Arts quangos axed 'before costs known' says watchdog
Quangos were merged and axed by the Department for Culture, Media and Sport (DCMS) without analysing how much it would cost, says the spending watchdog.
The National Audit Office said redundancies and cancelling leases were not taken into account when bodies such as the UK Film Council were axed.
It added that projects worth £73m were ditched before full costs were known.
The department said closing bodies always resulted in long-term savings and they had "maximised efficiencies".
The NAO report concluded that financial management at DCMS had improved - but it was still not achieving value for money.
The department's decision to close and merge a number of quangos - such as the Football Licensing Authority, the Museums, Libraries and Archives Council and the Gambling Commission - was "not informed by a financial analysis of the costs and benefits", it said.
"It based its decisions on estimates which did not take account of the full costs of closure such as lease cancellation, redundancy and pension costs. The decision was not informed by an estimation of future savings or of what the payback period would be."
A further seven projects were axed - including the Stonehenge visitor centre, a libraries modernisation programme and a contribution for a new BFI film centre - "without ascertaining the financial penalties that might be incurred", the report said.
The NAO also said "flat rate" cuts to most of the arts and culture quangos meant the department could not yet tell what their ultimate impact would be.
"While the department was influenced by the desire to make quick decisions, the use of standard flat rates does not differentiate sufficiently between the existing cost bases of the different bodies, although access to reserves and restructuring funds may address this going forward."
The report concluded that DCMS should be paying more attention to the financial management of its arms-length bodies, should stop "over-committing" money to different bodies and "planning to overspend" and make decisions based on a full cost analysis. It also warned against "undifferentiated top-slicing of budgets" to meet spending cuts.
Amyas Morse, head of the National Audit Office, said: "Financial management at the Department for Culture, Media and Sport has improved, but there is still a way to go before I can say that it is achieving value for money.
"Some decisions have been made based on insufficient financial information and analysis, as exemplified by the decisions to merge and close some arms-length bodies. This can leave organisations exposed and unprepared for the future and lead to high overall costs or the displacement of costs elsewhere."
'Driven down costs'
A spokesman for DCMS said: "Closing a body always results in savings in the long term and similarly, merging a body, if done in a structured way almost inevitably results in efficiencies and savings.
"We have been actively managing the closures and mergers to achieve value for money since these decisions were taken and have both driven down costs and maximised efficiencies. We don't feel this has been recognised by the NAO."
The department also welcomed "the NAO's recognition of the department's good financial management on the huge project that is the Olympics".
And the spokesman said: "We also welcome their acknowledgement of how quickly we took funding decisions following the comprehensive spending review.
"We had consulted extensively over the summer with our bodies, which meant that we could take swift and informed decisions immediately after the settlement. We have worked hard to protect front line delivery and ensured that arms-length bodies have access to a number of different funding routes to secure this."
In the Lords on Wednesday, peers criticised the decision to include the Welsh language channel S4C in the bill which will give ministers powers to scrap quangos without consulting MPs.
The government wants the BBC to take over part-funding the channel from the government in 2013 and legislation has been introduced to break the link between the its annual grant, and inflation.
Baroness Rawlings, for the DCMS, told peers that in the present economic climate it was not possible for S4C's funding to be linked to the retail price index and the government needed "flexibility" on funding settlements.
But former Conservative chancellor Lord Howe said S4C should be removed from the Public Bodies Bill said relying on "this nuclear kind" of legislation would be "politically unwise and disastrous" and it should be possible to change the financing in another way.
He said the former Conservative Home Secretary Willie Whitelaw, who set up S4C in the early 1980s, would be "turning in his grave".