The following evidence was submitted to the House of Commons Select Committee on Procedure (Finance) and printed with its Report of Session 1982-83, as Appendix 10 to the Minutes of Evidence (HC 42-III, pp 10-17).
Memorandum by Dr Ann Robinson, Department of Politics, University of Cardiff, after consultation with members of the Study of Parliament Group
- Parliamentary Control of Public Expenditure
Parliamentary Control of Public Expenditure
1. Before we consider how Parliament might improve its methods of control over public expenditure it is necessary to define the concept of control. In the popular mind “control of public expenditure” has, since 1976 at least, been associated with cutting public expenditure back from its current limits, or with rooting out waste. These usages of the term are not very helpful because they tell only part of the story. Politicians do much more than cut expenditure. They determine levels of spending and they allocate and distribute spending among competing services. As social, economic and political circumstances alter so some items of expenditure will need to be increased (as there are more of the very elderly in the population, for instance, their care will become more costly) and some items will present opportunities for deceases (as there are fewer children of school age the demand for educational services will be reduced). Control of public expenditure, therefore, means much more than reduction of spending on public services. It means determining the optimum levels of expenditure (a) overall as a percentage of national output (b) as a balance between major services (c) as totals of individual services and (d) as a balance of details within services, all of these items being planned over a period of years (Estimates Committee, Sixth Report 1957-58, Treasury Control of Expenditure, para. 9; Ryle, 1967). Control of public expenditure also means ensuring that the actual expenditures incurred by the various agencies of Government correspond to the levels planned for, or that any changes are the result of deliberate changes of plan. Admittedly this is a theoretical simplification: in practice control of planned levels and the processes of controlling the outcome overlap and are closely interrelated.
2. Thus, if any Government is to control public expenditure it requires two sorts of machinery. It requires machinery for the determination of goals and objectives (the levels of expenditure) and for the rational forward planning of these levels, and it requires machinery that will permit it to attain its goals and to monitor and evaluate the performance of the administrative system that delivers public services.
3. The word “control”, is also used in two different senses. It may imply direct determination of objectives or outcomes, or it may be used to mean influences that affect the attainment of those objectives while not uniquely determining them. Moreover such control may be total and direct or partial and indirect. Which parts of the political system should perform either of these functions of control in a democracy? As far as the setting of goals and objectives is concerned it is generally assumed that this will be done by the elected representatives of the people. But in different political systems the elected representatives occupy different positions. In a presidential system, where the head of the executive government is directly elected (USA for example) the capacity of the elected head of the executive to set the goals of public spending is balanced by a countervailing power in the hands of the elected representatives in the legislature who also have the capacity directly to establish spending goals. Thus the President’s “budget” in the USA emerges from the Congress each year with the overall level of spending, the balance between services etc, all considerably altered from the original levels proposed by the President and the executive branch. In some other Presidential systems this balance of goal determining power between executive and legislature exists to a lesser degree (France for example, see Coombes (ed) 1976). In Britain, however, in the 20th century all the direct power of determining levels of public spending is in the hands of the executive. Parliament may have “influence” in the sphere of public spending, but because the government has effective control of legislation through its majority, Parliament is prevented from exercising an independent and separate power.
4. If, therefore, the House of Commons wants to improve its capacity for control of public expenditure it has first to decide whether or not it really wishes to reverse the trends of the past 100 years and to re-establish direct control–the power of determining, separately from the executive branch, the levels and patterns of spending that it desires. (This may be called the model (i) solution). Theoretically the House of Commons has such powers at hand. But it has not exercised them for many years and has adopted a set of procedures that are wholly designed to prevent the exercise of those inherent powers and to enable the Government of the day to get its legislative and spending programmes through the House in as unaltered state as possible. (Redlich, 1908, Morrison, 3rd Edn. l964). In practice today the Government alone exercises direct control over spending because it (and its agencies) alone determine the figures that appear in the plans for public spending. The House of Commons merely endorses these plans.
5. On the other hand the House of Commons may prefer to exercise indirect control–to continue as a force for “influence”–and may not wish to attain the capacity for direct control of spending proposals as has the US Congress. (The model (ii) solution). At present the House exercises its “influence” by putting pressure on the Government at the formative stages of policy through debates held on major policy issues, through examination of the detail of spending plans in committees and ensuring publicity for competing causes. However, as in most other elected legislatures, the main thrust of Parliament’s influence in recent years has been to recommend increases in spending. Parliament also has a role to play in monitoring the performance of Government both in the execution of spending programmes, and after money has been spent. But it exercises no positive and direct sanctions in these respects either.
6. It is for the Procedure Committee to decide whether it believes that the House of Commons should exercise direct powers of the purse by altering upwards or downwards the spending objectives laid out by the Government (model (i)) or whether it prefers to see the House continuing to play an influential, but not decision-taking, role (model (ii)). This is the primary question that the Committee has to face squarely and answer before it goes on to recommend any details of changes in procedure.
7. The procedures appropriate for a system of direct control over spending (model (i)) are quite different from the procedures appropriate for a system of Parliamentary influence (model (ii)). If the Committee were to opt for model (i) if would break a long tradition that has established the executive as the effective locus of goal determining power in Britain and the House of Commons as an influence or pressure group. If however, the Committee prefers model (ii) following the line of procedural changes that have taken place from 1833 to around 1970 (Redlich, 1908, Robinson, 1972), they may still wish to recommend improvements in procedure and practice designed to enlarge Parliamentary influence. (The procedural changes of 1970 onwards (particularly the new select committees) have not fundamentally altered the balance of power between executive and legislature but have undoubtedly increased the House’s influence). It must also be recognised that any changes in procedure within model (ii) will not permit the House of Commons independently to exercise direct control over the levels and patterns of public spending, but nevertheless could improve the House’s ability to influence those levels and patterns.
The implications of choosing model (i)
8. If the Committee were to take the bold step and opt for model (i) what sort of changes in procedure would this imply?
9. First of all there would have to be substantial changes in practical presentation from the Government side (quite apart from the relaxation of party political control) if any consequential changes in Parliament were to work without constant conflict.
(1) The presentation of the Government’s spending proposals would have to be much more regular and consistent, for it alone would not be the final decision maker. A time-table of events throughout the Parliamentary year would be necessary for unless such a time-table were adhered to the legislative branch with its positive powers of direct decision making could inhibit the orderly working of the administration. The American experience is instructive in this respect (Robinson, 1981, Schick, 1980).
(2) For any really satisfactory debate and decisions to emerge from a numerous assembly it would be necessary for the British Government to follow the procedures adopted by most other countries and to introduce a “Unified Budget” (Armstrong, 1980) showing both spending proposals and expected receipts.
(3) The House would have to be given much more information about the working of Government and about the assumptions on which the Government has built its new spending proposals. Model (i) cannot work effectively without a more “open” system of government than prevails in Britain today. The Government would have to release many of its background papers at least for parliamentary if not for general public consumption. So long as Parliament has no authority to make spending decisions the Government is not required to release the information on which its decision are based. If Parliament were to have the ability to alter numbers up and down it would be unable to perform this function unless it had before it the reasons why the Government had selected the particular numbers in the first place.
10. Model (i) would involve fundamental changes in parliamentary financial procedures. The doctrine of Crown initiative would have to be modified, and the Commons would need to be empowered to initiate expenditure proposals and members would have to be able to move amendments to increase charges as well as to reduce them. Furthermore if Parliament were to have the power to make direct decisions about spending and were given the authority to add or to subtract from Government plans, Parliament would also have to decide whether these detailed controls would apply only to central Government expenditures as displayed in the estimates or whether they would extend over the whole of public expenditure, or over that part of public expenditure directly funded by central Government.
11. Changes in Parliamentary procedure would also involve establishing a locus of decision making power. Would this be at the Committee level or on the floor of the House? Or would the House of Commons follow the American practice whereby Committees recommend and the floor of the House accepts or rejects those recommendations? The House of Commons would also require more effective machinery than is currently available to it for its own separate analysis of the Government’s spending plans. It would require some sort of “counter bureaucracy”.
12. Finally, it should be noted that there would be a political consequence of giving real effective control over spending to the House of Commons. Pressure groups which at present look to the Government for decision (for example see the submissions made at each Budget to the Chancellor) would increase the attention that they pay to the House of Commons. The effect of the new Select Committees has been to draw pressure groups to Parliament for the publicity that they can thereby gain. They would be even more attracted if they could see real positive changes in decision resulting from lobbying MPs.
13. It is clear from the foregoing, and there may be other points that are omitted here, that if the Committee were to opt for model (i) it would be recommending a course that would involve many other radical changes in the day to day operation of British Government and the British political process. However it is one of the roles of Parliament to press for better and more effective Government. The fact that the House of Commons does not exert effective direct control over public spending does not mean that the Government itself does. Without adequate information perhaps the Government too has lost some control over its own behaviour.
A society or community that is to steer itself must continue to receive a full flow of three kinds of information: first, information about the world outside; secondly, information from the past; and third, information about itself and its own parts. Let any one of these three streams be long interrupted, such as by oppression or secrecy, and the society becomes an automaton, a walking corpse. It loses control over its own behaviour, not only for some of its parts, but also eventually at its very top.
Karl Deutsch, The Nerves of Government: Models of Political Communication and Control, New York, the Free Press, 1966, p. 129.
The implications of choosing model (ii)
14. The central theme of model (ii) would be improved practices and procedures for the scrutiny and criticism of the Government’s spending decision, leading to greater parliamentary influence. However, by selecting model (ii) the House of Commons would not avoid some of the problems outlined above. These problems will continue to affect Parliament’s capacity for “influence” just as they affect its capacity for direct control. Information is as essential to effective influence as it is to direct control.
15. Influence over public spending may take the form of political pressure for higher or lower overall levels, for changes in allocation of resources (less on defence, more on social security for example), and for better use of existing resources. Influence by Parliament can be enhanced by widening the opportunities for critical examination of forward plans and of actual performance. If Parliament wishes better to influence Government, therefore it is essential that all Government spending decisions, at every level, are matched by opportunities for critical examination in the House of Commons. The House, therefore, needs:
(1) Opportunities (debates and committees)
(2) Appropriate procedures; including techniques for obtaining information, and for examining Ministers and civil servants
16. It is important, at this stage, to make a general point about parliamentary opportunities, and the use of the House of Commons’ valuable time. In theory there is opportunity to consider any aspect of Government policy, administration or expenditure, but in practice this depends on the willingness of the three main elements in the House–the Government, the official Opposition and back-benchers–to take the necessary initiative to bring matters before the House or a committee. When the Government requires the formal authority of the House–primarily for legislation, supply votes and taxation–they will take the necessary initiative and the House is guaranteed the opportunity for debate and criticism. But for many matters of policy including major issues involving massive public expenditure (such as capital building programmes, development and procurement of weapon systems, and public borrowing) no such Government initiative is required, and the matter will usually only be debated if one of the other elements uses the limited opportunities open to it. And, even then, debates will not be linked to a formal motion to approve the policy issue concerned. Thus many minor matters involving legislation (e.g. the details of the Wildlife and Countryside Bill) will be fully debated, while much more important matters (e.g. a new weapon system) may not be debated at all. Only the requirement for formal authorisation by the House–by legislation or some other procedure–can ensure both the opportunity for debate and the necessary serious attention of the House.
17. If we consider public spending at each of the levels referred to in paragraph 1 we can lay out the current procedures and evaluate them in terms of the three requirements listed above. We can also see what further opportunities, and what new techniques might be desirable.
Overall level of public spending
18. The Government’s decisions on the overall level of public spending are fundamental to their political stand and condition most areas of policy and administration. Of course any determined level does not necessarily involve a balanced budget and both the level of the PSBR, and the level of expenditure are a constant theme of political discussions. More particularly they are the main theme in the annual Budget debate and are discussed when there is a debate on a Public Expenditure White Paper or on the economy (e.g. if such a subject is selected on an Opposition Day).
19. There is no occasion (except perhaps in the Budget debate) when the House is specifically called upon to debate the desired overall level of spending. The debate on the Public Expenditure White Paper was supposed to provide this focus, but as this debate is separated from the Budget, it lacks the focus that Armstrong recommended. It might therefore be desirable to bring consideration of total expenditure and taxation together, at an early stage, before Budget proposals are finalised, as recommended by the Treasury and Civil Service Committee.
20. However, the Treasury and Civil Service Committee does now provide a forum and techniques for obtaining information from Ministers and civil servants about the factors influencing the decisions on the total of expenditure and the planned PSBR. This Committee also sheds the light of publicity on Government decisions. There is at present, however, no requirement for the House to debate the Committee’s reports.
21. It can be argued that the House ought formally to authorise the total of supply expenditure at the time of the Budget. At present such formal authority is only conveyed, though without relevant debate, by the passage of the Consolidated Fund (Appropriation) Bill at the end of July. The need for further formal authority for this total may, therefore, not be essential, but it might be better if the House approved the total at the beginning of the financial year, when the Estimates are first presented, not four months later. This agreed total would then operate as a ceiling within which any changes in individual services would have to be contained. It would also be necessary for revised totals to be approved from time to time. Debates on motions to approve totals of supply expenditure would be useful occasions for debating overall budgetary policy, including the level of borrowing requirements.
Balance between major services
22. The balances of expenditure across the board and over the years between major services is one of the main problems that confront modern Government, and is discussed at length by the Cabinet every year. They make broad allocations. But these allocations are almost totally neglected by the House of Commons (although the question of defence spending versus social spending is widely pursued in general terms). The opportunity to discuss whether or not the Government’s allocations are what Parliament wants exists in the debates on the Public Expenditure White Paper, but members take little advantage of this opportunity. This failure of the House to match the central decision-taking process of Government in relation to public expenditure by any effective critical scrutiny is a major weakness in Parliament’s control of public spending.
23. The failure to take up the question of allocations between services rests on the lack of appropriate machinery to enable MPs to perform this task. If they were to be encouraged to think in allocative terms they would have to consider the Expenditure White Paper chapter by chapter, to have some way of bringing forward amendments to alter the balance between services, but not the total overall and to approve the total on each chapter. Action along these lines is taken by the French National Assembly in respect of the 5-year plan. (Again, here there would be the difficulty of requiring further formal authorisation for changes in plans involving changes in the overall balance). The House would be assisted in this task if the Treasury and Civil Service Committee were itself to take the White Paper and consider it chapter by chapter reporting on suitable changes of balance. At present the Treasury Committee is much more interested in the overall level of expenditure, and in the relationship of total public expenditure to the management of the economy. For the committee to examine the White Paper in detail would mean a different focus of attention among its members and a different type of specialist advice. A valuable task would be performed by the committee, which would help inform later debates in the House, if they were to explore the economic and policy assumption on which the various chapters of the White Paper had been prepared to draw attention to the policy implications regarding, for example, resource allocation of each chapter, and to point out significant trends inherent in current policy (Ryle 1967).
Expenditure on individual services (including programmes and projects)
24. The House of Commons theoretically examines the level of expenditure in each individual service when it considers the Estimates. But of course the House does not in practice consider the Estimates in detail. Moreover, there are severe limitations on the use of Estimates as a means of controlling expenditure on individual services of Government. The Estimates do not include all public expenditure, only those items that come directly under the supervision of Central Government departments. The Estimates are presented on an annual basis, thus they cannot give a clear picture of the implications of continuing commitments. Much of public spending is already committed as a consequence of previous policy and legislative decisions and is hardly amenable to alteration at the Estimates stage. As well, it is possible for major new decisions to be made each year not only without specific legislative authorisation being required (e.g. large expenditures on items of defence spending, capital programmes etc) but without any significant effect on the current Estimates if most of this expenditure will be incurred in later years. As a result the Estimates provide an unsound basis for adequate consideration of specific programmes. They simply indicate the bills that are coming in for one year ahead and are procedurally divorced from the actual decision to spend. What is needed is opportunities and techniques for the House to control (by debate and criticism) spending decisions at the time they are taken.
25. Before considering individual programmes and projects etc., it would be helpful if the House provided the opportunity for annual debates on the total provision for expenditure in each of the main civil spending services (education, transport, health and social services, etc) similar to that provided for debating defence policy and expenditure on the annual Defence White Paper. These debates could be based on the Public Expenditure White Paper and on committee reports on the relevant chapters and would provide the opportunity for an annual review of policy in each of these sectors, as used to be done for many years in Supply debates. At the same time the House could formally authorise the total supply expenditure, as set out in the current Estimates, for each service and this would determine the maximum sum within which further proposals for amending those Estimates (see paragraph 32 below) would have to be contained.
26. If realistic and worthwhile opportunities are to be provided for MPs to consider specific programmes and projects at the time they are decided on and before the expenditure is committed, a more consistent approach to legislative authority and Estimates needs to be established. First, more attention should be paid to expenditure implications as Bills pass through the House. Select Committees could be more frequently employed to examine the details of new legislation including their forward spending implications. Financial memoranda to Bills could be more informative and helpful, and money resolutions could be considered more carefully.
27. However, this does still not deal with those aspects of spending policies and decisions which do not require legislation. In some countries (USA for example) specific legislative authority is required for all major programmes and policies such as road building, hospital building and large scale defence expenditures such as Trident. It is hoped that the Committee will look at the possibilities of adapting this system for this country.
28 However the difficulties of such adaptation have to be recognised. The chief problem is the identification of those projects and programmes for which specific legislative sanction should be required. First, how could the very existence of some projects (especially in the sensitive areas of defence) be discovered? Second, when does a project or programme begin–when a feasibility study is ordered, or when research starts, or when the first firm orders are placed? And, third, how should those projects requiring sanction be defined? Clearly only major projects should be included and monetary value over the years would be one (but not the only relevant) test. That value, however, may not be precisely measurable at the formative stage. In the USA there is less problem of identification for Congress itself decides which projects and programmes require its sanction. Here this would not (under model (ii)) be possible.
29. It may be that it would have to be left to Government to decide what projects and programmes to bring before the House for approval–and at what stage. However the select committees could again be helpful in this respect. They could make it their task to identify, at as early a stage as possible, projects and programmes that were being initiated by departments (they could for example report on research and development programmes), and they could then ask for information about the bigger, more important, or more controversial ones to be included in the relevant chapters of the Public Expenditure White Paper, and so provide material for annual debate on their progress.
30. Programmes and projects once approved could also be subject to time limits on their life as in the USA (sunset laws). If this were done, existing programmes would not continue simply through the forces of inertia but as a result of a conscious decision that they should be prolonged. The need to come to Parliament from time to time for new authorisation would ensure that Governments have actively to defend the existence of programmes before both Parliament and the public, and would enhance the role of the Legislature in the critical appraisal of Government activities.
Balance and details within services
31. There is no doubt that the scrutiny of the balance and details within major services cannot easily be undertaken by a numerous assembly. Consideration of spending details can only reasonably be undertaken by committees. The opportunities for Parliament today are greater following the creation of departmental committees. So far, however, they have proved themselves only marginally interested in the details of spending. They occasionally pay attention to changes in balance between elements of a given service–more on alternatives to prison versus more on prison building for example–and such studies should be encouraged. For this sort of activity to be promoted it is necessary that Parliament has adequate information not only on the forward planning of individual services but on the past performance of Government agencies. Consideration of the most effective use of public funds within services is closely tied to knowledge of cost effectiveness and evaluations of current performance. At present the select committees have to rely on very limited sources of such information.
32. It might also be desirable for committees when recommending increases on the aspect of a service to match this by reductions in another area, within the total allotted for that service. Furthermore a greater reality and sense of purpose would be given to debates on Estimates (based on select committee inquiry) if members were empowered to move amendments to the Estimates for increases on expenditure in one part of a service provided this was at least matched by a corresponding decrease in another part of that service. For example, following a report by the Transport Committee, members might move a reduction in the provision for Government assistance to the railways matched by increased expenditure on roads (or vice-versa) provided the total of votes for transport services was not increased.
33. The element of “feedback” is essential to proper control. Unless the body that wishes to control its behaviour is able to learn from past experiences it is unlikely to succeed in future ventures. At present the function of monitoring and “feedback” is performed in the House of Commons by the Public Accounts Committee. The Treasury and Civil Service Committee and the Public Accounts Committee have already considered proposals for improvements in the information available to the Public Accounts Committee, in particular the idea that the Office of the Comptroller and Auditor General should be permitted to widen the scope and range of its enquiries. The Government has not viewed this proposal with favour. Nevertheless, any changes to the House’s capacity to control public spending, (whether by radical changes of the model (i) type or by more traditional changes following model (ii)) would require the sort of information on effectiveness of spending programmes that could only be provided by a more up to date audit system.
34. No legislative assembly, whether it has the direct authority of the US Congress or relies on influence like the British House of Commons, can possibly play an effective role in the control of public expenditure if it does not have access to information about what the Government does and how well it does it. While it is possible, as appears to be the case in the USA to have too much information, too little information completely denies the capacity for effective influence.
35. Information is not enough. In the end influence comes from having the guaranteed opportunities for debating and criticising the government spending plans and policies at every level and, wherever possible, at the time they are first decided on. Formal occasions for formal approvals of the total of supply expenditures each year and of major individual services, projects and programmes, (both initially and annually) would provide such guarantees.
36. Lastly if this influence is to be truly credible and effective, then Parliament must also face up to the painful but necessary obligation to look at the optimum balance of expenditure over the years. If money is wanted for one service which other service will need to be held back? This is the basic challenge that Governments have to face each year, and Parliament (whether it seeks to exercise direct control or whether it prefers to exercise indirect control by the process of public debate, scrutiny and influence) must not avoid. If Parliamentary control of expenditure is to be more than a charade, then the House of Commons must play its part in ensuring that the nation gets full value from the money that is spent in its name.
David Coombes et al., The Power of the Purse: The Role of European Parliaments in Budgetary Decisions, Allen and Unwin/PEP, London, 1976.
Bernard Crick, The Reform of Parliament, Weidenfeld, London, 1964.
Ann Robinson, Select Committees and the Functions of Parliament, Ph. D. Thesis, McGill University, 1972.
Parliament and Public Spending: The Expenditure Committee of the House of Commons, 1970-76, Heinemann, London, 1978.
Congress and the Budget: Are there some lessons for Britain? University of Bath, Centre for Fiscal Studies, 1981.
The Myth of Central Control, The Listener, June 17, 1982.
Josef Redlich, The Procedure of the House of Commons, London, 1908.
Lord Morrison, Government and Parliament, 3rd Edn. Oxford, 1964.
Allen Schick, Congress and Money: Budgeting, Spending and Taxing, The Urban Institute, Washington, 1980.
Michael Ryle, “Parliament Control of Expenditure and Taxation” Political Quarterly, 1967.
Budgetary Reform in the UK, OUP for the Institute of Fiscal Studies, 1980 (The Armstrong Report).
Treasury and Civil Service Committee “Budgetary Reform” HC 137, 1981-82.
Prepared by Simon Patrick, 4 June 2001