Opinion: Killing off quangos is more complicated than it sounds

Opinion is divided about the reasons for – and the efficacy of - the proposals to scrap more than 190 public bodies and merge many others. Although a key plank of the ­Government’s public sector reform ­programme, the stated aim of the ­proposals is to “increase accountability” rather than to cut costs. Everything will be done, we are told, to avoid job losses.

But what are the implications for the many thousands of employees working in the public bodies destined for the flames? The Government’s proposals do not answer this question. Whether employees lose their jobs will depend on the fate of their employing body. In some cases, affected employees will transfer to newly merged bodies or the Government department which sponsors their current employer.

In others, where a quango disappears ­altogether, there will be redundancies.

Where the affected employees transfer to a new body or department the main employment law issue will be whether they retain their terms and conditions of employment. This question, in turn, will depend on the legal means by which the transfer is effected. The Transfer of ­Undertakings (Protection of ­Employment) Regulations 2006 (TUPE) normally ­protect the rights of transferring employees in these circumstances. ­

However, the TUPE regulations contain a key exemption in relation to certain ­Government-sponsored reorganisations. This was tested recently in the case of Law Society v Secretary of State for Justice and Office for Legal Complaints.

The Law Society sought to challenge the creation of the new independent Legal Ombudsman (LeO) which was established under the Legal Services Act, largely in response to its own poor record of handling complaints against solicitors. The Law Society contended that liability for its 350 complaints handing staff and their ­redundancy payments should transfer to LeO under the TUPE regulations when LeO became operational on 6 October this year. The High Court concluded, however, that the TUPE regulations did not apply and that the ensuing redundancy costs would remain with the Law Society.

The Government has promised to ­introduce a public bodies bill empowering departments to cut or change the ­functions of statutory bodies. It remains to be seen whether this will also include provisions for the transfer of employees and employment liabilities to the new body.

There is also the thorny issue of comparability of terms and conditions.

In many cases the quango under threat will have the equivalent of private sector remuneration policies. By contrast, civil service pay rates are often higher than in the private sector, supplemented by generous pension and redundancy rights.

Will departments ring-fence less ­generous terms and conditions of the transferring employee or level them up? Central Government departments and agencies do not always make the ­commercial decisions which are second nature in the private sector. There is already anecdotal evidence of the ­assumption being made that transferring employees will be offered the more ­generous rights of their new colleagues, even though this will raise the cost base of the function which has transferred.

The employment law and HR issues involved in reorganising, merging and ­disbanding public bodies are complicated - it’s not just a case of switching off the
funding. It remains to be seen whether the Government will take this opportunity to act strategically to maintain the efficiencies and savings already being made by some of the bodies under threat, or whether it will simply add cost to the public purse.