Leading article: After the bar-room brawl, we pick up the pieces

It has been a confusing week for students of the British state. The head-butting between Michael Howard and Derek Lewis, the sacked director general of the prison service, followed by the bottle-throwing across the dispatch box between Mr Howard and his Labour opposite Jack Straw, has left much glass on the floor but a good deal of mist on the saloon bar windows. It is not easy to see what is going on.

Even the most assiduous reader, who has followed in detail the arguments that arose from the Learmont report into British jails, must be thoroughly perplexed. To whom should we now address our complaints about the perilous condition of Britain's prisons? To Mr Howard? To Mr Lewis? To the impressive members of the Prison Board, headed by Sir Duncan Nichol, a former chief executive of the National Health Service? If Mr Howard is responsible for "policy", where does policy stop and managerial action begin?

The good news is that incidents like those of this week encourage us to re-examine one of the most far-reaching changes to the way that Britain is governed - the creation of a series of agencies to take over work formerly conducted directly by departments of state - introduced by the Conservatives since 1979.

The Prison Service is one of these "Next Steps" agencies, along with over 100 others ranging from the Child Support Agency and the Benefits Agency to the Passport Office and the Driver and Vehicle Licensing Centre in Swansea.

The idea is that where there is a clear, identifiable job to be done, for example distributing benefits, it is better done by a specialised organisation rather than by a group of generalist civil servants. This clarity of focus brings many potential advantages: expertise can be more systematically developed, customers will know better to whom they should address their demands, and standards of performance can more easily be monitored and published. At a time when the public is ever more demanding of the quality of the public services, agencies offer a break from the monolithic and centralised Whitehall machine towards a more flexible, variegated and modern network of service providers.

There is no doubt that a greater clarity of managerial purpose in many of these agencies has resulted in better services. The Passport Office and the DVLC are both examples of bodies that used to be a byword for inefficiency and about which we now hear little, because there is little about which we need to complain. Even the top civil servants' trade union, the First Division Association, whose voice has been loud in the prison service argument this week, admits that many of its members now like working in agencies. The old argument of principle, that agencies would somehow erode the very foundations of public morality in the British civil service, has been shown to be false.

It is evident, however, that there are still serious issues of accountability to be resolved. Just as we are still struggling to consolidate a system of regulation for the privatised utilities, so the responsibilities of those who run agencies and the politicians to whom they answer are insufficiently clear. MPs are frustrated at their inability to get answers to questions on agency matters on the floor of the House of Commons. Although parliamentary committees have improved the quality of their oversight of the new agencies - as well as of older ones, such as the Bank of England - MPs often look slow and ill-informed when interrogating the professionals who sit atop these powerful bodies. There are also important questions to answer about the mechanism for appointing members of agency boards, which in many cases have been stuffed with business figures sympathetic to a Conservative government. Some agencies have also taken a rather contemptuous view of the need to be open to scrutiny by the media, although hardly more so than the traditional organs of government.

Above all, perhaps, there is the problem of how to distinguish between the political role of the minister and the executive role of the manager. Is a high-profile prison escape a matter for the director general because an individual prison officer behaved incompetently or is it a question for the Home Secretary, who failed to provide adequate training resources? Does a prison riot fall on the shoulders of the agency for not enforcing discipline, or on the minister for imposing a hardship regime that raised tensions?

Clearly these problems are greatest in areas of the most acute public concern. The Child Support Agency could, in theory, have been an uncontroversial collecting body, like the local authority organisation that gathers parking fines. The politics of the modern family ensured that it would, in practice, be a source of such fierce dispute that in the end its first head was forced out. Prisons, with the risk of riot and breakout, fall naturally into the same category.

It would be a serious mistake, however, to give up or even slow down on agencies. All of the problems revealed so far are capable of being addressed. The appointments system could readily be made more transparent and open to public comment. It is not difficult to imagine how parliament could improve its methods of scrutiny. Much has been learnt in recent years about public audit upon which we can build.

The most intractable difficulty in reality, and the least discussed, is that so long as central government pays for the work of agencies from the proceeds of general taxation, there will be a tendency towards central control, thus restricting the ability of agencies to respond to local conditions and to show imagination. To tackle this problem requires radical thinking about the future of local government and localised public bodies beyond the range of the current party political debate.

But we should not let Mr Howard's brawling bother us too much. He, or his successor, will in the end have to clarify roles and responsibilities, knowing full well that in a crisis, fingers will point in all directions. The conflict may be bad for the conduct of Britain's prisons in that it reveals serious inconsistencies of strategy, as well as gaps in managerial performance. But the fact that we can see what is going on is in large measure because the prisons agency exists. Does anyone really think it would be better if the Home Office was in sole charge?