WRITTEN EVIDENCE SUBMITTED BY THE ACADEMIC MEMBERS OF THE STUDY OF PARLIAMENT GROUP (EST 09)

Introduction

1. The Study of Parliament Group is a charity established to bring together academics, parliamentary officials and others concerned to “advance and further the study of and research into methods of government through Parliament (including the working of Parliament and Parliamentary Institutions) or other branches of political science in, and for the benefit of, the community as a whole, and to publish the results of such study and research”. This memorandum has been prepared by two academic members of the Group with an interest in financial scrutiny, namely Professor John McEldowney (Warwick University), and Sir Stephen Laws, (Former First Parliamentary Counsel). This memorandum only represents the views of the individuals concerned, not those of the Study of Parliament Group.[1]

Financial scrutiny: the wider context

2. A review of progress on and prospects for reform produced by the SPG in 2004 noted that “for at least the last forty years the financial procedures of the House of Commons have seemed ripe for reform”.[2] The formal procedures for debating and approving annual expenditure established in their current form in the early 1980s seem even more in need of change in the context of the significant advances in reform in House of Commons practice and procedure there have been in recent years, including:

• More varied procedures in General Committees, including evidence-taking at the start of consideration of many Bills and the arrangements for questions for Ministers in European Committees;

• A variety of procedures for the work of select committees to determine the nature of subsequent proceedings on delegated legislation; and

• The return of backbench control over significant amounts of non-legislative time on the floor of the House following the creation of the Backbench Business Committee.

The specific options for reform in this paper are designed to reflect and be consonant with the wider reforms seen in recent years.

3. The Procedure Committee’s current inquiry and call for evidence are focused on the formal procedures for approving the Estimates. Estimates are central to the formal role of the House in relation to public spending. The purposes of the Estimates is to provide Parliament’s authority for the government to undertake its spending plans. The majority of this memorandum is concerned with those procedures and seeks to address some of the specific questions raised by the call for evidence, but it is important to place any proposals about Estimates procedure within a wider context.

4. It has previously been suggested that the greatest prospects for progress in the overall area of how the House of Commons exercises influence on expenditure lay in changes to financial scrutiny by select committees rather than reform of formal procedures for the annual approval of estimates.[3] The Fiscal Maze, the in-depth study of Parliament, Government and Public Money published by the Hansard Society in 2005, focused on changes which could be effected by reforms to the support for, and approach of, select committees to spending more than changes to formal procedures.[4]

5. There are very good reasons why it is necessary and appropriate for the House of Commons to authorise spending within the Estimates on an annual basis. The setting of annual limits is an essential component of the regular scrutiny of the financial implications of government policy decisions and of the way in which they administer the public service. The annual authorisation of such spending provides the basis for audit undertaken on behalf of the House of Commons by the National Audit Office and the publication of audited annual accounts. However, the fundamental path of public spending during a Parliament is determined within multi-year Spending Reviews, usually within an overall envelope set in Budgets and other major fiscal statements. The financial procedures of the House make no provision for these Spending Reviews to be approved, or in most cases even debated. In the limited cases where the House has a role in approving multi-year financial proposals outside the context of the Budget or the Estimates (the Charter for Fiscal Responsibility under section 1 of the Budget Responsibility and National Audit Act 2011 and, more recently, the Welfare Cap under the terms of that Charter), the House is acting at the behest of the Executive, rather than as part of a strategy shaped within the House in order to support scrutiny of or exercise influence over medium-term expenditure plans.

6. It is very much hoped that, in the course of this Parliament, the Procedure Committee will look at the wider control of spending on a multi-year basis and the wider prospects for improving financial scrutiny. Multi-year public expenditure is well developed within the UK but it is Executive-driven leaving Parliamentary scrutiny and oversight to catch up. Here the Treasury Committee might take the initiative, including better scrutiny of the intelligibility of the publication of Spending Reviews. This is a critical matter in favour of giving MPs the necessary information to ensure better scrutiny and the time in which to assimilate relevant information.

7. It may be that such work could be informed by further work planned within the Study of Parliament Group on financial scrutiny.

Current select committee scrutiny of the Estimates

8. It appears that the majority of the financial scrutiny work undertaken by select committees is focused on departmental annual reports and major policy announcements with a significant policy component rather than Estimates. There are good reasons for that. Departmental annual reports have a clearer narrative element and provide a sensible basis for regular questioning, usually of the Permanent Secretary of the Department concerned. In the case of the Estimates, and the Supplementary Estimates to an even greater degree, the short time window between the publication of the documents and their formal approval by the House makes it difficult for Committees to complete an inquiry and seek a debate on an Estimate itself, unless founded on prior work on related matters. An informal survey at the end of the 2015 Parliament indicated that most Committees had published Estimates memoranda provided by Departments, considered briefing from the Scrutiny Unit and undertaken correspondence with Ministers or officials as a result, but rarely more than that.

9. A salient exception to this general approach in the last Parliament, as in previous Parliaments, was the Defence Committee, which has published Reports on both the Main Estimates and the Supplementary Estimates. The latter document has particular significance for the Ministry of Defence, because it is now usual for funding to be sought for military operations by means of Supplementary Estimate, The Reports on Supplementary Estimates have not, however, always been published prior to the House’s formal consideration of them, for understandable reasons. On one occasion it should also be noted that the Justice Committee published a Report drawing attention to the very considerable increase in spending sought for the Serious Fraud Office by means of a Supplementary Estimate.

Documentation available

10. The quality of the documentation that informs the House’s consideration of Estimates has improved in recent years, but from a very low base. Since 2011, the Treasury’s Clear Line of Sight (Alignment Project) has helped ensure that there is a clearer read across between the Estimates documentation, the Spending Review documentation and the departmental annual reports. However, there remains room for improvement in terms of documentation, including in the following areas:

• More information could be provided to refer to the changes in provision compared with the previous financial year and trends over a longer period could be described;

• Information could be provided which explains how the resources sought in the Estimates differ from the level that would have arisen directly from the relevant Spending Review settlement;

• A fuller account could be given of the basis on which provision is sought for Annually Managed Expenditure and how accurate past planning for such levels has been;

• The basis on which expenditure is allocated to Annually Managed Expenditure or made subject to the Departmental Expenditure Limit could be explained in each case;

• The allocation of resources to capital and revenue expenditure might be better explained and examined;

• The need for greater clarity about the assumptions made about provision included for offsettable income;

• The calculation of the block grants allocated in accordance with the Barnett formula could be explained, and the effect of changes in departmental allocations since the Spending Review on the calculations of the block grants could be described;

11. This last point may be considered of particular importance in view of the fact that, during the debates on English Votes for English laws, reference was made by Ministers to the role of Estimates proceedings in the consideration of “Barnett consequentials”, when the information available on Barnett consequentials in Estimates documentation at present is extremely limited.

12. A wider point that also needs consideration relates less to the documentation as such than the structure of the Estimates. When resource accounting and budgeting was first introduced, Departments often had two or three Requests for Resources, at least one of which related to a clearly identified programme or stream of expenditure. In the subsequent years, the trend has been towards a single Request for Resources for most Departments, with an all-encompassing ambit which refers to all activities of the Department, often in very general terms. This means that ambits are less effective as a control on the purposes of expenditure than was formerly the case. The Committee may wish to consider whether the very largest and most politically important multi-year programmes (such as Trident Renewal) should not have a separate Request for Resources, which would make them much more readily identifiable in Estimates, and aid proper scrutiny.

Debates on Estimates days

13. For most of the twentieth century, the majority of the time formally allocated to debates on Estimates (largely on “Supply days”) was controlled by the Official Opposition and other opposition parties, although days were also allotted in Supply time for discussions on the armed forces and debates on select committee reports. It was unsurprising that most debate was on matters of policy, usually linked tangentially or not at all to the Estimates needing approval. The 1981 Report from the Select Committee on Procedure (Supply) sought to improve matters by proposing the creation of two new types of parliamentary business: (i) Opposition days, still within the control of the Opposition parties, but freed from the constraints of Supply procedure, and (ii) Estimates days. That Committee clearly envisaged that the Estimates days would be for debates on the content of the Estimates. It proposed a separate Estimates Business Committee to determine which Estimates would be debated on each day and the time allotted to particular Estimates within a day.

14. When Estimates days were introduced in 1982, the choice of Estimates for debate was for the Liaison Committee (subject to formal ratification by the House), not a separate Estimates Business Committee. It remains largely true, as noted in 2005, that “the subjects chosen for Estimates day debates are generally policy topics examined in select committee reports, usually tenuously connected to the actual proposals for authorisation before the House”.[5] Indeed, it appears that the scope of debate is determined by the subject chosen by the Liaison Committee, rather than being set by the scope of the Estimates motion to approve the expenditure of the Department concerned. Over time, and particularly since the establishment of Backbench Business in 2010, the Government has ceased to provide time for debate on select committee reports, so that the three Estimates days have become in effect the only regular opportunity for debates on the floor of the House on matters chosen by select committees.[6] In these circumstances, it is unsurprising that the Liaison Committee’s priorities for debate can reflect the wider concerns of select committees on policy and administration, as well as expenditure, and not be geared primarily to expenditure scrutiny needs.

15. The Liaison Committee has in the past sought an increase in the number of Estimates days. However, such calls may have been motivated more by concern about the amount of time available to debate general matters of interest to select committees than concern about time available for consideration of the Estimates. Those requests for additional Estimates days also predated the establishment of the Backbench Business Committee.

Reform options

16. Select committees have a legitimate and arguably primary interest in debates on Estimates, as they undertake the most systematic financial scrutiny on behalf of the House of Commons. If select committees were to lose influence on the use of the finite time for debating the Estimates on the floor of the House, this would act as a disincentive to undertake financial scrutiny. However, a case can be made for separating the case for debates on select committee reports from the case for debates on the Estimates, and also for allowing a wider constituency of Members of the House a say in what Estimates are separately debated.

17. The Procedure Committee may wish to consider whether the Standing Orders governing backbench business could be modified to provide a guarantee that at least the equivalent of two full days on the floor of the House each Session would be for debates on subjects nominated by the Liaison Committee. (Individual select committees would remain able to apply for Backbench Business debates on other days.) These could be on substantive motions, offering greater flexibility than is available on Estimates days. As a quid pro quo for this, the number of Estimates days could be reduced to two (one for Main Estimates and one for Supplementary Estimates) and the number of Backbench Business days on the floor of the House each session could be increased from 27 to 28.

18. The two remaining Estimates days would then be for debates on the Estimates and Supplementary Estimates themselves. One option for allocating the time would be to prescribe some ‘triggers’ to provide for certain Estimates not to be included within the roll-up motion, but to be the subject of a separate motion. All such motions would be then be amendable as is the case with Estimates day motions at present.

19. The first trigger could be a Report from the relevant departmental select committee which specifically recommends a debate. The trigger report could highlight specific issues as the focus for debate, but this would not limit the scope of debate to the subject chosen by the select committee, as is apparently the case with the choice of the Liaison Committee at present.

20. A second trigger could be a similar report recommending separate debate on and consideration of an Estimate by the Committee of Public Accounts. This could be based on specific issues arising from the audit of previous annual accounts of the Department in question (creating a desirable feedback loop between audit of accounts and Estimates) or issues relevant to Estimates identified as a result of National Audit Office value for money studies.

21. A third trigger could be a motion tabled as an Early Day Motion with cross-party support and a certain number of signatories. This would provide a remedy for one concern about the existing arrangements, namely that the control of Estimates business lies exclusively within select committees.

22. A possible objection to such trigger proposals is that they might give rise to more demands that could reasonably be met in the limited time available, or lead to, say, eight debates of 45 minutes on a single Estimates day. This objection must not be seen as compelling. A series of short debates focused on spending would arguably be well-geared to the needs of effective financial scrutiny. However, it could remain possible for the Liaison Committee to retain a power to make a recommendation to allocate the time, possibly with specific provision to combine debate on separate motions. All votes could anyway take place at the conclusion of the Estimates day in question.

23. A more far-reaching option, possibly for development only in the event that demand for the time for debate on Estimates proved greater than expected, would be for a provision to exist for some Estimates to be debated off the floor of the House, in a specially created General Committee working on similar lines to a European Committee. Thus, a Minister in the department would answer questions from Members (whether or not nominated as members of the Committee) at the start of the session, and this would then be followed by a debate on a motion that the Committee had considered the Estimate. The Estimate would then be agreed to as part of the roll-up motion. Such committees may not be easy to establish in the limited time between the laying of the Estimates and the roll-up motion, but they would be an opportunity to respond to demand for more debate on the Estimates without trespassing unduly on the finite time on the floor of the House.

April 2016

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