AUDITING THE EFFICIENCY OF NATIONALIZED INDUSTRIES: ENTER THE MONOPOLIES A MERGERS COMMISSION
| Author | MAURICE R. GARNER |
| DOI | http://doi.org/10.1111/j.1467-9299.1982.tb00491.x |
| Published date | 01 December 1982 |
| Date | 01 December 1982 |
AUDITING THE EFFICIENCY
OF
NATI
INDUSTRIES: ENTER THE MONOPOLIES A
MERGERS COMMISSION
-
~~ ~
MAURICE
R.
GARNER
For
over thirty years, there have been no arrangements for the systematic audit
of
the
efficiency and effectiveness of British nationalized industries. In November
1981,
the Government announced their intention to introduce such audits on a regular,
programmed basis and assigned the responsibility to the Monopolies and Mergers
Commission. Using two of the Commission’s reports, this essay contests the opinion
that efficiency audits, as distinct from effectiveness audits, require pre-determined
performance criteria. But whilst recognizing both the advance in Whitehall thinking
represented by the new arrangements and the quality
of
the audits
so
far completed
by the Commission, the essay questions the decision
to
assign this function
to
the
Commission, rather than the Comptroller and Auditor General, and expresses doubts
about the extent
to
which the new arrangements will contribute to proper parliamentary
control and accountability in the case of public enterprises.
’Robson! thou shouldst be living at this hour!’
It
was
in
1960 that you wrote:
‘The Webbs rightly regarded publicity and measurement as the two most
potent instruments of efficiency and progress in a socialist commonwealth;
and we cannot afford to abandon them merely because the governing
boards of public corporations say they cannot bear any demonstration that
their handiwork has not attained perfection. This is mere vanity, and we
cannot pander to such a human weakness in seeking to attain the highest
standards of performance in the nationalised industries.’ (Robson 1962, 205).
Some years later, in evidence to the Select Committee on Nationalised
Industries
(SCNI),
you tried again, recalling that you had ‘advocated
for
many years the establishment of an Efficiency Audit Commission to assess
the work of the nationalised industries,
to
draw attention
to
weaknesses and
to make suggestions for improvement‘
(SCNI
1968, vol.
11,
534).
For
the
rest of your long life you continued your advocacy
of
efficiency auditing but
not until the year after your death was the principle of regular examination
of nationalized industries’ efficiency by a permanent external, and, to some
extent, independent commission, formally conceded by the Government.
With your deep understanding of politics and public administration you
would probably have seen nothing surprising in the time it took for the
concession to materialize, despite its seeming benefit to the public;
you would, however, have certainly asked what the concession portended
Maurice Garner is Visiting Professor, London School
of
Economics and Political Science.
Public Administration Vol.
60
Winter
1982 (409-428)
0
1982
Royal Institute
of
Public Administration
410
MAURICE R. GARNER
for the Morrisonian concept of the public corporation at ’arm’s length from
government which at one time you greatly admired; and you would have
wished to consider whether the Government’s announced arrangements for
implementing its concession of principle were likely to operate as much to
the advantage of Parliament and the public as to the satisfaction of ministers.
Here then, from an erstwhile student, by way of tribute to your advocacy
of
efficiency auditing of nationalized industries,
is
an essay aimed at focusing
attention upon the issues involved and throwing light upon them. For this
it is necessary to set the Government’s announcement of
30
November 1981,
in its historical context.
STALEMATE
FOR
THIRTY YEAR§
A
Limited Government Responsibility
The leitmotiv of the nationalization statutes was the complete responsibility
of the boards for the management
of
their industries. Efficiency was
explicitly the boards’ affair. Thus, in the Electricity Act of 1947, the British
Electricity Authority was given the duty ’to develop and maintain an
efficient, co-ordinated and economical system of electricity supply’ and it
became the duty
of
the area boards ’to plan and carry out an efficient and
economical distribution of those supplies (of bulk electricity) to persons in
their area who require them’; thirty years later, under the Aircraft and
Shipbuilding Industries Act, 1977, it was still
to
the newly constituted British
Shipbuilders that the duty was given in S.2 (2) ’to promote and secure the
promotion by its wholly owned subsidiaries
of
the efficient and economical
design, development, production, sale, repair and maintenance of ships and
slow speed diesel marine engines’. Whether
or
not they had intended
to
go
so
far, ministers had to recognize very early on that it had become a
debatable point whether they were legally answerable for even the general
efficiency of the boards (Chester 1975, 960); however, rising public criticism
of the industries’ performance soon brought it home to ministers that they
would not escape electoral accountability for the boards’ efficiency,
so,
as
early as 1948, the issue of efficiency auditing was under discussion within
Whitehall and between ministers and the boards. Whilst ministers were not
fully agreed on their objectives, the board chairmen, by contrast, were united
in their opposition to a systematic examination of their industries’ efficiency
and it was the Select Committee on Nationalised Industries that eventually
came into being and not an efficiency audit commission (Chester 1975, ch.X).
By the time of the first White Paper on the nationalized industries, the
Government’s recognition of its responsibility for the efficiency
of
nationalized
industries had changed only marginally
-
the White Paper said ’the task of
government is to ensure that the industries are organised and administered
efficiently and economically to carry out their responsibilities’ (Treasury
1961. para.2). By the time of the second White Paper however, stimulated
by the requirements of its productivity, prices and incomes policy and also
to some extent protected by it from the criticisms of the boards, the
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