Authorising Government expenditure: steps to more effective scrutiny Contents

Summary

The House’s procedures for examining and authorising Government proposals for expenditure were put under close scrutiny during the consideration by the House of the Government’s proposals for the system of ‘English votes for English laws’ (EVEL), adopted by the House in October 2015. At that time we observed that it was largely impossible for Members concerned about the spending consequences of legislation to exercise any effective control over the Government’s plans for public spending through the House’s existing processes.

We have made financial procedure a priority for scrutiny throughout this Parliament, and we will be examining the implications for financial procedure of the move to autumn Budgets announced by the Chancellor of the Exchequer in November 2016.

The constitutional significance of Estimates

The Estimates process is the means the House uses to control the Crown’s expenditure out of taxation. It is an annual process, and is the foundation of the House’s control over the Executive. Although since 1866 the House’s historic function of controlling expenditure has been delegated to the Treasury and to departmental accounting officers, the House’s important constitutional role remains. Parliament’s annual authorisation, through Supply and Appropriation Acts, of spending proposed by the Government provides the basis for the National Audit Office’s audits of all Government accounts.

Other House bodies and officers—departmental select committees, the Public Accounts Committee, the Comptroller and Auditor General and his National Audit Office—all have key roles to play in examining Government expenditure and holding Ministers and officials to account for their spending decisions. These activities do not substitute for proper consideration, scrutiny and authorisation of Government spending plans in the House. The House must control Government spending proposals effectively, and be seen to do it effectively.

The effect of spending reviews

The multi-year spending reviews introduced by the Government in 1997 have set ceilings for Government spending over three-year periods, and these in effect now set the spending envelopes for annual Estimates. Unlike the requirement for annual Estimates to be approved by the House and the expenditure to be given legislative authority in Supply and Appropriation Acts, there is no systematic examination of, and no parliamentary control over, the Government’s spending plans as set out in spending reviews. While annual authorisation for Government expenditure, through the Estimates process, is an important check on executive action, the process as it operates at present exerts no effective control over these multi-annual spending decisions. We will look at the House’s means of controlling Government spending plans in spending reviews in a future inquiry.

The present impact of Estimates scrutiny

The present process for consideration of Estimates by the House has been diverted from its original object, though for entirely legitimate purposes: the three Estimates days, which since 1982 have been formally allocated for consideration of Government spending plans, are now routinely allocated for debate on select committee reports, which may or may not be directly related to spending plans in an Estimate. On occasion attempts to debate a motion to approve an Estimate—upon which debate formally arises—have been ruled out of order. The House routinely approves Government plans to spend considerable sums of public money—over £500 billion in the case of the main Estimates for 2016–17—in formal votes, with debates on select committee reports related to a couple of Estimates. These receive little or no media or public attention, and the Estimates selected for debate rarely receive direct and focused scrutiny on the floor of the House.

Timing issues

The timing of the supply process does not always allow for effective scrutiny. Main Estimates are typically approved over three months into the financial year when expenditure is planned, and Supplementary Estimates—which adjust the totals requested in Main Estimates—are frequently laid very shortly before approval for the changes is sought. We consider that the bare minimum period required for effective consideration of Supplementary Estimates is five calendar weeks. We also consider that with effect from the 2017–18 Session there should be two days of debate on Main Estimates and one day on Supplementary Estimates.

We therefore recommend that, as part of the necessary changes to financial procedure arising from the move to autumn Budgets, the Treasury consider changes to the supply cycle to give the House better opportunities for effective scrutiny. In our view, Main Estimates should be published before the start of the financial year to which they relate, and there should be at least five sitting weeks between the presentation of an Estimate and the date scheduled for its approval. Such changes will have significant consequences for the preparation of Main and Supplementary Estimates, and we anticipate that they will have to be phased in over two or more supply cycles in a process which may involve the preparation of draft or shadow Estimates. The Treasury should consult the Procedure Committee, the Public Accounts Committee and the Treasury Committee in implementing this recommendation.

Scrutiny and debate of Estimates

Scrutiny of Estimates is a core task for select committees, and one which they discharge in a variety of ways. At present the only way in which select committee reports can be debated on the floor of the House is on a recommendation from the Liaison Committee, which allocates debates on the three Estimates days. This can constrain committees in their approach, as their policy-focused reports may not necessarily be directly related to Estimates.

The system of allocation is not operating as it should: Estimates days are an ineffective way of allowing debates on select committee reports, and an equally ineffective way of allowing all Members an opportunity to debate the Government’s spending plans.

We therefore recommend that the Backbench Business Committee and the Liaison Committee should enter into an informal arrangement where the Backbench Business Committee will effectively determine the Estimates to be debated on Estimates days, on the basis of bids from Members, and in return the Liaison Committee will receive three backbench business days for debates on select committee reports. This arrangement should come into force in time for consideration of the Main Estimates for the financial year 2018/19.

There are significant limitations on the form and content of motions to approve Estimates, and on the admissibility of amendments to such motions. Changes to such limitations raise issues of constitutional principle, and we therefore do not recommend any change as part of this report, though we may examine the case for change at a later date.

When we come to consider the House’s scrutiny of Government spending plans set out in spending reviews, we will also consider in more detail the proposal for a budget committee, supported by a dedicated budget officer, which Sir Edward Leigh MP and John Pugh MP made in their 2012 report to the then Chancellor on financial procedure in the House.

Information contained in Estimates

The poor presentation of information in Estimates documentation is an obstacle to effective scrutiny. The use of infographics, improvement of the layout, and the introduction of brief explanations of the technical terminology would assist the reader seeking to navigate the substantial Estimates volumes produced twice annually. These criticisms are by no means new. We recommend that the Treasury work with the National Audit Office and with the Scrutiny Unit of the House of Commons to prepare proposals for a change in format and content of future Estimates. While meeting necessary legal and audit requirements, future documentation should present information more clearly, simply and accessibly and in plain English wherever possible. The information should also be published online in spreadsheet format, to meet open data standards, as a matter of course.

The Estimates memoranda customarily provided to select committees to assist their scrutiny could also be improved, particularly since our proposed reforms mean that the memoranda may have a wider audience than at present. We recommend that in future these memoranda be laid before the House and published alongside the Estimates to which they relate. We identify ample scope for the Treasury to work with Departments to improve the content and presentation of such memoranda. Alongside this, we propose that the Scrutiny Unit and the House of Commons Library collaborate in preparing background briefing and analysis of Estimates for Members, to assist Members in their analysis of Estimates prior to bidding for Estimates Day debates.

Estimates and the block grants to devolved institutions

This inquiry originated in consideration of the effectiveness or otherwise of the control exercised by Members over the Government’s spending plans consequent on the changes introduced under the English votes for English laws Standing Orders. We recommend that the body allocating debates on Estimates have regard to allocating at least one debate slot per session for consideration of an Estimate which has significant effects on, or is significantly affected by, Barnett consequentials arising from spending changes driven by legislation, in order to allow Members from parts of the UK affected by such changes to express their views in the House.





18 April 2017