I.    Our terms of reference required us to consider the present condition and future development of the "Public Service" with particular regard to the effectiveness of recent and continuing changes and their impact on standards of conduct and service in the public interest. Some matters were excluded from our enquiry-local government, the NHS, schools and institutions of higher and further education-but there were included "all government departments, executive agencies, non-departmental public bodies and other organisations created by and working for the Public Service". (paragraph 1)

  II.    Some of the time available to us was spent looking at RAS. The rest of our time was interrupted by a general election and by two summer recesses. In view of these limitations, we decided to concentrate on the functions of the Civil Service which have been, as we saw it, the subject of the greatest structural change. We have for this purpose looked in some detail at what we regarded as representative departments. We have not, nor do we think that in the time available it was possible or necessary that we should have, looked at all government departments nor at all other organisations created by or working for the public service. We have, therefore, been concerned with that aspect of the Public Service which in earlier times was the responsibility of the Home Civil Service as traditionally understood. Different considerations apply to the Foreign and Commonwealth Service and we have not included these in our enquiry. (paragraph 4)

  III.    The Northcote-Trevelyan Report of 1853 laid the foundations for a non-political Civil Service which was to be uniform and unified, with open competitive entrance examinations and a service-wide classification of staff. The philosophy of that Report dominated the Civil Service until the late 1960s. From then on, beginning with the Fulton Committee report in 1968, changes have been introduced with the intention of producing a Civil Service capable of adapting to the demands of the second half of the twentieth Century and thereafter. These changes have taken place against the background of changes in thinking and practice in commerce and in industry together with extensive social and political changes. In the result there have been structural changes in the Civil Service, the extent of which was, we think, not sufficiently appreciated. (paragraphs 11, 24, 126-128, 152)

  IV.    We believe that it has been a valuable exercise to record the changes which have taken place and the way they have operated-as seen both by those involved in operating them and by outside observers. Only by understanding broadly what the changes are can their effectiveness and their impact be judged. At a relatively late stage in our enquiry we learned that the Government is to publish a White Paper on the Civil Service. We believe that the evidence we have recorded and the views we express on the basis of that evidence will be relevant and helpful both to the preparation of, and the public discussion about, the Government White Paper.

  V.    There have been three main types of change:

(a)  privatisation;

(b)  attribution of functions to non-departmental public bodies;

(c)  attribution of functions to units within departments called Executive Agencies. (paragraphs 129-133)

  VI.    The test for the privatisation of Civil Service functions, so far as relevant to our enquiry, appears to have been whether it was necessary to keep a particular function within the Civil Service and, if not, whether it could be more efficiently dealt with outside under commercial conditions. In looking at RAS in the first part of our Report we thought that such a step should not have been taken because of the nature of the function. We have not, however, received evidence of other such privatisations even where the privatisation was initially controversial to suggest that the process should be reversed. We do, however, recommend that in good time before the existing contract dealing with the services provided by RAS is due to terminate experience during that period should be reviewed, and it should be considered whether and on what terms those services should continue to be provided by the private sector. (paragraphs 131, 132, 274-275)

  VII.    There has, however, been a greatly extended use of contracting out by departments, though this in one way or another no doubt always existed. For highly specialised activities of information technology this process seems to have been necessary; for the supply of goods and services readily available commercially it no doubt made good sense. (paragraphs 89, 104, 133, 134, 191, 227)

  VIII.    A particular question arose in relation to prisons. No prison has been privatised though particular services have been contracted out and some private prisons have been established, though they do not take prisoners in the highest security category. We received evidence from the Director General of Prisons that private prisons have been found to be satisfactory, though the Prison Officers' Association objected in principle to them, and it seems to us that interchangeability of staff and functions between state and private prisons might be difficult if such interchange were necessary in an emergency. The Committee also notes the view of the Prison Reform Trust that agency status offers a more appropriate management structure for the Prison Service than any alternative model. This is plainly a controversial issue and the use of private prisons and the contracting out of services by state prisons needs to be carefully monitored as we have no doubt it is by the present Director General. (paragraphs 274-276, 341-344)

  IX.    In the case of the privatisation of some nationalised industries Regulators have been appointed. Their function in safeguarding the public interest is of great importance and it will be valuable in due time to review both the kinds of regulator which have been appointed and the way in which the regulators have respectively operated. (paragraphs 105-110)

  X.    Leaving aside privatisation no single coherent policy has been suggested to indicate whether a function previously carried out in the traditional Civil Service should be attributed to non-departmental public bodies or to an executive agency within the department. (paragraphs 158-160, 168, 170)

  XI.    There is, however, a real distinction in that non-departmental public bodies, and there are many different kinds, are more independent and more autonomous and the staff who are employed there are not normally Civil Servants. The staff are often employed on short term contracts. (paragraphs 161-167)

  XII.    The term Executive Agency is in some ways misleading, since, as a general rule, the agency, to which are attributed particular functions, remains close to the core department. It is staffed by Civil Servants; its chief executive, though having some independent functions, is ultimately supervised by the Head of the Department and is answerable to the Minister. It is not an independent agency. (paragraph 161)

  XIII.    Thus, though non-departmental public bodies have in a real sense been hived off an executive agency remains essentially a part of the department.(paragraphs 171, 172, 191)

  XIV.    Some functions remain those of the central, or as it has been called, the core department. (paragraphs 148-150)

  XV.    There is an underlying notion that the central department is responsible for policy, the agency for particular operations. This distinction is not clear cut and does not really work since the two matters overlap and each affects the other. The degree of overlap moreover varies considerably from department to department. (paragraphs 311-349)

  XVI.    On the evidence which we have heard the executive agencies have performed well and have led to greater efficiency. We refer particularly to the Department of Social Security where despite initial problems with the Child Support Agency the main agencies (Contributions and Benefits) have operated well giving better service to the public. (paragraphs 368-382)

  XVII.    These changes of organisation could have led to the fragmentation of the Civil Service. Some observers consider that such fragmentation has occurred. We are not satisfied that, although divisions of function have taken place, there is what can really be called a harmful fragmentation of the public service. What has been done must however be carefully observed and reconsidered before any further structural changes are made. It is clearly desirable to ensure that essential policy decisions remain within the core Civil Service. (paragraphs 192-194)

  XVIII.    The Civil Service traditions of integrity, loyalty to the Crown, commitment to the task and lack of political bias have been responsible for the high regard in which the Civil Service has been held. These qualities, together with the principle that Civil Servants are constitutionally the alter ego of their Ministers with not merely the right but the duty when necessary to proffer unwelcome advice to Ministers, mean that a post in the Civil Service is not merely a job but is genuinely a form of service to the public, so that analogies with the terms and conditions of employees in the private sector must not be pushed too far. (paragraphs 183, 247-259, 263-267)

  XIX.    It is of the greatest importance that these qualities, cumulatively constituting what has been called the Civil Service ethos, should be maintained. They are not applicable as such in those areas which have been privatised, though of course staff there will also feel a sense of loyalty and commitment to the particular enterprise. They are, however, as applicable to the executive agencies as to the core Civil Service departments. Essentially they are also applicable to non-departmental public bodies. (paragraphs 260, 261)

  XX.    The 'ethos' is closely linked to the morale of the Civil Service. A view has been expressed that morale is currently very low. By some witnesses the main reason put forward was that of low pay. On the other hand there seems to us little doubt that the substantial reduction in the size of the Civil Service, the fact that Civil Servants have to accept that they may not necessarily have a career for life and the very substantial changes which have taken place in a relatively short period have had a very unsettling effect on parts of the Civil Service. They have produced an atmosphere of uncertainty and in some quarters maybe discontent. (paragraphs 281-288)

  XXI.    There is a likelihood that when outsiders are recruited by competition to top positions, existing officials, both at the top and lower down, will individually be disappointed by the effect on their promotion prospects. We have not, however, had evidence that bringing in outsiders at the top has so far had a generally harmful effect on ethos or morale-indeed some evidence was given to suggest that by advertising top posts to open competition a challenge was created which was not unwelcome. Nor have we had evidence that this ethos in the higher grades of the administrative Civil Service has been damaged by the structural changes which have taken place in particular by the creation of the executive agencies. (paragraphs 196, 197)

  XXII.    It must be accepted that change is always capable of producing an unsettled atmosphere. On the other hand the factors referred to in the previous two paragraphs cannot be ignored or discounted simply because it has always been the case that legally Civil Servants could be dismissed at will by the Crown and because in commercial concerns employees cannot assume a career for life. The Civil Service both now and in the future must be considered as being in a special position. It now needs a period in which to assimilate and fine tune the recent organisational changes and to reflect upon them. (paragraphs 140 and 287)

  XXIII.    The role of the Civil Service is of great importance to the State; it is crucial for the future well-being and efficiency of the Civil Service that the ethos and morale to which we have referred must not only be monitored but must be consciously nurtured. This is no doubt the function in the first place of heads of departments and ultimately of the Permanent Secretaries and the Head of the Home Civil Service. (paragraph 297)

  XXIV.    At the Ministerial level the overall responsibility for protecting the ethos and morale lies in the first place with the Minister for Civil Service (i.e. the Prime Minister) and the Chancellor of the Duchy of Lancaster as Head of the Office of Public Service. But all Ministers as guardians of the public service should bear the responsibility regardless of their particular portfolios to uphold and sustain the traditions and the ethos of an impartial, dedicated, non-political Civil Service. Indications that Ministers have at times (and it may be exceptional) been unduly dismissive of the proper role of their officials is disturbing since it can adversely affect both ethos and morale. (paragraph 298)

  XXV.    This responsibility should be spelled out in the Ministerial Code (July 1997). It is a matter for consideration whether such responsibility should be included expressly in the Civil Service Act the introduction of which, on balance, we favour. We recommend that it should be so included. (paragraphs 298, 415)

  XXVI.    Protecting the ethos and morale is of course important for those in post. It is not, however, important just for them. It is an important feature in the recruitment of new Civil Servants of the necessary calibre. Reducing or damaging the ethos and lowering morale would provide a serious deterrent to high quality candidates. That would in the long term be seriously damaging to the public interest.

  XXVII.    Chief Executives of agencies must remain answerable to Ministers and Ministers must in the end be answerable to Parliament for what is done in the agencies as in the core Civil Service. Chief Executives should, however, be able to appear before select committees and be answerable on behalf of Ministers. (paragraphs 192, 367)

  XXVIII.    In 1974, a system was introduced whereby senior Ministers were able to appoint political aides to be paid from public funds, in addition to non-political aides who served as specialist advisers. Parallel to that development funds were made available to parties in Parliament to enable them to recruit political staff. Over the last twenty years a new type of political adviser has grown up who move in and out of Government with their Ministers. We received no evidence that the system of political advisers had been abused or had caused resentment from the established Civil Service. It is a matter of concern, however, that under successive administrations, legitimate areas of activity could become blurred. (paragraphs 42, 255, 256)

  XXIX.    Thus in particular Civil Servants could be tempted or encouraged to undertake party political activity; and political advisers may try to extend their own briefs to areas which are properly the responsibility of established Civil Servants. A number of witnesses testified that such a mix was healthy and productive. However, to safeguard the Northcote-Trevelyan principles in terms of both recruitment and conduct clear guidelines need to be set out which protect the neutrality and independence of the Civil Service whilst opening up access to Ministers for political advice in their work.

  XXX.    We consider that the question of structural change in the Civil Service is one of great importance, and Parliament should be prepared to devote time to its careful consideration. We therefore recommend that the Civil Service Act, if adopted, should include a requirement for the Government to report annually to Parliament on recent and proposed structural changes to the Civil Service. We further recommend that whenever such a Report is received, it should be referred to a Select Committee set up for the purpose of considering it. We think it desirable that the Government's Report, together with the Committee's Report on it, should then be published together with a recommendation as to whether the Committee's Report is made for information or debate. (paragraph 226)

  XXXI.    The evidence we have received has shown that the current Civil Service has coped in the highest traditions of the Civil Service with the change of Government which occurred in May 1997. We have also received much evidence testifying to the continuing high standards of efficiency, integrity, impartiality and intellectual rigour which characterise the Civil Service. We pay tribute to the Civil Service for maintaining these qualities so well. (paragraphs 263-265)