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Evidence on budget procedure, 1993

The following memorandum was submitted to the House of Commons Treasury and Civil Service Committee in 1993 and printed with its Fifth Report, Session 1992-93, HC 583, The Government's Proposals for Budgetary Reform, as Appendix 10 (pp 43-48). See copyright notice below.

Footnotes are at the end of the document, with links from the appropriate pages in the text. Some browsers will also display a footnote if the cursor is placed on a raised figure.

Memorandum submitted by the academic members of the Study of Parliament Group

THE UNIFIED BUDGET: PROCEDURES OF THE HOUSE OF COMMONS

1. This paper has a limited purpose: to suggest, in the light of the changes announced in the Budgetary Reform White Paper (Cm 1867) some corresponding changes which might be made in the processes and legislative instruments by which the House of Commons approves and enacts the Government's annual spending plans and taxation proposals and to draw attention to the effect of the changes on the scrutiny of financial decisions by the House and its Committees. Erskine May states: "The Crown demands money, the Commons grant it, and the Lords assent to the grant."(1) That being so, it is surely right that the mechanisms whereby the Commons grant money should bear as close a relationship as possible to the processes within Government which generate the Crown's demands and to the primary documents in which those demands are submitted to Parliament.

2. Over the past 30 years a great deal of attention has been devoted, by Government, Parliament and academic commentators, to possible improvements in the control and scrutiny of public expenditure and finance and many changes have been made. There are now more rigorous and sophisticated systems for planning and control within Government; clearer and more informative documentation is made available to Parliament and the public; and the restructuring of the select committee system has provided the House with the means to examine and assess information. We believe that the proposals in the Government's White Paper represent a logical and largely welcome continuation of this process of reform.

3. Nevertheless, there are many, both inside and outside the House. who remain deeply sceptical as to whether these developments have resulted in any real improvement in Parliament's scrutiny of public expenditure and taxation. For example:

"Parliament has certainly altered many of its procedures and sharpened up its capacity to oversee and examine public expenditure and taxation over the past ten years. Yet the results remain disappointing."(2)
"ln practice, parliamentary 'control' of the purse appears to mean authorising spending in general without any discussion, and occasionally closely scrutinising a particular item of expenditure without any coherent analytical framework."(3)

The constitutional theory that the government recommends and Parliament decides is nowhere less realistic than in the business of finance; and the House has long accepted, in the form of the rule that only a minister may propose higher expenditure or taxation, greater constraint in this field than in non-financial business. Nevertheless, means should exist, and if they do not exist should be created, to allow Members to give effect to their views on government proposals and, to some extent at least, to substitute the judgment of the majority of the House for that of the government where the two do not coincide. If this is prevented, either by rule or by inadequate procedures, it is hard to reconcile the situation with the natural requirements of a parliamentary democracy.

4. We suggest that the existing mechanisms for parliamentary consideration of expenditure proposals are unsatisfactory. The process of expenditure bidding and planning within Government Departments takes place in the spring-summer for the 3 year period beginning on 1 April of the following year; the crucial negotiations between spending Ministers and the Treasury by which expenditure bids by the different Departments are boiled down to an acceptable overall total are conducted for the most part during the summer recess; and the Autumn Statement, in which the conclusions of this process are announced to the House, is made in November when there are more than four months to go before the start of the first financial year to which it relates. However, the House takes no effective decision on public expenditure before the start of the financial year except for the Vote on Account, and that is a mere formality.

5. It may be argued that the Autumn Statement is subject to debate and approval by the House; but a distinction must be drawn between general political approval and functional or legislative approval. ln recent years the debate on the Autumn Statement has invariably been based on a motion of high political content, the following example (12 January 1989) being typical:

"That this House approves the Autumn Statement presented by Mr. Chancellor of the Exchequer on 1 November 1988; endorses the action taken by Her Majesty's Government to ensure that inflation resumes its downward trend; welcomes the prospect of continued growth and strong investment as the basis for maintaining the trend of rising employment; and congratulates Her Majesty's Government on the continuing reduction in the share of national income pre-empted by public expenditure."

Debates of this nature provide a legitimate opportunity to air political differences on the management of the economy; but they play no formal role in the authorisation of Government expenditure.

6. The Select Committee on Procedure (Finance) envisaged the possibility of an integrated Budget and proposed that such a Budget should be enacted by a single annual Finance Bill covering all the elements in the financial equation: revenue, expenditure and borrowing.(4) We strongly endorse this proposal but recognise that its implementation is likely to be a long way off, not least because the Finance Bill in its present form includes a great deal of tax management detail which would sit uneasily with provisions authorising expenditure only in terms of large aggregates. The Procedure (Finance) Committee recommended that separate Bills should cover rates of taxation on the one hand and taxes management on the other. If this proposal were accepted, the first proposal could perhaps be accommodated in one Bill with the authorisation of the Autumn Statement totals. Meanwhile, we recommend that those totals, and other matters detailed below, should be authorised in a new-style Consolidated Fund Bill. (That title might be changed but we use it here for convenience.) The Bill should authorise:

Later amendments to planning totals proposed by the Government would be approved by subsequent Consolidated Fund Bills, together with the relevant Supplementary Estimates.

Replacing the Vote on Account

7. We recommend item (b) in para 6 above because of the unsatisfactory and almost meaningless nature of the present Vote on Account and because the new system makes a more suitable arrangement for advance authorisation possible. The White Paper on Budgetary Reform is silent on this matter, the implication being that no change in the Vote on Account process is envisaged, but we do not agree. The Vote on Account merely authorises a global figure calculated as a percentage of the previous year's total. Although an allocation of the total amount between Departments is shown in a table, this table has no effective status because it is not enacted in the resulting Consolidated Fund Bill and the funds are not appropriated to particular services. The Vote on Account has none of the detail, analysis and political significance of the Autumn Statement. Before the development of the Autumn Statement, the presentation of the main Supply Estimates in March was the first documentary statement to the House of the Government's spending plans and requirements for the ensuring financial year. In those circumstances the earlier passage of a Vote on Account to ensure uninterrupted Supply was essential. Now that the Autumn Statement lays down the planning limits which establish--as far as the first year of the planning cycle is concerned--a firm framework for the subsequent Supply Estimates and a maximum cash figure, it is anomalous that the Vote on Account should continue to be presented in the same way as before, at more or less the same time as the Autumn Statement but having no functional connection with it. Accordingly we suggest that the new style Consolidated Fund Bill should authorise a sum of 35 per cent of the aggregate of planning totals for the next year to cover departmental services for 3 or 4 months of that year. It would of course be possible to go farther and vote that percentage of each department's separate total if that did not prove too restrictive.

Authorisation of Government Borrowing

8. The introduction of a unified Budget makes it appropriate to reconsider the recommendation made by the Select Committee on Procedure (Finance) a decade ago that the level of the Government's annual borrowing requirement should be subject to formal control by the House of Commons.(5) Once the Government's proposals for revenue raising through taxation are presented to the House at the same time as its plans for public expenditure in the year ahead, it is inevitable that attention will be focused even more sharply than it already is on the level of borrowing required to finance the gap between the two. The House's procedures for authorising the unified Budget should reflect that political reality.

9. In evidence to the Select Committee, the Treasury and the Bank of England raised a number of practical objections to parliamentary control of borrowing. The fact that the Canadian Parliament, a legislature based on Westminster traditions, exercises this control power suggest that these objections could be overcome. In Canada the Government normally introduces separate borrowing authority legislation shortly after presenting the Budget and tabling the Main Estimates. We suggest that a neater solution is for borrowing authority to be the third element in the new style Consolidated Fund Bill as proposed in paragraph 6 above.

Opportunity to Amend

10. If the House is to exercise even a severely restricted influence over public spending, it must be possible for Members to move amendments to the Bill or to the resolutions on which it is founded. We suggest that the resolutions should be so framed as to admit of amendments not only to reduce individual planning totals but also to transfer money from one Department to another within the limit of the aggregate planning total put forward by the Government on behalf of the Crown.

Effect on Estimates

11. The Budgetary Reform White Paper does not propose any change in present arrangements for the presentation and enactment of the Main Estimates. Since the Estimates appear three-four months after the first announcement of the public expenditure plans to which they relate and are not enacted until the relevant financial year is one-third over, this process has for many years been no more than a formality. Nonetheless it is a necessary formality, because it provides the statutory framework for the Appropriation Accounts and the subsequent audit and examination carried out by the National Audit Office and the Public Accounts Committee.

12. Committees of the House have frequently called for greater clarity in the alignment between the Departmental Expenditure Plans (formerly PEWP) and the Estimates.(6) The long time gap between the two documents has meant that the Estimates could reflect more up-to-date information and also changes of policy adopted in the interval. Members found it difficult to disentangle variations due to each of those reasons from those reflecting only the different technical requirements of the Estimates. The new timetable, with its narrower gap of just three weeks between the publication of the two documents (late February to mid March), should mean that the expenditure document reflects more mature information and that both documents reflect the same information.

Parliamentary Timetable

13. The White Paper invites comment on the timing of parliamentary business consequent upon a unified Budget. At present the following opportunities are available to the House for discussing the business which in future will be covered by the unified Budget:

This amounts to nine and a half days of parliamentary time plus the time for one extended statement. The list takes no account of the later stages of the Finance Bill nor of the Private Members' adjournment debates held under Standing Order No. 54 following the formal passage of Consolidated Fund Bills. These arrangements, it is assumed, will not be affected by the introduction of the unified Budget--at least not for the foreseeable future.

14. We suggest the following re-arrangement of time and debates in the light of the unified Budget:

This amounts to nine days of debate and the time for one extended statement. The present opportunities for debate, those implied in the Government's proposals and those recommended above are set out in Table 1 below.

Scrutiny and Debate of the Government's Forecasts of Economic Prospects

15. By combining the announcement of the principal decisions relating to taxation and expenditure in December, it could be argued that there is no need for two major statements of economic policy to Parliament per year as there have been on presentation of the Autumn Statement and the Budget. However the Government is committed (as required by the Industry Act 1975) to the publication of two short-term economic forecasts each year: one with the unified budget in the December and one in the summer.(7) While the debate on the budget may be improved as decisions on both revenue and expenditure can be discussed together, there is a risk that there will be no ready framework within which the summer forecast can be scrutinised.

16. At present, the Treasury and Civil Service Committee is normally able to comment twice each year on economic prospects, once following the publication of the Autumn Statement before the decisions are debated by the House and again, later in the Parliamentary Year, on the Budget before the debate on Second Reading for the Finance Bill. It is not yet clear in what form the summer short term economic forecast will be published, nor whether it will be presented to Parliament in an oral statement. Its timing will also be significant. Unless the summer forecast is made early in June there will not be time for the Treasury Committee to report on it before the summer recess. If an appropriate form of parliamentary debate of both forecast and Committee Report is not devised, a valuable element of parliamentary scrutiny will be lost. We therefore recommend that the Chancellor make a statement to the House on presentation of the summer economic forecast, and that a day is provided for debate of economic prospects before the summer recess (these proposals have been included in the annual timetable set out in paragraph 14 above).

Scrutiny of Departmental Reports and Expenditure

17. The new timetable will constrain the opportunities for scrutiny by committees of public expenditure. First there will be a delay of approximately one month in the announcement (in the unified budget) of the totals of public expenditure for each Government Department for the forthcoming three financial years. This has the effect of delaying their publication until barely four months before the actual expenditure is undertaken and only three months before the Estimates for the next financial year are laid before the House. Given the advantages which it is assumed will be gained from the unification of the revenue and expenditure elements of Government finances, this may have to be accepted. However, it would be unfortunate if the compression of the timetable led to approval in principle of the expenditure totals being sought immediately after presentation of the Unified Budget. This would prevent any investigation being made by the Treasury and Civil Service Committee before approval of Public Expenditure proposals, which hitherto has regularly been done before the approval of the Autumn Statement.

18. In the last Parliament, all of the Departmental Select Committees but one undertook at least one enquiry into the Estimates/expenditure plans of their related departments.(8) The practice of select committees to inquire into such matters has been encouraged by the Liaison Committee and by the Treasury and Civil Service which has provided "core questions" for use by committees as a starting point for their questioning on their Departmental Reports.(9) Because committees have a full agenda of subjects of inquiry, it is important that they have the maximum time within which to complete expenditure inquiries.

19. The delay in presentation of information hitherto contained in the Autumn Statement and of the Departmental Reports will also reduce the time available to Committees to report on public expenditure plans before the commencement of the new financial year. It also makes it less likely that Reports will be completed and available for debate in time for the two initial supply guillotines--on 6 February (but in practice mid-December) and 18 March.

The Financial Year

20. It has been assumed in drawing up this paper that there is no intention to alter the financial year. The introduction of a unified Budget more than three months before the start of the financial year has great potential for enhancing the perceived role of Parliament in the budgetary process. A change in the financial year would nullify that benefit and could easily create a far worse timetable for Parliament than the existing one.

March 1993

Table 1: Annual Timetable of Parliamentary Activity

Month Present Future (from Cm 1867) SPG Proposals
January - Debate on Autumn Statement* (1 day) - Second Reading of Finance Bill (1 day) - Second Reading of Finance Bill (1 day)
February - Consolidated Fund Bill (late Feb/Early March)
- Debate on Public Expenditure# (1 day)
- Consolidated Fund Bill (late Feb/Early March)
- Committee Stage, Finance Bill (1 day)
- Committee Stage, Finance Bill (1 day)
March - Estimates Day (1 day)
- Debate on the Budget Resolutions (3 days)
- Estimates Day (1 day)
- Committee Stage, Finance Bill
- Debates on planning totals on borrowing limits (3 days)
- Consolidated Fund Bill
April Second Reading, Finance Bill (1 day) Report Stage, Finance Bill Report Stage, Finance Bill
May Committee Stage, Finance Bill Finance Bill, Royal Assent Finance Bill, Royal Assent
June Committee Stage, Finance Bill Possibly, Statement on Industry Act short-term Economic Forecast Statement on Industry Act short term economic forecast
July - Estimates Day (1 day)
- Report Stage, Finance Bill
- Consolidated Fund (Appropriation) Bill
- Finance Bill, Royal Assent
- Estimates Day (1 day)
- Consolidated Fund (Appropriation) Bill
- Estimates Day (1 day)
- Debate on Industry Act short term economic forecast (1 day)
- Consolidated Fund (Appropriation) Bill
August
September
October
     
November Statement on presentation of Autumn Statement - Debate on the Unified Budget (late Nov/Early December) (3 days) - Statement on the Unified Budget
- Debate on Budget (2 days)
December - Estimates Day (1 day)
- Consolidated Fund Bill
- Estimates Day (1 day)
- Consolidated Fund Bill
- Estimates Day (1 day)
- Consolidated Fund Bill

Note: only those days of debate have been counted which relate to the proposals in paragraphs 13 and 14.

* the 1992 Autumn Statement was debated in November 1992 but in most years the debate has taken place in early January by which time the Report of the Treasury and Civil Service Committee has been published.

# since the PEWP was replaced by the Departmental Reports in 1991, there has been no regular debate on Public Expenditure which hitherto had taken place usually in February.

Footnotes:

1. Erskine May's Parliamentary Practice. 21st edition, p. 684.

2. Ann Robinson, The House of Commons and Public Money, in The Commons Under Scrutiny (ed. Ryle and Richards: Routledge, 1988).

3. John Garrett MP, Westminster: Does Parliament Work?, p. 108 (Gollancz, 1992).

4. HC 24-I, 1982-83 paras 44, 115-121.

5. HC 24-I, 1982-83, paras 11-44, which explains in detail why this control would have to apply only to the Central Government Borrowing Requirement on Own Account (CGBR(O)) rather than to the PSBR as whole.

6. See for example, Eighth Report of PAC, 1986-87, HC 98.

7. Budgetary Reform Cm 1867, para. 33.

8. See Government Departmental Reports: Points for the future: Andrew Likierman and Alison Taylor, Table l, p. 20.

9. See evidence by Mr Terence Higgins to the Procedure Committee, 1989-90, HC 19-iv, p. 39.

© Study of Parliament Group 1993.


Prepared by Simon Patrick, 30 May 2001