governance of the Scottish Qualifications Authority (SQA). In doing so, the note places the SQA in the context of the more general debate about quangos. It identifies the different kinds of public bodies and highlights the similarities in the institutional structure of the SQA and other public bodies in Scotland.

WHAT IS A QUANGO?
The term ‘quango’ is an acronym of ‘quasi non-governmental organisation’.1 However, there is considerable confusion and disagreement over what is or is not a quango.

Definition Difficulties:
The concept of the “quango” is one of the most confusing and unhelpful in public policy studies” There is no satisfactory nor universally agreed definition of quango” , …
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Sometimes the term is taken to stand for ‘quasi-autonomous national government organisation’ or ‘quasiautonomous non governmental organisation’ 2 Quangos and the Structure of the Public Sector in Scotland” Richard Parry, Scottish Affairs, no 29, autumn 1999. 3 Weir and Hall (1994) quoted in “Quasi-Government in Britain: The Origins, Persistence and Implications of the Term “Quango”, Michael Cole, Public Policy and Administration, Volume 13 No 1, Spring 1998

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We may have to accept that an agreed, workable, inclusive and exclusive definition of type of body 4 may not be possible to achieve … The concept has been applied to a vast range of bodies that have widely different powers, 5 responsibilities and relationships with central government.” [the term ‘quango’ was]invented to describe a perceived growth in quasi-state agencies, an umbrella 6 beneath which a tremendous variety of organisations shelter

The Cabinet Office defines it in the following terms7
A quango is officially defined as a body which has a role in the processes of national Government, but is not a government department or part of one, and which accordingly operates to a greater or lesser extent at arm's length from Ministers. More simply, this means a national or regional public body, operating independently of Ministers, but for which Ministers are ultimately responsible. Such bodies are formally classified as NDPBs - or nondepartmental public bodies.

The term ‘NDPB’ was first coined in 1980 in Sir Leo Pliatsky’s Report on Non Departmental Public Bodies which was commissioned by then Prime Minister Margaret Thatcher to scope the increase in the number of such organisations. The Cabinet Office’s own Guide for Departments on NDPBs states that each is a body that has a ‘role in the processes of national government, but is not a government department or part of one, and which accordingly operates to a greater or lesser extent at arm’s length from Ministers’.8 In most cases, NDPB employees are not civil servants.9 Generally, each NDPB has its own budget (drawn down from the sponsor department). Their aims and objectives are set out in a Management Statement and they are subject to performance review. They are accountable to the Parliament and to Scottish Ministers. Increasingly, executive NDPBs are established on the basis of statute. The SQA was established by the Education (Scotland) Act 1996. Ministerial power to direct an executive NDPB is subject to judicial review (although ministerial power depends on the precise wording in each relevant statute). The Cabinet Office identifies four different types of NDPB: • Executive NDPBs, which carry out a wide range of administrative, regulatory, executive or commercial functions on behalf of Government. Examples include Scottish Higher Education Funding Council (SHEFC), the Scottish

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Hogwood, B (1995) The ‘Growth’ of Quangos, in F.F. Ridley and D. Wilson (eds) The Quango Debate. Oxford University Press, p.32 5 Quoted in Cole (1998) 6 “Management, Politics and Non-Departmental Public Bodies”, Andrew Massey, Public Money and Management April-June 1997 7 The Quango website, Cabinet Office 8 Cabinet Office (2000), NDPBs: A Guide for Departments, p.6 9 However, important exceptions include the Health and Safety Executive, which is a Crown body that does employ civil servants.

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Further Education Funding Council (SFEFC), Scottish Enterprise and Highlands & Islands Enterprise. SQA is an Executive NDPB. • Advisory NDPBs, which are set up to provide independent, expert advice to Ministers and officials. Examples include the Scottish Valuation and Rating Council and the Local Government Boundary Commission for Scotland. • Tribunal NDPBs, which have semi-judicial functions, e.g. Rent Assessment Panel and the Children’s Panel • Boards of visitors to penal establishments In addition to NDPBs, there are a range of other organisations which are classified by the Government as ‘public bodies’.10 Some observers would also view these as quangos. They include: • Public Corporations, which are publicly controlled and owned but which have substantial freedom to conduct their affairs along business lines. The Scottish Water authorities are public corporations. Nationalised Industries, including Caledonian MacBrayne and Scottish Transport Group National Health Service Bodies, e.g. health boards, Mental Welfare Commission for Scotland, and the Common Services Agency

• •

OTHER PUBLIC BODIES
Some organisations, such as universities, housing associations and local authorities are excluded from the official definition even although they are publicly funded. The Scottish Executive’s consultation paper on Standards in Public Life11 states that:
There are of course important constitutional differences between local authorities and public bodies. Public bodies are not homogeneous, as local authorities are; and their members are not elected but instead are appointed or sit as a consequence of another office they hold.

Other observers argue that the definition should be much wider than that included by the Cabinet Office. For example, Parry includes ‘networks’ (looser groupings of bodies with some claim to expertise or legitimacy, such as the Scottish Social Inclusion Network.12 Plummer claims that Local Enterpise Companies and housing associations should be included.13

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Public Bodies 1999 Scottish Executive (1999) Standards in Public Life: Consultations on the Ethical Standards in Public Life etc. (Scotland) Bill. Edinburgh 12 Parry, R. (1999), Quangos and the Structure of the Public Sector in Scotland, Scottish Affairs, No. 29, pp.12-27 13 Plummer, J. The Governance Gap: Quangos and Accountability. Joseph Rowntree Foundation Findings, September 1994.

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The main principles governing the Government’s policy towards NDPBs are that: a new NDPB should only be set up only where it can be demonstrated that this is the most appropriate and cost-effective means of carrying out the given function; NDPBs should be accountable to Parliament and to the public for the way they carry out their functions; the relationship between each NDPB and its sponsor department should be clearly defined in a way which supports the appropriate degree of delegation and independence of the NDPB, while assuring the accountable Minister and department that financial management arrangements ensure propriety, regularity and value for money; all NDPBs should be subject to a quinquennial review to establish whether the functions of the body are still required; and if so, whether they still need to be undertaken by an NDPB; and bodies which have completed their tasks or are no longer needed should be wound up.
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Executive Agencies In addition, a group of organisations exist that are known as Executive (or ‘Next Steps’) agencies. These are part of the government department and their staff (in most cases) remain civil servants. However, confusion often exists as to the difference between agencies and quangos (especially as some quangos have the term ‘agency’ in their name, e.g. the Scottish Environment Protection Agency and the Teacher Training Agency both of which are actually Executive NDPBs not executive agencies). A relevant example of an executive agency is the Student Awards Agency for Scotland (SAAS). Executive agencies have been established on a rolling basis since 1988. The process technically distances ministers and departmental officials from the day to day running of large parts of their departments. The intention has been to improve service delivery by providing managers with greater operational autonomy. Responsibility for the definition of policy remains within the department. Agencies remain at arm’s length from the responsible Minister, but are closer to the department than are most NDPBs. Each has a ‘framework agreement’ setting out the respective roles and responsibilities of the minister, departmental officials and chief executive. Each has clearly defined targets and objectives, agreed with their department. Their annual reports and corporate plans are approved by Ministers, as are key performance indicators. In most cases, they are funded as part of the department.15 Executive agencies are not normally established on the basis of statute.

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Cabinet Office (2000), NDPBs: A Guide for Departments, pp.5-6 Although a small number have trading fund status that allows them greater funding autonomy

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Some academics have argued that this potentially increases, rather than decreases, the scope for ministerial involvement:
With executive agencies operating within policy and resource framework set by ministers, and agreeing targets for performance, ministers have arguably strengthened control over agencies in which they took little interest when they were executive divisions of 16 departments.

Chief executives are responsible for the operational matters relating to their agency, whereas ministers are responsible for policy. The distinction between the two is sometimes highly controversial (e.g. the dismissal of Derek Lewis, the Chief Executive of HM Prison Service). However, to add to the confusion, all new and some existing NDPBs are now subject to ‘next steps’ rigour in that they too must have a management statement (similar to a framework document), a quinquennial (five-yearly) review and defined performance targets agreed with the sponsor department.

WHY ARE QUANGOS ESTABLISHED?
The Government may decide to establish a public body to deliver services for a variety of reasons. It has been suggested that the real advantage to ministers and departments is that:
They are by definition adaptable and easily established [and] allow central government fairly easily to set up mechanisms outside existing structures and relatively free from political opposition and formal checks to meet its political needs and to carry out its policies. They 17 are in this sense the flexible friends of central government

Hogwood (1995)18 and Parry (1999)19 identify a number of motives that have made Quangos attractive to ministers; • • • • • Distancing: where the allocation of funds by ministers and civil servants would be unacceptable Co-option: enable ‘non-political elites’ to become involved and to contribute to the provision of government services incorporated into government Expertise: to allow acknowledged experts in a subject to become involved and to contribute to the provision of government services Legitimacy: the establishment of a quango can indicate concern with a topical issue Bypassing and outflanking: as an alternative to local government as a provider of services

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Midwinter, A. and McGarvey, N. (2000). In Search of the Regulatory State: Evidence from Scotland Weir, S and Beetham, D (1998) Political Power and Democratic Control in Britain. London: Routledge, pp.203-4 18 Hogwood, B (1995) The ‘Growth’ of Quangos, in F.F. Ridley and D. Wilson (eds) The Quango Debate. Oxford University Press, pp.29-47 19 Parry, R. (1999), Quangos and the Structure of the Public Sector in Scotland, Scottish Affairs, No. 29, pp.12-27

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• • • •

Fashion: when ‘hiving-off’ parts of departments has been ‘in vogue’ Professional or industry self-control: to enable self-regulation by a professional or specialist group Concealing the real size of the central bureaucracy: to reduce the apparent size of the civil service ‘Institutionalitis’: the practice of setting up a new discrete body for each new issue or problem

Another way of viewing quangos is to accord them points along a theoretical spectrum ranging from direct control by the Minister to very limited influence. Thus: • • • • • Executive Departments are closest to the Minister (e.g. the Scottish Executive Enterprise and Lifelong Learning Department) Executive Agencies (e.g. Student Awards Agency for Scotland) Non Ministerial departments 20 (e.g. Registers of Scotland, Scottish Record Office)21 NDPBs (e.g. Scottish Enterprise) A government may wish to place a specific function or activity out to private tender. Control is limited to setting the terms of the contract and ensuring it is adhered to Alternatively the Government may wish to leave the action entirely up to the private sector, and in such cases Government operates only a regulatory role

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THE SCOTTISH QUALIFICATIONS AUTHORITY
The SQA’s mission statement is as follows:
The Scottish Qualifications Authority will enhance education, training and lifelong learning in Scotland through the provision of high quality qualifications which will met the needs of the individual and society and be recognised internationally as a centre of excellence in the 22 design and assessment of qualifications.

The SQA was established under the relevant provisions of the Education (Scotland) Act 1996. Like many other executive NDPBs it merges the functions of previous bodies: the Scottish Examination Board (SEB) and the Scottish Vocational Education Council (SCOTVEC). The general functions (set out in section 2 of the Act are): • • To devise qualifications To determine the entitlement of individuals to SQA qualifications and, where a person is entitled, to award and record such a qualification

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In addition, others have functions that fall within the remit of the Scottish Parliament but which operate on a British basis., e.g. the Intervention Board 21 Although these are also executive Agencies. 22 Scottish Qualifications Authority. Corporate Plan 2000-03, p.1

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• • •

To keep under review and develop SQA qualifications To approve education and training establishments as being suitable for presenting persons for SQA qualifications To make arrangements for, assist in or carry out the assessment of persons undertaking education and training.

Section 3 states that the SQA shall also have the function of accrediting qualifications but that this function will be carried out by an ‘Accreditation Committee’, established for that purpose by SQA (and the majority of whose members will be neither members nor employees of SQA). This is intended to reflect the need for a clear separation between SQA’s awarding and accrediting functions. Other relevant sections specify Ministers’ powers and responsibilities to: • establish the SQA and appoint the majority of its members (the ‘Board of Management’) (section 1) require SQA to provide advice in respect of any matter to which its functions relate (section 5) receive such advice from the SQA in respect of any matter to which its functions relate as SQA thinks fit (section 5) (after consultation with the SQA) give SQA direction of a general or specific character with regard to the discharge of its functions and it shall be the duty of SQA to comply with such directions (section 9)

•

•

•

In the pre-devolution system, the SQA’s sponsor department was the Scottish Office Education and Industry Department (SOEID). Following the establishment of the Scottish Executive:
The SQA is responsible to the Minister for Enterprise and Lifelong Learning for the development and management of assessment and certification of a wide range of 23 qualifications in Scotland (specifically excluding degrees).

COMPARISONS WITH OTHER NDPBS
The following information highlights some of the key aspects of other NDPBs, all of which are involved in enterprise and lifelong learning. The information is taken from the Executive NDPBs 1999 Report published in March 2000 for the Cabinet Office. Figures for staff numbers, income sources and expenditure all relate to forecasts for 1999-00 financial year unless otherwise stated. These figures are

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Scottish Qualifications Authority Corporate Plan 2000-03, p.1

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taken in order to provide a single comparable basis, though figures may have been revised in some instances. In analysing the income and expenditure charts it is perhaps worth bearing in mind one of Parry’s (1999) classifications of NDPB, that of “money mover”. For some organisations the “other expenditure” heading is particularly large (for example the Further and Higher Education Funding Councils), as this reflects their role in distributing funding to the further and higher education institutions.

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Scottish Qualifications Authority (SQA)
Source of statistics; Executive NDPBs 1999, March 2000. Function – “The SQA is responsible to the Scottish Executive for the development and management of assessment and certification of a wide range of qualifications in Scotland” Number of Staff - 512 Income and Expenditure (1999/00 forecast) Expenditure - £32.75m Income - £31.25m
SQA Income sources (99-00 forecast)

Other 1%

Government 21% Lottery 0%

Chargeable Services 78%

Broad expenditure headings 1999/00 (forecast)

Gross capital expenditure 2% Other expenditure 0%

Operating costs 98%

Appointments – The Secretary of State has the power to appoint at least 12 and no more than 19 Board members. The SQA appoints (up to 5) members in proportion to Executive appointments, according to a specific formula set out in the Management Plan. Framework of Control – The legislative basis of the SQA is the Education (Scotland) Act 1996. The Scottish Office Education and Industry Department published a Management Statement and Financial Memorandum in April 1997 (finalised March 1998). This document describes the relationship between the Secretary of State and the SQA and sets out the policy and financial framework within which the SQA is required to operate and discharge its functions. The Enterprise and Lifelong Learning Department is the sponsoring Department for the SQA.
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Highlands and Islands Enterprise
Source of statistics; Executive NDPBs 1999, March 2000. Function – “Highlands and Islands Enterprise (HIE), established in April 1991, operates through a network of 10 Local enterprise Companies (LECs) to deliver sustainable economic and social development in the northern half of Scotland” Number of Staff - 330 Income and Expenditure (99/00 forecast) Income - £78.6m Expenditure - £78.6m
HIE Sources of Income (forecast 1999/00)

HIE Broad expenditure headings 1999/00 forecast
Operating costs 15%

Other 20% Chargeable Services 0% Lottery 0%

Gross capital expenditure 35%

Government 80%

Other expenditure 50%

Appointments to the Board – Scottish Ministers (with the approval of the First Minister) have the power to appoint not less than 6 but no more than 11 members to the board of Highlands and Islands Enterprise. These are persons who appear to Scottish Ministers “to have the knowledge or experience relevant to the discharge of the functions of the body”. Framework of control – The legislative basis for HIE is the Enterprise and New Towns (Scotland) Act 1990. As for both SE and the STB, the relationship between Scottish Ministers and HIE is governed by management statements setting out the financial, managerial and operational frameworks within which the bodies operate. The operations of HIE are also governed by more detailed Manuals of Project and Programme Rules which set out the requirements for specific projects and programmes. The Executive “regularly” revises these documents, after consultation with the bodies concerned. HIE is also subject to a five yearly Policy and Financial Management Review (PFMR), which provides a fundamental review of the very basis of the organisation.

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Scottish Enterprise
Source of statistics; Executive NDPBs 1999, March 2000. Function – “Scottish Enterprise, the economic development agency for lowland Scotland, covering 93% of Scotland’s [population with its LEC Network, handles business development, inward investment, exports, investment, skills development, property, the environment and regeneration" Number of staff – 1,750 Income and Expenditure (1999/00 forecast) Income - £422.9m Expenditure - £477.7m
Scottish Enterprise, Sources of Income, 1999/00 forecast
Other 11%

Scottish Enterprise, Broad expenditure headings (1999/00 forecast)
Gross capital Operating expenditure costs 7% 14%

Chargeable Services 0% Lottery 0%

Government 89%

Other expenditure 79%

Appointments to the Board – As with HIE Scottish Ministers, with the approval of the First Minister, have the power to appoint members to the SE Board. For Scottish Enterprise the minimum number is 8 members with a maximum of 11. As with HIE Chief Executive appointments are made by the organisation with the approval of the Scottish Executive. Framework of Control - The legislative basis for Scottish Enterprise is the Enterprise and New Towns (Scotland) Act 1990. As for both HIE and the STB, the relationship between Scottish Ministers and Scottish Enterprise is governed by management statements setting out the financial, managerial and operational frameworks within which the bodies operate. As with HIE, the operations of SE are also governed by more detailed Manuals of Project and Programme Rules which set out the requirements for specific projects and programmes. The Executive “regularly” revises these documents, after consultation with the bodies concerned. SE is also subject to a five yearly PFMR.

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Scottish Further Education Funding Council (SFEFC)
Source of statistics; Executive NDPBs 1999, March 2000. Function - “The Council which became fully operational in July 1999 seeks to develop the contribution of further education to Scotland’s success, by funding learning opportunities that enable students to achieve personal, social and economic goals, and by supporting the sector to earn a world class reputation” Number of staff - 39 Income and Expenditure (1999/00 forecast) Income – £217.9m Expenditure - £217.9m
SFEFC sources of income (1999/00 forecast)

Chargeable Services 0% Lottery 0% Other 0%

Government 100%

SFEFC broad headings of expenditure (1999/00 forecast)
Operating costs Gross capital 1% expenditure 0%

Other expenditure 99%

Appointments to the Board – Scottish Ministers appoint between members of the SFEFC Board

and

Framework of Control – SFEFC was established on 1st January 1999 by the Scottish Further Education Funding Council (Establishment) (Scotland) Order 1998, under section 7 of the Further and Higher Education (Scotland) Act 1992. The Management Statement and Financial Memorandum set out the Council’s powers, functions and responsibilities, and describes SFEFC’s relationship with the Scottish Executive and Ministers. SFEFC also operates a Financial Memorandum between the Council and the Further Education institutions that it funds. Scottish Ministers are responsible for making funds available and issuing letters of guidance setting the broad policy framework. PFMRs will be conducted at least every five years.
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Scottish Higher Education Funding Council (SHEFC)
Source of statistics; Executive NDPBs 1999, March 2000. Function – “The Scottish Higher Education Funding Council aims to promote the quality and encourage the development of teaching and research in Scottish higher education institutions to help meet Scotland’s needs” Number of staff - 63 Funding and Expenditure (1999/00 forecast) Income - £587m Expenditure - £596.5m
SHEFC sources of Income (forecast 1999/00)

Lottery 0% Chargeable Services 0% Other 0%

Government 100%

SHEFC broad expenditure headings (1999/00 forecast)

Gross capital expenditure 0.01%

Operating costs 0.44%

Other expenditure 99.55%

Appointment to the Board – Scottish Ministers appoint between 12 and 15 members of the Board of SHEFC. Framework of Control - The legislative basis for SHEFC is the Further and Higher Education (Scotland) Act 1992. The Management Statement and Financial Memorandum set out the Council’s powers, functions and responsibilities, and describes SHEFC’s relationship with the Scottish Executive and Ministers. SHEFC also operates a Financial Memorandum between the Council and the Higher Education institutions that it funds. Scottish Ministers are responsible for making funds available and issuing letters of guidance setting the broad policy framework. PFMRs will be conducted at least every five years.
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Scottish Tourist Board
Source of statistics; Executive NDPBs 1999, March 2000. Function – “The Scottish Tourist Board is the statutory body charged with the development of Scottish tourism. It aims to generate economic benefits by promoting Scotland as a tourism destination and encouraging improvements in facilities” Number of staff - 180 Income and Expenditure (1999/00 forecast) Income – £24.6m Expenditure - £24.9m
Scottish Tourist Board broad expenditure headings (1999/00 forecast)

Gross capital expenditure 2% Operating costs 35% Other expenditure 63%

Scottish Tourist Board, sources of income (1999/00 forecast)
Other 2% Chargeable Services 20% Lottery 0%

Government 78%

Appointment to the Board – Scottish Ministers appoint board members of the Scottish Tourist Board under section 1 of the Development of Tourism Act 1969. “the Scottish Tourist Board shall consist of a chairman and not more than six other members”. Framework of Control - The Scottish Tourist Board was established by the Development of Tourism Act 1969. The Tourism (Overseas Promotion) (Scotland) Act 1984 subsequently allowed the STB to actively encourage people to visit Scotland, then subject to the approval of the Secretary of State, in consultation with the British tourist Authority. Financial, managerial and operational Statements set out the relationship with the Scottish Ministers and provide the framework for operation. The STB is subject to the five yearly PFMR cycle.
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Research Notes are compiled for the benefit of Members of Parliament and their personal staff. Authors are available to discuss the contents of these papers with Members and their staff but cannot advise members of the general public.

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