COMMONS

MPs report on accountability for public money

05 April 2011

The Commons Public Accounts Committee has today published a report which, on the basis of evidence from the Cabinet Office and HM Treasury, addresses an issue at the core of the relationship between Parliament and government - accountability for public spending

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:

"We looked at the implications for accountability of two recent developments: the governance reforms which include Ministers chairing departmental boards and greater non-executive involvement in those boards; and the reform and localism proposals which envisage a significant devolution of responsibility for service delivery to a wide range of new bodes, in some cases independent of both central and local government.

The personal accountability of the Accounting Officer, normally the Permanent Secretary in a Whitehall department, forms the foundation of Parliament's ability to hold government to account for public spending.

This must not be undermined by the new roles of either ministers or non-executive directors.

Further, there is a potential conflict between the demands of accountability to Parliament and the devolution of responsibility for the delivery of public services under the Government’s reform and localism agenda. We are concerned that Parliament, through this committee, could be handed responsibility for holding innumerable local delivery bodies to account for their use of taxpayers' money.  That will not be practical if accountability is completely decentralized to Foundation Trusts and Free Schools.
At the same time, the abolition of the Audit Commission presents a further challenge to ensuring proper oversight and accountability for the use of taxpayers' money at a local level.

We welcome the Government's commitment to transparency but it is not good enough to dump data into the public domain. It must be analysed to be relevant, robust and fit for purpose. As responsibility for service delivery is devolved to new bodies departments must clearly set out what they are expected to deliver, how they will be held accountable and what action will be taken should performance fall short.

In today's report, we give our view of the elements which are fundamental to the effectiveness of this accountability process."

Margaret Hodge was speaking as the committee published its 28th Report of this Session which examined accountability for public money.

"This Report addresses an issue at the core of the relationship between Parliament and government – accountability for public spending.  We recognise that this is just one dimension of the accountability framework that underpins our constitution: Ministers have a separate accountability to Parliament and the public for their policy choices and outcomes achieved; and local authorities are answerable directly to their own electorate. We also recognise the inherent tensions between these different dimensions of accountability and that as government has evolved demarcation between them has become less clear.  Our concern is to ensure that regardless of what public money is spent on, or which bodies are spending it, it is spent properly with due regard to value for money, hence our focus on financial accountability.

Our hearing addressed policy issues surrounding parliamentary accountability because the Committee of Public Accounts and the Comptroller and Auditor General have particular statutory charges in this regard.  While the PAC is most engaged with the effectiveness of accountability for public spending, the issues are of significant interest to other select committees and to Parliament as a whole.

We were interested in the implications for accountability of two recent developments: the governance reforms which include Ministers chairing departmental boards and greater non-executive involvement in those boards; and the reform and localism proposals which envisage a significant devolution of responsibility for service delivery to a wide range of new bodies, in some cases independent of both central and local government.  We took evidence from the Minister for the Cabinet Office, the Cabinet Secretary, the Permanent Secretary to the Treasury and the Government’s lead non-executive.  Our concern was to understand rather than challenge the underlying policy intentions.  The testimony we heard on the governance reforms raised a number of practical points on which we have written to the Treasury in response to their consultation on the draft Corporate Governance Code (copy attached as the annex to this Report).  The testimony we heard on the reform and localism proposals raised more fundamental points about the current model of accountability, which we explore in this report.

We wanted to understand whether the Government intended that its departmental boards or reform proposals should alter the accountability structure of which this committee is part.  Our concern was that Parliament gives government the authority to raise revenue, and that it approves public spending and in turn holds government to account for the use of public funds and for what is achieved.  In practice government has long chosen to discharge this accountability through the senior civil servant in each department, the Accounting Officer.  Government vests in each Accounting Officer a direct and personal accountability to Parliament for his or her department’s stewardship of public funds.  While significant sums are spent locally, local taxes account for just 5% of revenue raised and so the overwhelming majority of public spending in the UK is routed through departments and is the responsibility of the departmental Accounting Officer.  Parliament vests responsibility in this committee to hold Accounting Officers accountable on its behalf.
 
The Accounting Officer model has a number of strengths: it promotes high standards of propriety in public spending and an understanding within departments of the importance of securing value for money.  The Accounting Officer model has also stood the test of time, adapting to new and diverse methods of delivering services to the public.
 
The environment within which Accounting Officers operate has evolved since they were first appointed in the 1870s.  The clear demarcation between ministerial responsibility for policy and Accounting Officer responsibility for implementation has blurred as Ministers in successive administrations have taken a closer interest in how their policies are delivered, and the present public service reforms will inevitably impact on senior relationships within departments.  These developments, taken to their logical conclusion, might have been thought to argue for a shift from the current individual accountability model to a collective model in which departmental boards would be held accountable.  We were told very clearly, however, that the Government intends to continue with the current model, and our Report therefore starts from this premise. 
 
The Government has recognised the need to reconcile the policy objective of its reform and localism agenda with the demands of accountability to Parliament through the Accounting Officer model, and has asked Sir Bob Kerslake to review how this might be achieved.  We welcome this review and the commitment to consult this committee, and have taken the opportunity in this Report to set out our view of the fundamental elements that need to be in place to ensure the accountability process is effective.  These are set out in Figure 1, and provide the context for our consideration of the current reform proposals."

Further information

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