Select Committee on Public Accounts Seventh Report


The Committee of Public Accounts has agreed to the following Report:—



1. During the year ended 31 March 2000, expenditure in excess of the grants voted by Parliament was incurred as follows:

Class and Vote
Excess of Expenditure and/or
deficiency of Appropriations in
Excess as a % of
 Net Vote
Amounts to be
applied to meet
Amounts to be
voted as supply
Vote 2
Ministry of
Fisheries and
Vote 3

2. The Committee views every Excess Vote as a serious matter, as they always represent some failure in control. There were two excesses in 1999-2000, one of which arose because the Department made payments which were outside the ambit of its vote and the other due to a failure to manage cash flows properly. Departments are expected to control and monitor payments carefully throughout the year to ensure all expenditure is regular and that grants voted by Parliament are not exceeded.


3. The Committee has considered the Comptroller and Auditor General's separate report on the Class X, Vote 2 excess. The overspending of £308,778 was caused by the Ministry of Agriculture, Fisheries and Food (MAFF) making payments into court in respect of claims for damages which were outside the ambit of the Ministry's vote.

4. The Merchant Shipping Act 1988 restricted access to the British fishing vessel register to British owned vessels. This excluded around 150 foreign owned vessels, many of which had been registered under the previous Merchant Shipping Act 1894. The European Court of Justice held that this Act was not compatible with Community law and failed to meet the requirements of the Treaty of Rome. Following further rulings by the European Court and the House of Lords a number of companies owning vessels made claims for damages.

5. A hearing for 13 claimants was set for February 2000. Legal counsel advised MAFF to make a payment into Court by December 1999 to encourage settlement of the claims, and to minimise costs. Following advice from the Treasury that the ambit of the Ministry's vote would not cover such payments, MAFF sought an advance of £10,630,000 from the Contingencies Fund. They paid £9,335,000 into Court and returned the balance to the Contingencies Fund in February 2000.

6. MAFF intended to seek Parliamentary approval for the expenditure through a Spring Supplementary Estimate. However, it was essential that the trial judge should not know the amount of the payments to Court. As the Treasury required MAFF to disclose in detail in the Supplementary Estimate the reason for the additional funding, MAFF delayed seeking authority for the expenditure until their Main Estimate for 2000-2001 with the Treasury's approval. Parliament was, however, informed about the drawdown from the Contingencies Fund by way of a letter from the Chief Secretary to the Treasury to the Chairman of this Committee on 20 December 1999.

7. In March 2000 MAFF were advised by legal counsel to make further payments of £308,778 in final settlement of some of the claims. As no Spring Supplementary Estimate had been taken, the ambit of MAFF's vote remained unchanged. They should therefore have sought a further advance from the Contingencies Fund for this additional payment. However, through oversight, the amount was paid from the Ministry's vote, and hence the expenditure was irregular. The Ministry has made savings on its vote sufficient to fund the irregular expenditure of £308,778, and a token vote of £1,000 is necessary to regularise the spending.

8. For the future, where payments have to be made from an advance from the Contingencies Fund, MAFF has instructed that payments must be processed and controlled through its central Finance Policy Division.


9. The Committee has considered the Comptroller and Auditor General's separate report on the Class X, Vote 3 excess. The Excess of £446,617 arose because of weaknesses in the Commission's arrangements for managing its cash flows and, in particular, a failure to take account of the effect of VAT settlement payments in their monitoring Vote outturn.

10. During 1999-2000, a reduction in timber prices led to an increase in the net cost of the Forestry Enterprise Agency compared to estimated provisions. The Commission took action by seeking additional provision through a Supplementary Estimate and by offsetting the expected loss in timber revenues with savings in net expenditure in other departmental and agency activities. However, in monitoring the Vote outturn, the Forestry Commission failed to take account of an unusually high VAT settlement in the first quarter of 1999-2000.

11. The Commission's estimates for 1999-2000 assumed that VAT transactions would have a broadly neutral affect on cash flows over the year. However, the Commission's efforts to contain net expenditure within the Net Estimate in the previous financial year (1998-99), by maximising timber sales and minimising expenditure during the final quarter of that year, gave rise to an unusually high net VAT settlement of £1.4 million in the first quarter of 1999-2000. As the Commission failed to take account of VAT payments and receipts in their monitoring of cash flows and in the management and control of voted funds, this sum was not reflected in the request for additional provision in the Supplementary Estimate.

12. The excess of expenditure against Estimate could have been avoided if expenditure under Subhead A2 had been more tightly managed. Having sought to balance the Forest Enterprise Agency's overspending on Subhead A3 against a reduction in Woodland Grants on Subhead A4, the Commission assumed that expenditure was well within the overall Vote provision. Based on this view, and having failed to identify the impact of VAT payments described above, the Commission continued to make payments up to the end of March, including a £915,000 payment for refurbishment. This expenditure, together with the identification of the VAT payments which had been held in a suspense account, contributed to the overspending on Subhead A2 and, as a consequence, the overall excess of expenditure against provision.

13. The Forestry Commission proposes to avoid a recurrence of this problem by ensuring that actual VAT receipts and payments are included in their cash monitoring and management procedures in future.


14. It has been the practice to regularise the position by means of Excess Votes, and the Committee recommend that the sums set out in paragraph 1 should be provided accordingly. To regularise the position is not to condone it, however, and the Committee expect a robust management response by the Departments concerned to address the weaknesses which have led to these excesses.

15. We expect the Treasury to bring our concerns to the attention of these departments and, where appropriate, to Departments more generally. In particular we expect the Treasury to remind them:

  • Departments should monitor cash flows by taking into account all amounts payable, including VAT, and management should regularly review variances between forecast and actual financial data, so early action can be taken to manage and control voted funds.

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