Sean O'Grady: Quango cuts may well cost more than they save

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As bonfires go, this one is a little less fiery and accompanied by a rather less spectacular display of fireworks than you might have thought, listening to the soaring, boastful rhetoric of ministers and the squeals of anguish from the quangos being roasted alive. More of a damp squib really.

First, many of the bodies being abolished are already ghostly leftovers with no staff, budgets or executive functions. It's very good of Mr Maude to go round Whitehall tidying up like a housemaid, but the effort and money expended cleaning out the cupboard may exceed savings. British Shipbuilders, for example, once a controversial and powerful instrument of state socialism, was long ago wound up operationally, and exists in name only. Like the Norwegian Blue, this is a quango that has already ceased to be. It is not even resting.

Second, savings will also be far less than first appears because the quangos' functions, and staffing and spending, will be transferred to Whitehall. Take the Human Fertilisation and Embryology Authority. Even if its entire £2m budget were saved, you have to set that against the £700bn total of public spending this year. And someone somewhere will still have to rule on stem cell research and be paid to do so. Meanwhile, the one benefit of a quango – its arm's-length relationship with government (itself a valuable asset in moral quagmires such as this) – is lost.

Third, there is an enormous risk that, in the rush, valuable assets – property, intellectual rights, land – will be mislaid or inadvertently transferred into the ownership of a few lucky individuals.

When Gordon Brown was chancellor he undertook the "Doomsday 2" exercise, which unearthed about £300bn in hidden state assets, many under the aegis of quangos. We have to be sure, for example, that the £300m of Lottery (ie public) money, that funds the National Endowment for Science and the the Arts will be protected when it is turned into a charitable trust; the same goes for the assets of British Waterways, when it turns into a National Trust-style charity. Who will own these assets? Will they be safe from carpetbaggers?

Past experience suggests that hurried exercises such as this – railway privatisation springs to mind – can leave lucrative opportunities for beady-eyed City types.

We might also ask what happens if, say, British Waterways cannot survive as a charity; even charitable bodies have to cover their costs.

In some cases, the state may end up having to renationalise the ex-quangos, which would be like getting singed by your own bonfire.

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