Spending & Receipts Transparency as a Consequence of Accepting Public Money?

One of the things I’ve been pondering lately is the asymmetry that exists between the information disclosures that public bodies are obliged to make compared to private ones. My gut feeling is that the public bodies may be placed at a disadvantage by these obligations compared to the private companies, though I guess I need to find some specific examples of this. (Cost may be one; having to release data that can be used by competitors in a procurement exercise may be another; if you have any good examples, please post them in the comments…)

To start with, let’s see how the field is currently set in the area of “transparency” (at least, in a spending sense).

Central government spend over £25k
The obligation on NHS bodies to publish spending data on transactions over £25,000 appears to come via HM Treasury reporting guidance on Transparency – Publication of spend over £25,000 (9th September, 2010), which was released in support of a Prime Ministerial letter of 31st May 2010 to Secretaries of State:

2.1 Scope
2.1.1 This guidance applies to all parts of central government as defined by the Office for National Statistics, including departments, non‐ministerial departments, agencies, NDPBs, Trading Funds and NHS bodies. There are a limited number of exceptions to the requirement to publish. The Intelligence Agencies are completely exempt from this requirement. The following are also not subject to this requirement:
• Financial and non‐financial public corporations
• Parliamentary bodies
• Devolved Administrations
2.1.2 However it is recommended that these bodies adopt this guidance as best practice. Separate guidance is being prepared for local authorities.
2.1.3 Where an organisation comprises both a central government body and a public corporation (e.g. the BBC), this requirement applies to the part of the organisation that is classed as part of central government. The requirement does not apply to that part of the organisation that is a public corporation.

I’m not sure what power obliges these parts of government to conform to this guidance, or the requirement to publish spending data for transactions of £25,000?

A further letter – published on 7 July 2011 – added further obligations across a range of central government departments, as well as on the NHS.

(For information on Transparency in Procurement and Contracting see this supplier factsheet.)

Local authority spend over £500
By contrast, local authorities seem to be obliged to release spending data as a result of the publication of a Code of Recommended Practice for Local Authorities on Data Transparency (29 September 2011) (via) which was “issued by the Secretary of State for Communities and Local Government in exercise of his powers under section 2 of the Local Government, Planning and Land Act 1980 to issue a Code of Recommended Practice (The Code) as to the publication of information by local authorities about the discharge of their functions and other matters which he considers to be related”, where “local authority” means:

– a county council
– a district council
– a parish council which has gross annual income or expenditure (whichever
is the higher) of at least £200,000
– a London borough council
– the Common Council of the City of London in its capacity as a local authority
or police authority
– the Council of the Isles of Scilly
– a National Park authority for a National Park in England
– the Broads Authority 5
– the Greater London Authority so far as it exercises its functions through the
Mayor
– the London Fire and Emergency Planning Authority
– Transport for London
– the London Development Agency
– a fire and rescue authority (constituted by a scheme under section 2 of the
Fire and Rescue Services Act 2004 or a scheme to which section 4 of that
Act applies, and a metropolitan county fire and rescue authority)
– a police authority, meaning:
(a) a police authority established under section 3 of the Police Act 1996
(b) the Metropolitan Police Authority
– a joint authority established by Part IV of the Local Government Act 1985
(fire and rescue services and transport)
– joint waste authorities, i.e. an authority established for an area in England by
an order under section 207 of the Local Government and Public Involvement
in Health Act 2007
– an economic prosperity board established under section 88 of the Local
Democracy, Economic Development and Construction Act 2009
– a combined authority established under section 103 of that Act
– waste disposal authorities, i.e. an authority established under section 10 of
the Local Government Act 1985
– an Integrated Transport Authority for an integrated transport area in England

The policy area associated with releasing local spending data is this one: Policy – Making local councils more transparent and accountable to local people

UPDATE: an amendment to the Local Government, Planning and Land Act 1980 extends the code of practice relating to local government publication schemes to include “information about any expenditure incurred by authorities” and “information about any legally enforceable agreement entered into by authorities and any invitations to tender for such agreements”.

So What?

Writing in the Observer (“Open government? Don’t make me laugh”, September 29th, 2013), columnist Nick Cohen wrote:

Public services have always moved from daylight into darkness when private managers take them over. Ever since Labour passed the Freedom of Information Act in 2000, MPs, journalists, bloggers, academics, campaign groups and concerned citizens have been able to examine a prison, say, or medical service up to the moment of privatisation when the possibility of scrutiny vanished.

Sadiq Khan, Labour’s justice spokesman, grasped the need to extend freedom of information to cover the private recipients of public money…

As it is the job of parliament to hold the executive to account, Khan set a test for G4S. He asked for details of its restraint techniques. The company replied that it could not respond to freedom of information requests. The Ministry of Justice would, even though G4S trained the guards and knew what they did while the ministry did not,

The cloak of secrecy may soon be draped over the public sector as well. The Campaign for Freedom of Information is alarmed – to put it mildly – that ministers are talking about making it all too easy for civil servants to refuse to disclose information that the public needs to know – and once had a right to know.

The keenness with which the coalition is protecting commercial interests explains a ministerial manoeuvre that baffled me at the time. When libel reform came before parliament, I, along with everyone else, assumed that the private contractors moving into the NHS, prison service and just about every other service would not be allowed to sue their critics for libel. Under the far-from-liberal existing law, public authorities could not sue because in a democracy voters were free to speak their minds about the providers of public services even if what they said was not in the best possible taste. Indeed, as taxpayers and as the recipients of services, we had a dual justification for saying what we wanted without the threat that crushing financial penalties would bully us into silence.

In the new market-orientated order the coalition was so keen to embrace, any restriction on robust debate would be unfair as well as undemocratic. A failure to allow free speech would mean that businesses and charities could say what they liked about a local authority bidding for a service, but the local authority could not respond in kind for fear of a writ. The Conservatives would not give an inch. In the name of libel reform, they insisted that the freedom to argue in the public square must be restricted and gave private interests an exemption from criticism they denied to public services.

Whatever your feelings about public services and the extent to which private companies could or should be able to deliver them, it seems to me that the different transparency regulations are simply not fair. Public bodies receive public money, so you may argue that it is only right that they should disclose how they spend it. But when the spend with another organisation is so large that it is essentially devolving a significant part of a public body’s budget for spending by a private company, then that private body should be transparent about the way in which it further spends or otherwise allocates the money.

At the moment, transparency in the UK tries to make it possible for use to see who public bodies give money to. If one public body, A, spends with another public body, B, we can also derive information about the receipts that body B has from other public bodies, such as A. If A spends with private company C, we know that A has spent with C but not how C further disburses the funds. If C purchases a service from public body B (which could be a police authority, for example), we don’t know that C spent the public money with B, nor do we know (from the non-existent recipient column of C’s non-existent transparency spending data) that public body B received public money from public body A via private company C.

There is an asymmetry in the way we have sight of public spend when it passes through private hands.

The solution? How about we require private companies that obtain substantial receipts from public bodies (say, over £25k in a single payment) to account for their spend associated with contract in the matter of payments over £500. If the £25k/£500 limits are too onerous (government inflicting red tape on private enterprise, then how about £250k/£10k breakdown. As to the red tape: the public bodies have to dal with it and they are increasingly competing for the same pot of money with the private companies. Come on, chaps, play fair…

The Other Problem – Centralised Receipts

As well as the loss of oversight into how public money is being spent, there is a secondary problem when it comes to tracking the extent to which bodies both public and private receive public money: how do we find how much public money in total a particular private company has received?

On the one hand, we can easily generate reports that show the total amount of public money spent by public body A with private company C by looking at their spending data. (This may be complicated that different companies within a larger group (eg separate recipients C Services Ltd and C Operations Ltd may both be part of C Ltd) all receive separate payments from the body, but as we get more information about beneficial corporate interests we can start to piece together that piece of the jigsaw.)

On the other, to see all public money receipts by a particular company, we need to collate spend data from every public body and then aggregate all the spend with a particular company to get an idea of how much public money it has received, and in what spending areas, from the public sector. (For an early example of this, see Sketching Substantial Council Spending Flows to Serco Using OpenlyLocal Aggregated Spending Data.)

The solution? How about we require private corporate recipients to disclose all public money they have received as part of the deal associated with receiving that public money (a deal that public bodies have to accede to). Again, we may wish to put a threshold on this, even one that has some sort of symmetry associated with it compared to the spending requirements: say, disclosure of £500+ receipts from local government and £25k+ receipts from government departments and other associated bodies.

PS I note a recent Open Letter to the PM from UK civil society organisations that makes a related request:

2. ENABLE PUBLIC SCRUTINY OF ALL ORGANISATIONS IN RECEIPT OF PUBLIC MONEY,

by opening up public sector contracts and extending transparency standards and legislation. Endorse and implement a system of ‘Open Contracting’, ensuring public disclosure and monitoring of contracting from procurement to the close of projects, and amend the Freedom of Information Act so that all information held by a contractor in connection with a public service contract is brought within its scope.

Ah, yes… Information asymmetry around FOI requests. Do you know of any companies who operate parking meters on behalf of a local council? I’d like to see if I could get this sort of data from them…

PPS see also the House of Commons Public Administration Committee, who took evidence on Statistics and open data on October 8th, 2013.

2 comments

  1. Owen Boswarva (@owenboswarva)

    Good post, as usual. I generally agree the public interest would be better served if companies (and particularly those that receive public money) were required to be more transparent.

    I’m less convinced that publication of spending data by councils necessarily places them at a significant disadvantage in the procurement sphere. There is probably some small effect there. However central government has put in place other levers (such as the Public Sector Borrowing Requirement, which restricts councils’ access to capital markets) that militate in favour of outsourcing and privatisation.

    Generally when you are pointing to “guidance” that means there *isn’t* any power that actually obliges public bodies to comply in a statutory sense. My understanding is that the “obligation” of government departments and NHS bodies to publish spending data is based only on the mutual agreement of ministers in Cabinet. Similarly the Code of Recommended Practice for Local Authorities is just that; recommended practice. Last year DCLG did consult on a plan to make the Code a legal requirement, but so far that has not been implemented:

    https://www.gov.uk/government/consultations/improving-local-government-transparency

    This has been a running theme of the current Government’s open data policy; lots of consultations, papers, initiatives etc. but they have done nothing to advance the “information rights” side of the open data agenda by giving it a stronger legislative underpinning.

    Re yesterday’s PASC session on open data you may also be interested in the written evidence, which is now online:

    http://www.parliament.uk/business/committees/committees-a-z/commons-select/public-administration-select-committee/inquiries/parliament-2010/statistics/statistics-open-data/

    • Tony Hirst

      @owen Thanks for clarifying those points about “powers” – I have to admit I don’t really understand how government works!

      Re: disadvantages in procurement – I’m absolutely flying kites here. Something is niggling at me, but I’m not sure what… Maybe being able to see what a council spends on a particular service is inconsequential when framing bids, but is that also true eg in the case of the NHS? One thing I noticed recently was that GP practices are FOIable but their parent groups don’t seem to be. I don’t know extent to which the member practices can be FOI’d about finances (certain financial summaries are released via the HSCIC I think?) but their parent groups presumably can’t be? And so far I haven’t found a list of eg GP practice codes for all practices that are part of Virgin Care or The Practice, for example, which would make for a quick review of finances across those segments, for example?

      Thanks for the link to the written evidence too.. I meant to go digging for that and you saved me the job:-)