Before the Next Steps reforms introduced in 1988, all government activity took place within Whitehall Departments headed by Ministers. The aim of the reforms was to 'hive off' activities to arms-length organisations, or Executive Agencies, whilst retaining accountability to Ministers and to Parliament. To this end, each agency has a chief executive, who is responsible for operational issues, while a Minister makes, and takes responsibility for, policy decisions.
Ministers set targets for the agencies, whose spending appears on the balance sheet of the sponsoring department. Executive Agencies are normally audited by the National Audit Office and are subject to the scrutiny of the Commons Committee on Public Accounts and the relevant departmental select committee.
Executive Agencies now account for the majority of civil servants employed. Some Executive Agencies are 'trading funds.' This means that they secure their own income streams from their activity. The Royal Mint is an example of a trading fund.
Executive Agencies tend to be required to comply with a standard of service set by the sponsoring department. They also have to meet public service and service delivery agreements set by the Treasury. Most are required to make an annual report and are reviewed every five years (quinquennial review). This review considers the future of the agency against proposals for its abolition, privatisation or the contracting-out of its functions.
Non-Departmental Public Bodies or NDPBs are perhaps better known as Quangos (Quasi-autonomous non-governmental organisations). These are wide-ranging and varied bodies such as NHS trusts, learning and skills councils and advisory bodies, which normally spend funding allocated by departments. Their boards are appointed by Ministers, in line with the Code of Practice from the Office of the Commissioner for Public Appointments. This requires that, amongst other things, board members are appointed on merit and are subject to independent assessment.