External inspection of localgovernmentDriving improvement or drowning in detail?

Howard Davis, James Downe and Steve Martin

The Joseph Rowntree Foundation has supported this project as part of its programme ofresearch and innovative development projects, which it hopes will be of value to policymakers and practitioners. The facts presented and views expressed in this report are,however, those of the authors and not necessarily those of the Foundation.

© Joseph Rowntree Foundation 2001

All rights reserved.

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Howard Davis and James Downe are Senior Research Fellows at the Local GovernmentCentre, Warwick Business School

Steve Martin is Professor of Public Policy and Management at the Local & RegionalGovernment Research Unit, Cardiff Business School

Contents

PageAcknowledgements iv

1 Introduction 1

2 The rise of inspection 2

3 The inspectorates 6The Benefit Fraud Inspectorate (BFI) 6Her Majesty’s Fire Services Inspectorate (HMFSI) 6Her Majesty’s Inspectorate of Constabulary (HMIC) 7The Office for Standards in Education (OFSTED) 7The Social Services Inspectorate (SSI) 8The Best Value Inspection Service (BVIS) 9

4 Typologies of inspection 10

5 Impacts of inspection 14

6 Alternatives to inspection 17

7 Key issues and challenges 19The credibility of inspectors 20Style versus substance 20Local versus national priorities 21Understanding the causes of failure and of improvement 21Stakeholders’ views of inspection 21The limits of performance data 22Joined-up inspection 23The implications of partnership working 23The capacity to intervene 24

8 Conclusions 25

References 27

We acknowledge with gratitude funding fromthe Joseph Rowntree Foundation for theresearch on which this paper is based.

We are grateful to Pat Kneen, theFoundation’s Deputy Research Director, and tothe project advisory group (John Clarke, LynHomer, David Lamberti, Howard Miller, RogerSykes and Wendy Thomson) for their guidance,support and constructive comments on the earlystages of the research.

Acknowledgements

We also wish to place on record ourappreciation of the assistance that we havereceived from officers at the Local GovernmentAssociation and the Best Value InspectorateForum (together with its constituentinspectorates) in the course of the preliminaryresearch on which this paper draws.

iv

1

This paper is the result of the first phase ofresearch that is funded by the Joseph RowntreeFoundation. It draws on three main sources ofevidence – a review of existing research on theimpact of inspection regimes in the UK,interviews with senior policy makers ininspectorates and the Local GovernmentAssociation, and our research on the impacts ofthe Best Value pilot programme.

The overall aims of the research are toreview the development of inspectionprocedures, their impact on local government,and their effectiveness in promoting change. Itseeks to monitor the implementation of the newinspection regimes and assess in broad termstheir impact from the perspectives of a range ofstakeholders. It is also designed to reflect on theimplications of inspection regimes for relationsbetween central and local government, forpromoting effective and accountable policiesand practices, and for bringing aboutsustainable change in the culture and thinkingof local government.

The aim of this paper is to identify some ofthe key issues relating to the development of

external inspection of local governmentfunctions in order to contribute to the currentdebate about the effectiveness of these regimesas a means of regulating local public services.

The paper therefore provides a preliminaryanalysis of the scope, style, purpose andeffectiveness of the emerging inspectionregimes, and some of the key challengesassociated with external inspection as aregulatory mechanism. We first examine theincreasing importance of external inspection asa means of promoting service improvement.Next, we provide an overview of the remits,resources and approaches of the maininspectorates covering local authority functions.We then examine evidence of the likely impactsof inspection and the range of alternativeregulatory mechanisms. Finally, we analysesome of the tensions that we believe exist withinemerging inspection regimes and the challengesthese pose for central government policymakers, the inspectorates and inspected bodies.

1 Introduction

2

External inspection is not a new phenomenon.According to Rhodes (1981), its origins can betraced back at least as far as the eighteenthcentury (he cites provisions, which had theirorigins in legislation passed in 1786, for a paidInspector General of Prisons in Ireland andnotes that, during the period 1830 to 1860, thenumber of inspection regimes increasedmarkedly). However, the preoccupations ofnineteenth-century inspection were verydifferent to those of today. As Hood et al. (1999)noted, 150 years ago:

Legislation conferring powers on local authoritieswas largely enabling. It determined institutionalstructures, powers, and obligations but did notnormally specify standards in the sense of thelevel of service to be provided, or the mode ofdelivery … They were self-governing localauthorities, responsible for local services, under alow degree of central oversight.

By contrast, the present government hasimposed external audit and inspection on publicservices, seeing this as central to their effectivemanagement and regulation.

The increasing dependence on externalinspection dates from the mid-1970s. Hood et al.(1999) report, for example, that the number ofinspectorates covering what they call ‘corepublic sector: local public bodies’ (whichinclude local authorities and NHS trusts)increased by 18 per cent, from 57 to 67, between1976 and 1995.

This rise of external inspection is the resultof a combination of factors including:

• the ‘crisis’ of public spending in the1980s, which increased pressure to ensurethat public services provided ‘value formoney’

• the continued erosion of trust in thecapacity of professionals to safeguard theinterests of service users and taxpayers

• the need for new mechanisms to monitorand control the increasingly fragmentedpattern of public service providers thatemerged in the 1980s and 1990s as a resultof the privatisation and marketisation ofpublic services.

The rise of inspection therefore owes muchto the New Right critique of the post-warwelfare state and the arrival of the ‘New PublicManagement’ associated with Conservativeadministrations of the 1980s and the early 1990s.As Power (1994) argued:

… it is essential to understand that thereinvention of government is informed by twoopposite tendencies. On the one hand, there arecentrifugal pressures for the decentralisation anddevolution of services … On the other hand thereare equally powerful pressures to retain controlover functions that have been made autonomous.

Inspection has become so important becauseit appears to ‘reconcile [these] centrifugal andcentripetal forces better than the availablealternatives’ (Power, 1994) by offering a mode ofcontrol that enables ‘government to exercisesupervision and direction of services that wereincreasingly being provided in new devolved,decentralized and dispersed organizationalforms’ (Clarke et al., 2000).

New Labour has picked up enthusiasticallywhere the New Right left off. The scope andscale of external inspection have continued toincrease rapidly over the last four years andhave become a key element of the currentgovernment’s attempt to ‘modernise’ public

2 The rise of inspection

3

The rise of inspection

service provision. Inspection fits neatly withNew Labour’s much vaunted commitment to‘evidence-based policy making’ and, as a seniormember of the Audit Commission told us, ‘faithin inspection goes right to the heart of thisgovernment’s beliefs about public services’. It isseen as providing a diagnostic tool with whichministers can weed out or intervene in ‘failingservices’. It is also increasingly portrayed as animportant ‘safeguard’ for the public. By virtueof their ‘independence’, inspectors are seen asbringing pressure to bear on allegedly producer-dominated public service providers in the nameof the taxpayer and/or service users.

Public confidence in professional self-regulation has undoubtedly been dented inrecent years (Davies, 2000). This has led to a‘shift from relations based on trust and status tothose based more explicitly on contractualrelations’ (Hughes et al., 1997). Encouraged tothink of themselves as ‘consumers’, the publichave begun to display an increased appetite forsome (though not all) forms of performanceinformation – most notably, perhaps, in thewidespread use by parents of school leaguetables. Moreover, both the Audit Commissionand the Office for Standards in Education(OFSTED) can point to strong support inopinion polls for their activities. (A recentsurvey conducted for the Audit Commissionfound that 73 per cent of respondents welcomedits role in checking on local authorities’performance.)

As Power (1994) claimed, there is, then, ‘areal sense in which … Britain has become anaudit society’. Audit and inspection have‘become central to ways of talking aboutadministrative control’ and the growth of thesepractices is:

… more than a natural and self-evidently technicalresponse to problems of governance andaccountability. It has much to do with articulatingvalues, with rationalising and reinforcing publicimages of control. The audit explosion is theexplosion of an idea that is internal to the ways inwhich practitioners and policy makers makesense of what they are doing.

Moreover, claims Power, the failure ofexisting audit and inspection to promoteimprovement tends to lead, somewhatperversely, to increased external scrutiny ofservice providers:

Successive sequences of failure involve the useof audits as a restorer of comfort, each time in amore intensive form, and each time apparentlybetter immunised against failure, since everyfailure is particular and every solution general.

The Audit Commission has been a majorproponent and beneficiary of thesedevelopments, expanding its remit considerablysince the early 1980s by moving beyond localgovernment to the health service, and beyondissues of financial probity and regularity intoattempts to measure performance andpromulgate ‘good practice’. According toHumphrey et al. (1999), it secured a ‘pivotal role… in enforcing the Citizen’s Charter’ which:

… thrust the Commissioners into the realm ofpolitics, as they embarked upon a mission toinform the public about their new citizenshiprights, to educate local authorities about dialogueswith local publics and to rehabilitate councillorswith respect to their roles of monitoringperformances and representing publics.

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External inspection of local government

The Commission has been instrumental inencouraging a managerialist, performance-oriented approach to inspection that hasincreasingly been reflected in the work of otherinspectorates.

The arrival of the Best Value regimeintensifies and accelerates this trend, placingsignificant new demands on inspectors andinspected bodies alike. It introduces, for the firsttime, comprehensive inspection of all localgovernment functions. As a result, the activitiesof the inspectorates now impinge on manysmaller authorities that, because they are notresponsible for social services and education,have until now escaped the attentions of jointAudit Commission/Social Services Inspectorate(SSI) reviews and OFSTED. It also requiresinspectors to make judgements about not onlycurrent standards of service provision and costeffectiveness but also the capacity to improve.Inspection is increasingly expected to act as ‘acatalyst for improvement’ (IPPR, 2000) and,since Best Value is a duty that authorities ‘oweto local people’, inspectors need to take accountnot just of statutory performance measures butalso of local priorities.

Audit Commission officials claim that it wasministerial enthusiasm for external scrutiny oflocal authority functions that led to theintroduction of comprehensive inspection underBest Value. We were told by one senior sourcethat, when it came to designing the Best ValueInspection Service:

… there were some non-negotiables – what wecall ‘no-brainers’. These included the fact that allservices would be subject to robust and regularinspection … Ministers clearly wanted it and so itwas going to happen.

This account is confirmed by a formerCabinet Office minister, who recently reported:‘We believe that all services can benefit from theopportunities for improvement offered byinspection.’

The importance of external inspection wasreflected from the outset in the originalprinciples of Best Value and featured strongly insubsequent consultation, legislation andguidance (see, for example, DETR, 1999). TheBest Value regime and the wider localgovernment modernising agenda wereportrayed by government as a necessaryresponse to rising user expectations of publicservices (Cm. 4310, 1999). Best Valueperformance plans, statutory performanceindicators, and inspection and audit were seenas important surveillance mechanisms –intended to raise public awareness of localauthority performance and enable ministers toidentify poor performers (Cm. 4014, 1998).

The Best Value regime is symptomatic notonly of the growing reliance on inspection butalso of the way in which audit and inspectionpractices have increasingly converged. Day andKlein (1990) and Rhodes (1981) both regardedinspection and audit as distinct activities, andthe Audit Commission’s (1998) principles ofinspection also differentiated between them,claiming that inspection is concerned primarilywith the nature of service outcomes andconformity to professional standards, and auditis focused upon issues of financial regularity,value for money and the appropriateness of theaudited body’s management arrangements. Inpractice, however, as Humphrey et al. (1999)noted, over the last two decades, the boundaryhas become blurred as inspection has beenprogressively ‘colonised’ by audit practices and

5

The rise of inspection

the associated performance and managerialistparadigms. The result has, say Humphrey et al.,been the emergence of a hegemonic ‘audit-and-inspection regime’.

This creates potential for role confusion andperhaps even the possibility of turf warsbetween auditors and inspectors. In particular,the attempt to promote service improvement isbecoming a very crowded arena with DistrictAudit, the Best Value inspectors, theImprovement and Development Agency andeven the Department of Transport, LocalGovernment and the Regions (DTLR) (throughits ‘Local Government Modernisation Team’) allqueuing up to offer (and in some cases sell)councils advice and guidance. This jostling forposition was alluded to by several of ourinterviewees. A senior member of the Best ValueInspection Service told us:

I’m not surprised if auditors are seen as beingmore helpful than us by authorities – they live onsite, they’re keen to be helpful, they want todevelop their fee income and there are 1,600 ofthem. But the point is they are not supposed togive advice. If they do, it brings them smack intoour terrain and means that authorities are able toplay them off against us.

A senior officer in the District Audit Servicetold us:

There really is no need for a separate Best ValueInspection Service. Auditors could do Best Valueinspection. The inspectors were only createdbecause DA [District Audit] was unwilling to putits head above the parapet.

As a result, external auditors and externalinspectors are increasingly operating side byside, with both groups having a role inmonitoring local authority performance andseeing themselves as assisting local authoritiesto improve. As an interviewee from the BestValue Inspection Service acknowledged:

Pragmatically the current arrangements may workbut intellectually there is no rigorous basis for thedivision between what the auditors will be doingand the inspectors’ role.

6

Not only is there scope for confusion betweenauditors and inspectors, there are also concernsthat the activities of the six inspectoratescovering local authority services are notsufficiently ‘joined up’. Our analysis of theirannual reports and mission statements hasconfirmed that these inspectorates do indeeddiffer from each other in a number of importantrespects – they report to different centralgovernment departments, have quite differentorigins and histories, and have somewhatdifferent approaches to inspection.

The Benefit Fraud Inspectorate (BFI)

The Benefit Fraud Inspectorate (BFI) wasestablished in 1997 under the Social SecurityAdministration (Fraud) Act 1997 in response to‘widespread concerns about the estimated highlevels of fraud in the social security system’. Itsrole ‘is to maximise counter fraud performanceand minimise the risk of fraud throughout thesocial security system’ (BFI, 1999).

Confirmed benefit fraud costs at least £2billion a year but, if cases where there is highsuspicion of fraud are included, the actual figuremay be £5 billion. The BFI’s aim is to help toreduce this. Its approach to inspection is focusedon verification and improving the effectiveness ofservices by identifying and disseminating ‘goodpractice’ to authorities and private sectorcontractors. The emphasis is on improvingstandards in partnership with local authoritiesand its aim is to complete an inspection of allauthorities within five years. Central governmenthas indicated that it may direct the BFI to carryout follow-up inspections in at least someauthorities and there is a possibility that somefuture inspections will be thematic.

The BFI has an annual budget ofapproximately £6 million, which is provided bythe Department of Social Security, which alsooversees its activities. Its 133 staff are based infour locations – Edinburgh, Harrogate, Londonand Newcastle – and are drawn from the fieldsof benefit administration, security, fraud andaudit. Inspections last for approximately sixmonths – but vary according to size of serviceprovider being inspected. A memorandum ofunderstanding agreed with the AuditCommission and the Accounts Commission(Scotland) provides the basis for joint workingand exchange of information, and the BFI alsoworks with District Audit (a member of DA staffis seconded to work with the BFI).

Her Majesty’s Fire Services Inspectorate

(HMFSI)

Her Majesty’s Fire Services Inspectorate(HMFSI) was established in 1947 under the FireServices Act 1947. Its activities are also governedby subsequent legislation including the FirePrecautions Act 1971, Fire Precautions(Workplace) Regulations 1997 and the LocalGovernment Act 1999. It was set up as fireservices were being denationalised in order toprovide the Home Secretary with informationabout the manner in which fire authoritiescarried out their functions. It now providesadvice to Ministers and brigades on professionaland technical matters, and is directlyresponsible for the enforcement of fireprecautions in Crown premises.

The HMFSI’s mission is: ‘To obtain bestvalue from the fire service by advancingMinisterial, Directorate and Inspectorateobjectives’ by supporting ‘the fire service in its

3 The inspectorates

7

The inspectorates

objective of saving life and property byeducation, legislation and responding toemergencies. To advise how this can beachieved by the skilful and most cost effectiveuse of resources.’

HMFSI has a budget of £4.7 million (1999–2000) and a workforce of 80 professional staffwho are either serving or retired fire serviceofficers. Inspections focus on ‘validation,assessment and evaluation’, and cover all firebrigades in England and Wales.

All brigades are normally subject to aprincipal inspection every three years. Shorter,more focused inspections are carried out in theyears when no principal inspection takes place.These monitor progress in implementing theauthority’s action plan in response torecommendations made in the previous reports.In addition, each year, there is at least one‘thematic’ review, based on a topic of nationalsignificance for the fire service (e.g. equalopportunities) for which data are collected fromall brigades by questionnaire with a samplethen receiving visits. Terms of reference forinspections are generally agreed with the ChiefFire Officer and/or fire authority concerned andthe HMFSI works closely with its counterpartfire services inspectorate in Scotland, as well asthe Health and Safety Executive.

Her Majesty’s Inspectorate of Constabulary

(HMIC)

Her Majesty’s Inspectorate of Constabulary(HMIC) dates back to the Police (Counties andBoroughs) Act 1856. Subsequent provisionsinclude Police Acts in 1964, 1994 and 1996, andthe Local Government Act 1999. It reports to theHome Secretary and covers all police services in

England, Wales and Northern Ireland. Its aimsare to promote the efficiency of these services. Itemploys five inspectors and a Chief Inspector ofConstabulary, and each inspector has a smallteam of officers and support staff to assist ininspections. Inspectors are normally formerpolice officers, usually Chief Constables. Twoinspectors from non-police backgrounds wereappointed in October 1993 to incorporate a ‘lay’element.

A new model of inspection was adopted inApril 2000. This focuses on performance againsta number of protocols (statements ofexcellence). Prior to 2000, every force wassubjected to a comprehensive inspection every18 months. The new model incorporates astrong element of risk assessment approach,concentrating in particular on poor performingforces. Thematic inspections into aspects ofpolicing important to the government’s aims,and those identified by the police service as inneed of improvement, are also carried out. TheHMIC claims to work closely with itscounterpart police inspectorate in Scotland aswell as with HM Inspectorate of Probation,OFSTED, the Social Services Inspectorate andothers in carrying out thematic inspections.

The Office for Standards in Education

(OFSTED)

The Office for Standards in Education(OFSTED) was established in 1992 when itreplaced the Education Inspectorate (originallyset up in 1840). Its activities are governed by theEducation (Schools) Act 1992, Education Act1997 and Local Government Act 1999, and itsaim is to improve standards of achievement andthe quality of education through regular

8

External inspection of local government

independent inspection, public reporting andproviding informed advice to the Secretary ofState for Education. It is responsible for theinspection of schools, government-fundednursery education and local educationauthorities (LEAs). Inspections of LEAs reviewand report on the way authorities areperforming all of their functions but focus inparticular on the contribution each LEA ismaking to supporting individual pupils andpromoting improvements in educationalattainment.

In 1998–99, OFSTED had a budget of £132.6million and employed 515 staff. Most of its staffare former teachers but school inspection teamsalso include a ‘lay’ inspector who has nopersonal experience in the management orprovision of education. The length of aninspection varies according to the type ofinspection, the size of the body being inspectedand its performance. OFSTED undertakes twomain types of school inspections. Schools thatare deemed to be performing well receiverelatively short inspections; others receive a ‘fullinspection’ and, depending on the outcome,may receive follow-up visits. OFSTED inspectsall schools in England at least once every four tofive years and is in the process of inspectingLEAs. It works with the SSI in inspecting secureunits for children.

The Social Services Inspectorate (SSI)

The Social Services Inspectorate (SSI) was set upin 1985 when it replaced the Social Work Service(SWS) of the Department of Health and SocialSecurity (DHSS). The SWS was itself formed in1971 by the amalgamation of the Children’sInspectorate of the Home Office and the Social

Work Division of the DHSS – both of which cantrace their origins back to the nineteenthcentury. Legislation covering the SSI’s roleincludes the Audit (Miscellaneous Provisions)Act 1996 and Local Government Act 1999. Itreports to the Department of Health anddescribes its remit as being to:

• support local authorities and other socialcare providers in the provision of highquality social services

• provide professional advice to ministersand government departments on allmatters relating to the personal socialservices

• assist local government, voluntaryorganisations and private agencies in theplanning and delivery of effective andefficient social care services

• evaluate the quality of servicesexperienced by users and carers

• monitor the implementation ofgovernment policy for the personal socialservices.

The SSI inspects all local authority socialservices departments. Inspections typically take90 days, spread over a ten- to 12-month period,and involve an average of 40 days on site in anauthority. Inspections are conducted by the SSI’sstaff who include qualified professionals withexperience of working in social services and layvolunteers. Some inspections cover broad areassuch as children’s services or services for olderpeople. Others focus on themes such asadoption or welfare to work.

The SSI targets for particular attentionauthorities where services have been identified

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The inspectorates

as causing concern and it works closely with theAudit Commission as part of a joint reviewteam. As noted above, it also works withOFSTED in inspecting secure units for children.

The Best Value Inspection Service (BVIS)

The Best Value Inspection Service (BVIS) wasestablished under the Local Government Act1999. It is part of the Audit Commission andincludes a dedicated Housing Inspectorate. Itsremit is to ensure that all local authorityfunctions not covered by existing inspectoratesare subject to external scrutiny and thatauthorities have put in place appropriatearrangements to fulfil their statutory duty toachieve continuous improvement, havingregard to economy, efficiency and effectiveness.It is responsible for alerting ministers to failuresof ‘substance’ (poor performance) or ‘process’(not complying with the requirements of theBest Value legislation, for example publishingBest Value performance plans late or failing toconsult adequately with the public or businessesin the course of Best Value reviews).

The Best Value Inspection Service reports tothe Department of Transport, Local Governmentand the Regions and to the National Assemblyfor Wales, and its activities cost an estimated £50million per annum, funded through acombination of fees paid directly to theCommission by authorities and grants from

central government. By the end of the year 2000,it employed around 70 staff but hopedeventually to recruit up to 400 inspectors. It hassought to recruit from the private and not-for-profit sectors as well as from local governmentbut every inspection team includes at least oneperson with experience of managing theservice(s) that is being inspected.

The style, intensity and content of aninspection vary according to the nature of theservices being reviewed and the performance ofthe authority, and there is a promise of ‘lighttouch inspection’ in the future for authoritiesand services that are judged to be performingwell. Inspections vary in length from five to 40days and the focus of an inspection mirrors theauthority’s approach to implementing BestValue reviews. It may, therefore, be service-based or focus on a ‘cross-cutting issue’ or onthe needs of a specific group. Inspection reportsrate an authority’s current performance and itscapacity to improve on a 0 to 3 ‘star-rating’.

The BVIS sees itself as playing a major rolein identifying and disseminating ‘good practice’(in the tradition of the Audit Commission’svalue-for-money studies). It also carries out‘diagnostic inspections’ (aimed at identifyingthe causes of failure), at the direction of theSecretary of State, where the external auditorhas concerns or where an authority’s Best Valuereviews expose an unsatisfactory situation.

10

Several researchers have developed typologiesthat categorise different approaches toinspection and could be applied to theinspectorates covering local authority services.Rhodes (1981) differentiated betweeninspectorates that seek to ensure conformitywith particular statutory requirements(enforcement inspection), inspectorates thatoversee standards of performance (efficiencyinspection) and inspectorates with‘supervisory/regulatory’ functions including:

• internal management inspection

• revenue-collecting inspection (e.g.inspection of taxes)

• checking inspection (e.g. checking theperformance of contractors to ensure thatthey conform to contract specifications)

• quasi-judicial inspection (e.g. planninginspection)

• investigatory inspection (e.g.investigation of accidents).

Hughes et al. (1997) suggested thatinspectorates could be placed on a continuumranging from ‘non-punitive’ regimes based onpeer review controlled by professions to‘punitive’ regimes characterised by managerialapproaches subject to direct central governmentcontrol. They attributed the differences betweeninspection regimes to variations in the powerexercised by inspected bodies, which theybelieved was in turn determined by their publicstanding, the kinds of knowledge and expertisethey lay claim to, levels of concern about theircompetence and the extent to which members ofa profession worked collectively.

McGarvey and Stoker (1999) also focused onthe degree of control exerted by regulators.They suggested a continuum ranging from‘collegial/emancipatory’ regimes, whichemphasise self-responsibility, self-evaluation,self-regulation, to ‘bureaucratic/technicist’regimes, which are based on rules, procedures,accountability, compliance, sanctions. Day andKlein (1990) adopted a similar approach,differentiating between a ‘policing’ style ofinspection concerned with enforcing rules and a‘consultancy’ approach involving the use ofpersuasion.

A number of researchers have also stressedthe importance of ‘relational distance’ (RD), thatis, the closeness of the inspectors to those whomthey are inspecting and there is a widespreadassumption that the shorter the relationaldistance the less ‘punitive’ a regime is likely tobe. The Citizens’ Charter White Paper, forexample, claimed that inspectors who are closeto inspected bodies ‘may be captured byfashionable theories and lose the independenceand objectivity that the public needs.Professional inspectorates can easily becomepart of a closed professional world’ (cited inLoughlin, 1992). Hood et al. (1999) found that‘The more distant such regulators were fromtheir “clients” in professional-socialbackgrounds, the more regulatory they tendedto be in the sense of more formal and more rule-bound.’ They reported that ‘The police and fireinspectorates exhibited low RD and a much lessrigorous regulatory style, favouring persuasionrather than sanctions.’ By contrast, the AuditCommission was seen as having greater RD andmaking greater use of sanctions. Hood et al. alsofound that, ‘Inspectorates with frequent full

4 Typologies of inspection

11

Typologies of inspection

inspections of their clients seemed to have lessformal relationships with their charges thanbodies with less frequent contacts in that form.’

In broad terms, then, all of these typologiesdifferentiate between a ‘capacity-building’approach and more ‘punitive’ forms ofinspection. The former is seen as relying on thegiving of advice and the dissemination of ‘goodpractice’. It is relatively non-confrontational,relational distance is small and judgements takeaccount of local priorities and performancemeasures. In a truly capacity-building model,inspectors would probably seek to correctfailing authorities in private whilst publiclycelebrating those that were seen as succeeding.By contrast, a ‘punitive’ approach is moredirective. Inspectors ‘keep their distance’.Success criteria are centrally determined andthere is likely to be a strong emphasis on‘naming and shaming’ with failure being put onpublic display as a warning to other authorities.Inspections might even be designed to ‘catchout’ the inspected bodies with inspectorsarriving unannounced.

This schema has a strong intuitive appeal formany local policy makers and practitioners.Most local authorities appear, for example, toregard OFSTED as pursuing a relativelypunitive approach whilst the fire and policeinspectorates are widely seen as relativelyunthreatening. As one chief executive told us:

I was interviewed recently for our fire inspectionand it was a hoot! It felt like ‘Please sit down.Would you like a cup of tea and, by the way, isthere anything you would like to tell us?’ It was acompletely different experience to our experienceof SSI or OFSTED.

The Best Value Inspection Service is alsoapparently seen as less intimidating thanOFSTED. A Best Value officer told us:

If OFSTED and the Best Value inspectors arearriving at around the same time, it’s clear whichset of preparations the Chief Executive is going tobe most concerned to get right.

Some of those within the inspectorates alsobelieve that there are significant differencesbetween inspection regimes. A senior memberof the Best Value Inspection Service told us:

I think we’re working with a very different theoryof human nature to OFSTED. Woodhead thinkspeople are motivated to change by fear. Webelieve that people are basically well intentionedand are more likely to change if they have tofigure out for themselves what works.

Some researchers share this perception.Hughes et al. (1997), for example, reported that:

OFSTED has become a body which belongs verymuch at the policing end of the continuum ofactivities of inspection, particularly as they haverecently taken on the task of reporting on theeffectiveness of individual teachers.

Differences of approach between theinspectorates are reflected in the role played byformer service managers and lay inspectors, indifferences in the balance between desk-basedanalysis and site visits, in the importanceattached to user or citizen feedback, and in theemphasis placed on service standards asopposed to cost efficiency. Practitioners also seeinspectorates as having different levels ofinfluence over ministers and access to differentrepertoires of threats, sanctions and rewards. As

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External inspection of local government

Braithwaite (1992, quoted in Boyne et al., 2000)observes:

The greater the heights of tough enforcementwhich the agency can escalate … the moreeffective the agency will be at securingcompliance.

However, in spite of the widespreadperceptions that there are important differencesbetween inspection regimes, it is difficult tocategorise them in terms of a simple continuumof the kind suggested by previous studies. Mostinspectorates combine elements of ‘punitive’and ‘supportive’ inspection and there areimportant similarities in terms of theapproaches they adopt. All define their role asmonitoring performance and promotingimprovement. Most use a combination of desk-based analysis and site visits. They all employexperienced professionals who have previouslybeen involved in running or delivering theservices being inspected and they all claim touse some form of ‘risk assessment’ to targetparticular issues, authorities or services. It istrue that some inspectorates (notably the BestValue Inspection Service) have sought toportray themselves as adopting a distinctly‘supportive’ and consensual approach (cf. AuditCommission, 2000a), whilst others (notablyOFSTED) seem at times to have relishedconfrontation with inspected bodies. However,OFSTED officials would dispute this view and itremains to be seen whether the Best ValueInspection Service lives up to its early promises.As one local authority leader put it:

This new kid on the block is saying all the rightthings but we need to wait to see whether theybehave themselves.

Moreover, the situation is a dynamic andevolving one in which all of the inspectionregimes are changing and perhaps convergingwith similar trends evident across a number ofsectors.

In both education and social services,professional-dominated inspectorates have beenreplaced by more managerial regimes. TheEducation Inspectorate used to monitor only asample of schools, institutions’ and notindividuals’ performance was assessed, therewere no nationally agreed performanceindicators and there were no cases of schoolsbeing closed down as a result of an inspection.By contrast, OFSTED, which replaced theInstitute, inspects all schools, examines theperformance of teachers and has the power toclose schools if their performance and leaguetable position does not improve. Similarly, theDHSS’s Social Work Service was primarilyconcerned with ensuring good professionalpractices, whilst the SSI, which replaced it in1985, has focused on measurable performanceimprovement and good management practice(Day and Klein, 1987), leading to what Henkel(1991) describes as a conflict between the‘humanitarian’ and professional values andqualitative evidence base that informed theactivities of the Social Work Service and thepressure within the newly created SSI to focuson quantitative performance measures and thepursuit of economy, efficiency and effectiveness.According to this view, the SSI is ‘moving fast… from the professional-consultancy towardsthe inspectorial model’ (Day and Klein, 1990) ‘inmuch the same way as [education] from alargely colleague advisory body to one broughtin to identify default’ (Kogan and Maden, 1999).

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Typologies of inspection

The uniformed inspectorates display similartrends. The HMIC has adopted a moremanagerialist approach with more extensive useof performance indicators. As Carter et al. (1992)report ‘After 1983 inspection became a moreserious affair in which the inspectors helped setobjectives, assessed their achievement, and hadthe duty of examining financial information.’Reiner (1991) takes a similar view observing that‘The role of the HMIC has been considerablyenhanced in recent years as the linchpin of amore centralised co-ordination of standards and

procedures.’ HM Fire Services Inspectorateseems to be following a similar route. A ‘cultureand organisation review’, instigated followingthe appointment of a new Chief Inspector in1998, concluded that ‘Despite theprofessionalism of the Inspectorate … there [is]now a need for the corporate body of theInspectorate to move forward.’ This review hasin turn led to important changes in theorganisation of the Inspectorate and in itsapproach to inspection.

14

The fundamental question relating to all of theinspectorates that regulate local authorityfunctions is whether they ‘add value’ and, if so,at what cost. In theory, it may produce a rangeof benefits including:

• a catalyst for improvement

• improved accountability to the politiciansand to the public

• a means of identifying instances offailure, thereby helping to protectvulnerable service users and taxpayers

• diagnoses of the reasons for failure andsuccess, thus highlighting lessons forother agencies

• a means of preventing failure in advanceby encouraging agencies to take greatercare than they might do if their activitieswere not subject to external scrutiny

• encouragement to agencies to develop agreater capacity for self-evaluation andinter- and intra-organisational learning.

Inspection is, however, expensive. The totalcost of inspecting local government functionshas been estimated at £600 million for 2000/01(IPPR, 2000) and the Best Value InspectionService alone costs £50 million per annum.Moreover, as a number of researchers havepointed out, in addition to the direct costs ofrunning the inspectorates, there are indirectcosts, most of which are incurred by inspectedbodies. These include the following:

• Compliance costs: the staff costs ofputting in place measures to demonstratethat they are complying with a regime –for example, the preparation of written

strategies, performance plans, audit trailsand the performance data required byinspectors. Staff usually have to submit tointerviews by inspectors and to devote asubstantial amount of time to liasing withthem – both before and after site visits.Some inspected bodies also payconsultants to conduct ‘mock’ inspectionsin advance in order to test out theadequacy of their procedures anddocumentation.

• Avoidance costs: an alternative strategydeployed by some inspected bodies is toseek to circumvent legislation. This too,however, often requires an investment instaff and legal advice.

• Opportunity costs: the activities that havebeen put aside as a result of staff timehaving been ‘diverted’ to preparing forand managing inspection processes.

• Displacement effects: most inspectedbodies prioritise activities and outcomesthat are monitored and measured byaudit and inspection regimes, and giveless attention to what may be equallyimportant issues that are not scrutinised.

• A reduced inclination to experiment andinnovate: fear of failure may deterorganisations from taking risks anddeveloping innovative approaches. AsBoyne (1999) argues in relation to BestValue, ‘The fact that all councils will havetheir attention directed to the sameperformance indicators may lead to a dullconformity rather than the innovationthat Best Value is formally intended topromote.’

5 Impacts of inspection

15

Impacts of inspection

• Damage to staff morale: the sense ofbeing checked up on and the workloadinvolved in preparing for inspection candepress morale regardless of the outcomeof the inspection. Being judged to be afailing service may make it difficult toattract the calibre of new staff who areneeded to turn a ‘failing’ organisationaround.

Many of these costs are, of course, extremelydifficult to quantify. Similarly, even whereservice improvement can be measured, it isoften difficult to establish a direct link withinspection. Moreover, views of what constitutes‘improvement’, and for whom, are oftencontested. Improvements in service standards orcost effectiveness that benefit users and/ortaxpayers may, for example, require anintensification of labour and/or deterioration inthe pay, conditions and employment prospectsof front-line staff (Geddes and Martin, 2000). Inmany cases, the full impact of an inspection willbecome apparent only after several years. It isperhaps not surprising, therefore, that therehave been very few attempts to determine thecost–benefit ratios associated with theinspection. As Power (1994) noted, ‘one of theironies’ of the increased reliance on audit andinspection is that ‘despite being part of a culturethat is concerned with institutional (andpersonal) performance, it is never easy to seehow effective audits are … In short there issomething profoundly elusive about the benefitof audit.’ This view was reflected by an AuditCommission senior official who reportedrecently that:

The effectiveness of all of these new inspectionregimes is unproved. There is an awful lot ofbelief, an awful lot of expectation and an awful lotof politics combined with a great deal of potentialfor perverse incentives.

An exception is the Audit Commission claimthat its value-for-money studies in the 1980sidentified £750 million worth of ‘opportunities’for savings of which just under a third had beenachieved, but attempts to quantify the impactsof school inspection have reached varyingconclusions. Scanlon (1999) found that OFSTEDhad a positive impact, particularly on specialmeasures schools. She believed thatimprovements were achieved as a result ofcombinations of factors including changes inmanagement, increased funding and advisorysupport, and the focus and urgency that thespecial measures process entails. However, shealso notes that there were ‘some aspects ofschool life which seem to have deterioratedsubstantially since inspection, most notably staffmorale’ and that there appeared to be an inverserelationship between ‘staff morale andimprovements in standards of education’.Kogan and Maden (1999) also found evidence ofmajor management changes combined withlower levels of staff satisfaction reporting that:

Following OFSTED inspection, 25% of schoolshad changed their management structure, 58%of schools had changed their teaching styles andcurricular organisation, 20% of schools hadexperienced more staff retirements, 24% ofschools had experienced more staff absencelinked to stress.

16

External inspection of local government

They found, however, that schools were:

… relatively sceptical about the impact of theinspection findings on school processes orperformance, believing that, although OFSTEDmay have accelerated them, most changes wouldhave happened in any case.

Cullingford and Daniels (1999) reached avery different view, reporting that OFSTED’sactivities had a negative effect on the percentageof pupils achieving higher grades (obtainingfive or more A* to C GCSE grades): ‘OFSTEDinspections have the opposite effect to thatintended. Year on year they lower standards.’

It is of course too early to judge the impactsof the Best Value Inspection Service. However,there are some indications of how its first yearwas perceived ‘on the ground’. Martin et al.(2001) found that corporate Best Value officersin the pilot authorities, who at the time had nodirect experience of Best Value inspection, hadlow expectations of inspection at the start of thenew regime in April 2000. Almost 70 per centbelieved that audit and inspection were going toimpose too many bureaucratic burdens on localgovernment, and only a third expected that itwould help them to achieve Best Value.Research , funded by the Audit Commission, onthe first round of Best Value performance plans

in England confirmed that most authorities hadfound the process difficult. Most reported thatauditors had done little to help them to ensurethat reviews were challenging, to improveprocurement policies, to find comparative dataand to set meaningful targets (AuditCommission, 2000b). Three-quarters of chiefexecutives requested changes in the way inwhich Best Value was audited, highlighting inparticular the costs of audit, what theyperceived to be inconsistencies betweenauditors, the overemphasis on process, and thefact that guidance had been received late andhad been confusing.

A survey of local authority chief executivesin England and Wales, commissioned by theLocal Government Association (LGA) in late2000, demonstrated widespread support for theprinciple of external inspection. However, 96per cent of respondents believed it to be veryresource intensive and only 45 per cent felt thatit delivered improvements in services. Eighty-three per cent of respondents saw the SSI as acatalyst for improvement compared to 70 percent for OFSTED, and 63 per cent for the BVIS(LGA, 2001). Only a third believed thatinspectorates had well qualified staff and just 10per cent that there was effective co-ordinationbetween inspectorates.

17

In spite of the lack of quantifiable evidence ofthe impact of external inspection, it is currentlysuch a dominant model of regulation of localauthority services that some practitioners seemto find it difficult to conceive of other options.There are, however, alternative approaches.Many practitioners have argued that there is aneed to develop regimes that give less attentionto process and greater emphasis to outcomes.There is also widespread support for a more‘risk-based’ approach to inspection wherebyauthorities and/or services that have a trackrecord of good performance and have put inplace what are considered to be appropriatesystems and structures receive ‘lighter touch’inspection – usually in the form of less frequentand/or less intensive scrutiny. This is seen ashaving two main benefits. First, it would reducethe costs imposed on inspected bodies that arealready performing well. Second, it wouldenable inspectors to focus their resources onthose areas where improvement is most needed.Most inspectorates have embraced thisapproach to a limited extent but its wideradoption would require a greater degree of trustthan seems to exist between central and localgovernment. Its success would also, of course,depend on the ability of inspectors to assess riskaccurately.

More radically, a number of commentatorshave argued for ‘inspector-free’ approaches toregulating public services. Dunford (1998) andKogan and Maden (1999), for example,suggested that schools should be encouraged toundertake self-evaluation, with LEAs playing acentral role in supporting schools in makingchanges that they identify as being necessary.Ferguson et al. (2000) argued that self-evaluation

could be adapted to produce a system of self-inspection which might be more effective thanset-piece OFSTED inspections. Hood et al. (1999)identified four possible models of regulation:

• contrived randomness: regulationthrough processes and pay-offs that areby design unpredictable

• oversight: regulation through commandand control

• competition: regulation through thecreation of a multiplicity of providers andthus rivalry between them

• mutuality: regulation through groupprocesses.

Two of these approaches (regulation throughcompetition and mutuality) may not requireexternal inspection although, as McGarvey andStoker (1999) observe, intriguingly, all four havea role in the current Best Value regime.

Contrived randomness involves the creationof uncertainty in order that regulated bodiesmodify their behaviour in expectation ofsanctions or rewards that they believe, butcannot be sure, will follow from failure orsuccess. It is not the dominant mode of controlwithin the Best Value regime. Nevertheless, BestValue has introduced a degree of uncertaintyabout how the legislation and guidance are tobe implemented by authorities, how inspectorswill interpret the regulations and how forciblypotential sanctions will be applied. As one BestValue officer told us:

We still don’t really know what Best Value is.We’re just waiting for the inspectors to failsomeone, then at least we’ll know what it isn’t.

6 Alternatives to inspection

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External inspection of local government

Command and control mechanisms alsofeature strongly in many of the inspectionregimes to which local authorities are subject.Although the Best Value regime relaxes some ofthe ex ante controls placed on authorities, thereare still a range of processes to which they mustconform including, for example, the detailedregulations about the contents and timing ofBest Value performance plans. Moreover,authorities may be subject to intervention notjust because of failure to improve but alsobecause of ‘failures of process’.

Competition also features strongly in NewLabour’s approach to public serviceimprovement. Central government hasrepeatedly made it clear that it is more thanwilling to divert resources and responsibilitiesto other providers if local authorities do notdeliver cost-effective services – see, for example,the Prime Minister’s warning to local authorityleaders in 1998 that:

If you are unwilling or unable to work to themodern agenda then the government will have tolook to other partners to take on your role.(Blair, 1998)

The Best Value regime, therefore, requiresauthorities to promote a ‘mixed economy ofprovision’ in order to create ‘the conditionsunder which there is likely to be greater interestfrom the private and voluntary sectors inworking with local government to deliverquality services’ (Cm. 4014, clause 7.30).

Group processes have also becomeincreasingly important in the last three to fouryears with the establishment of a range of peerreview initiatives, ‘learning networks’ andbenchmarking clubs. Examples includeprofessional networks, peer review of BestValue initiatives by West Midlands authorities(Freer, 1998), the Local GovernmentImprovement Project and the Beacon Councilscheme run by the Improvement andDevelopment Agency (IDeA), regional BestValue seminars orchestrated by the IDeA andthe (then) Department of the Environment,Transport and the Regions (DETR), and theBetter Value Development Programme (whichwas jointly funded by participating authoritiesand the DETR) and the DETR’s in-house team offormer senior local authority managers (the‘local government modernisation team’) whoserole is to assist authorities in responding to the‘modernising agenda’ (Martin, 1999). In manycases, self-regulation and peer review may be aresponse to external inspection – an attempt bylocal government to show that it is able to ‘putits own house in order’ without the need forexternal regulation. As Rhodes (1981) explains:

It is often a feature of self-regulation that it isintroduced under the fear or threat that if theinterests concerned do not themselves takeeffective action government will introducestatutory requirements.

19

This paper has provided a brief review of someof the key literature on the role of inspectionand a summary of the views expressed bysenior policy makers and practitioners (at localand national level) with whom we haveconducted preliminary interviews. It is notintended as a comprehensive or definitiveanalysis of the impacts of external inspection onlocal government. However, the evidence thatwe have gathered does highlight a number ofissues that we believe need to be addressed bycentral government, the inspectorates andinspected bodies, and that merit more in-depthresearch.

There seems to be a widespread acceptancethat inspection has a role to play in theregulation of local authority services and, inparticular, that it may serve as a useful ‘catalyst’for improvement. Indeed, the rapid growth ofexternal inspection in recent years appears tohave gone largely unchallenged by the localgovernment community. The Local GovernmentAssociation has focused its efforts not onresisting new inspection regimes but oninfluencing the ways in which they operate. Fortheir part, the government and the inspectorateshave agreed that, in order to be effective,inspection has to be seen as credible and fairand must be ‘owned’ by inspected bodies. Theyhave also agreed that inspection should causeminimal disruption to front-line servicedelivery, that it should be co-ordinated and thatit needs to be complemented by other measuresthat enhance authorities’ capacity to improve.The intervention protocol, agreed betweencentral government and the LGA, establishesthat intervention must be based on firmevidence of ‘failure’ and proportionate to the

risks involved in continuing ‘failure’ (DETR,1999), and central government has establishedthe Inspectorates Forum to promote more‘joined-up’ inspection. It has also worked withthe LGA to establish the Improvement andDevelopment Agency (IDeA) and has promisedto reward ‘excellent’ authorities with ‘newflexibilities and freedoms’.

In spite of these promising signs, though, itis clear that it will be important that inspectionregimes achieve a balance between:

• local diversity and central prescription:allowing authorities to adopt approachesthat meet local priorities whilst alsoensuring that service users in differentparts of the country do not experiencewide disparities in standards

• experimentation and ‘zero tolerance offailure’: dealing with serious andpersistent underperformance withoutdiscouraging appropriate risk taking

• local capacity building and centralprescription: encouraging self-sustainingimprovement whilst also making surethat, in those instances where it is clear‘what works’, all authorities areencouraged to adopt ‘good practice’

• achieving ‘early wins’ and sustainableimprovement: providing incentives forauthorities to deal as rapidly as possiblewith underperforming services whilstalso creating the conditions (including thenecessary resources and stability) toenable them to reconfigure services inways that lead to sustainable, long-termimprovements

7 Key issues and challenges

20

External inspection of local government

• cost savings and improvements in thequality of services: keeping up thepressure to ensure that services aredelivered as cost effectively as possiblewhilst also making available the fundsneeded to invest in long-termimprovements in infrastructure andtraining.

Moreover, these issues need to be seenwithin the wider context of ongoing changes inthe framework for the management andregulation of public services as a whole. Thisposes a series of key issues for policy makers,practitioners and researchers.

The credibility of inspectors

There is a need to ensure that inspection isrigorous, evidence based and perceived to befair. Inspectors need to demonstrate anunderstanding of the service(s) that they areinspecting and an appreciation of what is likelyto work in individual authorities. This calls notonly for technical know-how but also sensitivityto local political contexts. The new inspectorates(the Best Value Inspection Service and HousingInspectorate) have gone to considerable lengthsto establish the credentials of their inspectors.However, it has been difficult to recruit suitablyqualified staff and many authorities haveembarked on a much larger number of reviewsthan was originally anticipated by Best Valueinspectors. This suggests that they may struggleto cover all reviews in detail. Moreover, therehave already been suggestions ofinconsistencies between different inspectors.This raises important questions about whatinspectors see as their role and whether there is

a common understanding both within andbetween inspectorates.

Style versus substance

There is a danger that external inspections willfocus on style rather than substance. If they do,authorities that are good at producing strategiesand plans, collecting performance data andestablishing audit trails may be able to ‘paperover’ problems with service delivery. As notedabove, some commentators have, for example,expressed concern that OFSTED inspectionvisits create ‘artificial conditions’ which are notan accurate reflection of ‘normal school life’. Theaudit of Best Value Performance Plans in 2000was also widely seen as being focused onprocess. A senior officer in one authority told us:

We’re sceptical of the value of audit andinspection. We fear that it will end up as a tickbox thing … There’s a danger that the inspectorswill lose touch with reality.

In another authority, we were told that:

The first meeting I had with the auditors I wasfaced with 20 pages of tick boxes.

Some external auditors agree. One told us:

This year, all we’ve had to check was thatauthorities had performance indicators in the rightbox. We weren’t too concerned with whether itwas an appropriate performance indicator and weweren’t required to check its accuracy.

The danger is that, if this perception persists,authorities will tend to focus primarily ondemonstrating compliance with regulationsrather than on genuine attempts to promoteservice improvement.

21

Key issues and challenges

Local versus national priorities

There is a concern that national inspectionregimes will encourage a standard approach tothe management of local services that may notbe appropriate to local needs and priorities in allareas. Authorities may be wary of appearing tobe different and, faced with inspectorates thatalready have a clear view of ‘what works’, manycould be disinclined to risk new approaches. Inthese circumstances, the dissemination of ‘goodpractice’ could lead to the widespread adoptionof approaches that have worked in someauthorities but may not be appropriate to thecircumstances facing many other councils. Anofficer in one of the Best Value pilots told us, forexample, that:

We’ve moved here to a very prescribed form ofBest Value – a Best Value review must look likethis, with this form of consultation.

As Hargreaves (1995) argued, in the case ofeducation, this is a difficult and importantdilemma:

The Government preaches diversity and choice.Parents are paramount: they decide. But theinformation supplied to parents from inspectionreflects the inspectors’ model of schools, againstwhich good, bad and indifferent are judged.Applying the OFSTED standard model in practiceand on every school in a short time-scale exertspressure on schools away from current diversitytowards the OFSTED model. In other words,divergence from the normative model canbecome not commendable diversity enhancingchoice, but reprehensible deviance demandingsuppression.

Understanding the causes of failure and of

improvement

There is an urgent need for a rigorous analysisof the causes of ‘failure’ in different contexts.The Best Value Inspection Service and the IDeAclearly believe that there is a strong linkbetween service failure and corporate structuresand performance. However, although there isstrong anecdotal evidence of their importance,the nature and extent of these relationshipsremain unclear and there are authorities inwhich some services perform well whilst othersare failing. Equally importantly, Best Valueinspectors are required not simply to ratecurrent performance but also to make publicjudgements about a service’s capacity toimprove. The basis on which these judgementsare made, the level of consistency betweeninspectors and the extent to which their viewsare proved to be accurate in future years areclearly going to become important issues forinspectors and inspected bodies.

Stakeholders’ views of inspection

There is also a gap in our understanding of theimpacts of inspection on different groups. Inmany cases, it is senior managers who are mostinvolved with inspection and who appeartherefore to be most aware of it. However, itsimpacts may be felt throughout theorganisation. There is, therefore, a need forresearch on different stakeholders’ views. Dothe results of inspection cascade ‘down’ throughan authority? Are front-line staff aware ofinspections? If so, to what extent do theyinfluence their actions and affect their roles?

22

External inspection of local government

What is the public’s view of inspectors andinspection outcomes? Do politicians see externalscrutiny as a means of enabling them to callservice managers to account or as a challenge totheir right to determine their authority’spriorities?

The limits of performance data

External inspection and audit continue to bevery dependent on quantitative performancemeasures. Compulsory competitive tendering(CCT), fiscal pressures and the increasedpoliticisation of local government have all led tothe wider use of performance data (Ball andMonaghan, 1996). However, it is clear thatexisting performance data remain inadequate.Smith (1995), Boyne (1997) and Tichelar (1998)have all highlighted the deficiencies of nationalperformance indicators (PIs). Boyne, forexample, concluded that:

… there is very limited evidence to suggest thatlevels of performance vary together acrossservices ... performance is not driven by thegeneral characteristics of local councils, but bythe circumstances, organisation or ethos ofspecific service departments. It is thereforeinappropriate to categorise councils into ‘highperforming’ and ‘low performing’ groups acrossall services.

Midwinter (1994) agreed:

The notion that authorities’ performance can bereduced to a few simple, quantifiable indicatorswhich can provide a basis for comparison oforganisational efficiency, is fallacious.

Performance measures are therefore bestconsidered as ‘hands-off’ instruments of control,‘dials’ or ‘tin-openers’ (Carter, 1989).

Moreover, whilst services that werepreviously subject to compulsory competitivetendering (CCT) often have basic informationabout unit costs and numbers of service users,even they lack adequate information aboutservice outcomes and user satisfaction. MostBest Value pilots, for example, found that theylacked the performance management systemsneeded to implement the regime (Martin et al.,2001). As one council (with a national reputationas a ‘flagship’ authority) told us:

We used to think and to tell everyone that wewere good. Now we realise that we simply don’thave the data we need to know how well we’reperforming.

Another reported that:

Management information in this place is atravesty. Our accounting system is geared up toproduce local government information, notactivity-based costing. Even the trading accountinformation isn’t that good. It has made anythingto do with comparative costs very tricky.

Not surprisingly, therefore, many localauthorities struggled to compile the datarequired for Best Value performance plans in2000 and there were major variations betweenservices in the availability and quality of theperformance data, as well as difficulties inmeasuring the contribution made by individualservices to the achievement of ‘corporate’objectives.

23

Key issues and challenges

Furthermore, all the signs are that it willcontinue to be very difficult for authorities orinspectors to measure outcomes in terms of‘cross-cutting’ issues (e.g. community safety,health promotion, lifelong learning), or theneeds of particular groups (e.g. older people,disaffected youth, people with disabilities).There is, then, a danger that authorities thatadopt cross-cutting approaches to Best Valuereviews will not be able to measureimprovement in a joined-up fashion.

Joined-up inspection

Many of the local authority officers to whom wehave spoken were concerned about theexistence of six different inspectorates requiringdifferent types of information and usingdifferent performance criteria. There was a fearthat, unless inspections are co-ordinated moreeffectively, authorities will experience‘inspection overload’. This is nothing new. Morethan a decade ago, Day and Klein (1990)suggested that:

There would seem to be considerable advantagesif different inspectorates were to build on eachother’s work instead of, as now, working inisolation. With the same frequency of inquiries byindividual inspectorates, their visits could allow acontinuous picture of developments over time toemerge: the reports might be cumulative ratherthan discrete.

Loughlin (1992) suggested integrating thevarious inspectorates into a ‘Commission forLocal Government’ that would assumeresponsibility for all the external mechanisms ofadministrative accountability of localgovernment. Hood et al. (1999) quoted a senior

local government officer from a Londonborough who remarked:

I’m obsessed by what the District Auditor issaying, and what OFSTED is saying about ourschools, what SSI might say and where we are inthe league tables, but the system isn’t co-ordinated and it’s hard to cultivate a goodrelationship with all of them at once.

Whilst central government has accepted that‘Joined-up government requires joined-upregulation to assess the joined-up performanceof those joined-up agencies’, ministers havemade it clear that there are no immediate plansto bring all inspection under the aegis of a singleagency. There have been attempts to ensurebetter co-ordination of the inspection regimesbut different services will continue to be subjectto different criteria and different styles ofinspection. It is therefore important that wedevelop a better understanding of thecircumstances in which joint inspections aremost needed and of the contexts in which theyare most likely to work. It is also important tomonitor whether the newly createdInspectorates Forum is able to act as vehicle forco-ordinating inspection and whether, as issuggested by some practitioners, the joint SSI/Audit Commission reviews offer a model formore integrated inspection.

The implications of partnership working

The government has placed considerableemphasis on the capacity of increasedpartnership working to promote serviceimprovement, and many authorities are in theprocess of developing new arrangements forjoint working – at both strategic and operational

24

External inspection of local government

levels with other public sector agencies, theprivate sector and voluntary and communitygroups. However, as a more mixed economy ofprovision increasingly takes hold, the standardof local services will depend more and more notsimply on the performance of local authoritiesbut also on the capacity of their partners.Clearly, this has important implications. Lines ofaccountability may become less clear and thecauses of ‘failing’ services may become moredifficult to pinpoint. Moreover, at present, theduty of Best Value applies only to selectedpublic agencies (including local authorities,national park authorities, police and fireservices). Many local councils argue that there isa need for other public agencies and for theirpartners in the private, voluntary andcommunity sectors to be subject to similardisciplines and to be called to account throughsimilar inspection mechanisms. However, it noteasy to see how this might work in practice andit seems unlikely that many potential privatesector partners would be willing to acquiesce.

The capacity to intervene

All six of the inspection regimes covering localgovernment are underpinned by the possibility(or threat) of intervention in cases whereauthorities are deemed to be ‘failing’. This isseen very much as a last resort and is typicallypreceded by a great deal of informal ‘behind the

scenes’ activity. In a number of high-profilecases, authorities with ‘failing’ LEAs have, forexample, agreed to outsource or radicallyreconfigure their education services in responseto adverse OFSTED reports – in effect, choosing‘to jump before they are pushed’. The IDeA(with the support of the DETR and now itssuccessor the DTLR) has also been very activelyinvolved in a small number of authorities thathave been seen to have chronically failingcorporate management systems. If, however, thenew Best Value inspectors judge large numbersof services and authorities to be failing,intervention may become more commonplace.This could threaten the largely consensualapproach that has surrounded Best Value so far.More fundamentally, it would pose importantquestions about the extent to which the privatesector, and other alternative deliverymechanisms, can in fact produce improvement.Both the inspectorates and central governmentdepartments face capacity constraints and manymarkets remain underdeveloped. If the threat ofintervention is to retain its potency, it willtherefore have to be used rather sparingly. If it isnot, as Hargreaves (1995) has argued (withreference to education), there is a danger thatinspection will become a form of quality controlthat ‘merely monitors the failure rate or the siteof failure, but does nothing in itself to put thefault right.’

25

There are strong a priori arguments in favour ofexternal inspection. It can help to ensure thatstandards are checked and that statutoryobligations are adhered to. In the right contexts,it may deter fraud, highlight pooradministration, increase public accountabilityand improve service delivery. Set against this,however, are the costs of inspection, and thedanger that inspectorates will focus onprocesses that can be measured rather than onthe outcomes that are more difficult to quantifybut matter most to service users and citizens.

As Humphrey et al. (1999) have argued, itseems likely that governments:

… will need to learn to cope with the complexityand ambiguity already lived out by governedsubjects and to curb their obsessive-compulsivequest for information and control withoutprojecting it onto ‘the public’.

However, whilst there is clearly a need toensure that the burdens imposed by inspectionare proportionate to the gains that might bederived from it, it is also clear that we do not yethave a sufficiently detailed understanding ofwhat the costs and benefits of inspection are. Asone chief executive, who had recently beenappointed from the private sector, told us:

I genuinely believe that it’s better that we’resubject to external scrutiny than that we are not.But I also have to ask myself whether, if we wereable to spend the £50 million per year that isgiven over to Best Value inspection onconsultancy support instead, it might produce alot more change, a lot quicker.

These sentiments reflect a fairly widespreadconcern. As the Select Committee onEnvironment, Transport and Regional Affairs

(2000a) put it, there is a danger that localgovernment is being ‘inspected to destructionand that this is diverting resources from serviceprovision, stifling innovation, lowering moraleand creating confusion.’

The Best Value inspection regime is stillrelatively new and it is important to avoidjumping to hasty conclusions or prematurecriticisms about what will almost certainly belooked back on as a transitional phase. Indeed,all the signs are that the inspection regimescovering local government will continue toevolve – in part, in response to the kinds ofconcerns that we have highlighted in this paper.This, though, makes it all the more importantthat policy makers and researchers monitor thedevelopment of the Best Value InspectionService and other inspectorates, and develop amore rigorous analysis of the long-term impactsof inspection.

The issues that we have highlighted in thispaper amount to a demanding research agenda.Given the time and resources available to us, itwill not be possible to address them all in thenext stage of our study. Comprehensive analysisof issues such as the level of public support forexternal inspection, the adequacy of currentexisting performance management systems, thelink between corporate management and failingservices, the implications for inspection ofpartnership working and the effectiveness ofintervention would all require in-depth studiesof their own. It will therefore be important forpolicy makers and the research community tofind ways of promoting future studies thatenable more detailed analysis of these importantissues. In the meantime, though, we hope thatthe second phase of our study will shed somelight on some of these issues, thereby

8 Conclusions

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External inspection of local government

stimulating debate and the search for a moresophisticated understanding of the value addedby inspection. In particular, there is a need topromote a much more comprehensive analysisof whether, and in what circumstances, externalinspection delivers the improvement thatministers are hoping for. As the SelectCommittee (2000b) put it, there is a need to:

… undertake a study to ascertain whether theinspection regime in local government deliversthe significantly enhanced overall benefits tojustify the overall cost of an onerous inspectionregime.

This will require a concerted attempt tobuild up a more sophisticated understanding of:

• how improvement is achieved in practice

• the ways in which inspection regimes cancontribute to improvement bycomplementing internal drivers of change

• which approaches work best in whichcircumstances

• how effectively inspection regimesinteract with each other and with otherpolicy instruments.

In an attempt to begin to open up some ofthese issues, the next phase of our study willexplore local experiences of, and perspectiveson, the impacts of inspection in a range ofdifferent case study authorities, focusing inparticular on whether:

• inspectors possess the necessary technicalknowledge and awareness of localcontexts for their judgements to be seenas useful and credible by inspected bodies

• current inspection criteria are appropriateand promote reliable judgements of thequality and cost effectiveness of services

• external inspection makes sufficient roomfor local priorities, managerial approachesand political priorities

• existing performance management andmeasurement technologies are sufficientlyrobust and reliable to enableimprovement to be monitored accurately

• inspectorates are able to co-ordinate theiractivities and, if they are not, what theconsequences are of fragmentedinspection in local government

• central government has the capacity tointervene effectively where services aredeemed to be failing and also whetherviable alternative delivery mechanismsexist

• the benefits of external inspectionoutweigh the costs and in whatcircumstances it is able to add the mostvalue.

27

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