Committee of Public Accounts


Press Notice dated 3 July 2006


IMPROVING FINANCIAL SCRUTINY

Mr Edward Leigh MP, Chairman of the Committee of Public Accounts, said today:

“As a result of talks with United States Congressmen who have far more power over appropriation than us, my Committee thinks that there is scope to improve the Parliamentary scrutiny of Government spending plans.

“We have decided to write to the Chairman of the Liaison Committee proposing that Departmental Select Committees devote more time to the scrutiny of expenditure plans. We will also draw his attention to the willingness of the National Audit Office to provide support for this.

“My Committee would also seek to play a fuller part in strengthening financial scrutiny - by giving more attention to the implications of recent performance for the future development of programmes and the risks that will need to be managed. We would accordingly look to the National Audit Office to ensure that its reports on major programmes are forward-looking and examine how risks to future delivery can be assessed and managed.”

Mr Leigh was speaking as the Committee published a paper outlining its conclusions and recommendations on improving financial scrutiny, arising from its recent visit to the USA.

A PAPER BY THE COMMITTEE OF PUBLIC ACCOUNTS

IMPROVING FINANCIAL SCRUTINY

Introduction

•  A key issue to emerge from the Committee of Public Accounts’ visit to the USA was the different approach taken to financial oversight, the level of resources devoted to this work and the direct role Congress has in budgetary matters.

•  The different US model cannot be easily translated to the UK. In the US the separation of powers provides for a separately elected President and Congress which can be at odds with each other. In the UK, the Government is formed by the party commanding a majority in the House, so parliamentary dissent from the Government’s budget proposals is unusual. Indeed the ability of the Government to obtain parliamentary supply is a key test of its authority.

•  While acknowledging these differences the Committee of Public Accounts has considered whether there is scope to improve Parliamentary scrutiny of expenditure proposals.

The current approach

•  Select Committees are the principal bodies through which the House scrutinises the Government’s expenditure plans. They are appointed to examine the expenditure, administration and policy of each principal government department and work to a series of core tasks set by the Liaison Committee which includes “to examine the expenditure plans and outturn of the department, its agencies and principal NDPBs”.

•  Over the years there have been a number of proposals to improve the systems for the effective scrutiny of expenditure. In November 2002 following recommendations from the Modernisation, Procedure, and Liaison Committees and the approval of the House of Commons Commission the Scrutiny Unit was created consisting of 17 staff to provide specialist support for committees on expenditure matters and draft bills.

•  Further strengthening parliamentary oversight of expenditure plans would require departmental Select Committees to devote more time to this area of their work. Expenditure plans and the Estimates require significant explanation to be comprehensible and competing demands on Members’ time coupled with committees’ limited ability to influence supply matters make it difficult to generate consistent and continuing interest in a line by line scrutiny of expenditure plans.

•  Effective scrutiny of expenditure plans requires the proposals be couched in terms that are intelligible. Departments are required to produce an Estimates Memorandum in support of each Estimate presented to Parliament for approval. Each Memorandum is intended to assist Select Committees’ scrutiny of public expenditure by providing explanations of the impact and consequences of changes sought in the Estimate. In scrutinising expenditure plans Select Committees are assisted by the Scrutiny Unit which examines financial documents and analyses the Estimates on behalf of committees and reviews the quality of Estimates Memoranda.

•  Despite these welcome developments Select Committees do not consistently devote sufficient time to consider departmental spending proposals. This view is likely to be supported by the findings of the Hansard Society’s current review of Parliament’s capacity to scrutinise government’s expenditure and taxation plans. Its report, due to be published on 4 July, is likely to recommend that, to give a higher priority to financial scrutiny within Select Committees, Parliament should consider the piloting of finance and audit sub-committees in certain departmental Select Committees.

•  As things stand the role of the Committee of Public Accounts relates to the implementation of expenditure plans once authorised by Parliament rather than to the authorisation process itself. An extension of the Committee’s work to encompass the appropriations process would move the Committee’s work closer to the policy arena and would require adjustments to its Standing Orders.

Recommendations

€ The Committee of Public Accounts has concluded that there are two areas in which it could press for further improvement in the scrutiny of expenditure plans:

1. The National Audit Office's engagement with Parliament is based firmly on the work of the Committee of Public Accounts. With the support of the Public Accounts Commission, however, the National Audit Office has also developed links with other Select Committees and supported them in a variety of ways including providing an increasing number of written and oral briefings. As a natural extension to this work the National Audit Office could support Select Committees in their scrutiny of expenditure plans by providing an analysis of significant changes and trends in major existing expenditure programmes. This approach might however be less applicable to new initiatives where trends would not have been established. The National Audit Office could also draw on its previous work relevant to consideration of ongoing programmes, thereby enabling Select Committees to probe whether lessons from the past (including those arising from the National Audit Office's work on similar issues in other parts of government) have been taken into account in developing future spending proposals.

2. The Committee of Public Accounts could seek to play a fuller part in strengthening financial scrutiny within its current terms of reference by looking to the National Audit Office to ensure its reports on major programmes are forward-looking and examine how public services can develop going forward and how risks to future delivery can be assessed and managed.

Accordingly, the Committee has decided:

a) to write to the Chairman of the Liaison Committee (with copies to the Chairman of the Modernisation Committee and the Chairman of the Public Accounts Commission) proposing that Departmental Select Committees devote more time to the scrutiny of expenditure plans and draw to their attention the willingness of the National Audit Office to provide support for this process, thereby allowing Select Committees to draw upon the National Audit Office's cross-government expertise.

b) in scrutinising the implementation of major programmes, to give more attention to the implications of recent performance for the future development of programmes and the risks that will need to be managed.