Select Committee on Liaison First Report



Report by Mr Barry Legg, Chairman of the Committee


  1. The Treasury Committee was nominated in July 1992 with the same terms of reference as its predecessor Committee, namely to examine the expenditure, administration and policy of the Treasury and the Office of Public Service and Science (but excluding the Office of Science and Technology and the drafting of bills by the Parliamentary Counsel Office), the Board of Customs and Excise and the Board of the Inland Revenue, and similar matters within the responsibilities of the Secretary of State for Northern Ireland. The Committee is one of the four departmental select committees with power to appoint a sub-committee.

  2. The Committee's terms of reference were subsequently modified first, coinciding with the appointment of the Northern Ireland Affairs Committee, by the removal of its responsibilities in relation to Northern Ireland, and secondly, from the beginning of the 1995-96 Session, by the transfer of responsibility for matters relating to the Civil Service to the new Public Service Committee.

  3. The staff of the Committee comprises two Clerks, one of whom is also Clerk of the Sub-Committee, a Senior Executive Officer, two specialist assistants, a Secretary and shared support staff. The Committee has also appointed a substantial body of specialist advisers, who are remunerated on a per diem and expenses basis, see paragraph 8 below.

Work of the Committee

The main Committee

  4. As in previous Parliaments, the Committee has alternated its regular inquiries into the Budget and the Autumn, subsequently Summer, Economic Statement[148] with inquiries into specific subjects. Some of these have been responses to particular issues such as the UK's withdrawal from the ERM on Wednesday 16 September 1992[149] or the collapse of Barings Bank[150]; others have looked at more general subjects such as the Private Finance Initiative[151] and the Prognosis for the Implementation of Stage Three of Economic and Monetary Union.[152]

  5. A significant change in the character of the Committee's work occurred at the beginning of the Parliament following the transfer of most responsibilities for financial services regulation from the Department of Trade and Industry to the Treasury.[153] This has had a profound effect on the nature of the Committee's work and on the balance of time devoted to budgetary and non-budgetary matters respectively. By the start of the 1993-94 Session the Committee had embarked on a demanding programme of hearings on different aspects of financial services regulation - both in areas covered by the 1986 Financial Services Act and those, such as banking and Lloyd's of London, which were not so covered - subsequently producing Reports on Retail Financial Services,[154] the Building Society Sector,[155] Self-Regulation at Lloyd's of London,[156] and the Regulation of Financial Services in the U.K.[157] For perhaps the first time, the Treasury Committee became the focus of sustained interest-group pressure - particularly from groups representing the disaffected victims of "mis-selling" in the mortgage, pensions and insurance industries and the spokesmen of the Lloyd's Names. As a result the Committee's role has become more akin to that of other departmental committees, working in a much wider public framework than hitherto. It is likely that the regulation of financial services will continue to form a substantial part of the Committee's work in the future.

The Sub-Committee

  6. By convention the Sub-Committee has always been chaired by a Member of the Opposition. At the beginning of this Parliament, the Sub-Committee was given the task of considering the need for further evidence on, and the Committee's response to, the Bingham Report on the Collapse of the Bank of Credit and Commerce International (BCCI).[158] After completion of that inquiry[159] and the discharge of the Sub-Committee, a new Sub-Committee was appointed to consider civil and public service matters.[160] The Sub-Committee conducted a long inquiry which culminated in the Committee's Fifth Report of 1993-94 on The Role of the Civil Service.[161] The Sub-Committee has not met since the transfer to the Public Service Committee at the beginning of the 1995-96 Session of responsibility for matters relating to the civil service.

Work-load of the Committee and use of spcialist advisers

  7. The addition of the regulation of financial services to the Committee's already substantial responsibilities resulted in a significant increase in its workload. The Committee and Sub-Committee together held an average of 54 meetings in each of the first four sessions of the 1992-97 Parliament, compared with an average of 37 meetings in the first four sessions of the previous Parliament.

  8. Specialist advisers have continued to play a useful part in the work of the Committee. A panel of specialist advisers has assisted the Committee on budgetary matters since it was first set up and has contributed written and, until the 1996-97 session, oral evidence to each Budget inquiry. In the present session, however, the Committee decided to take oral evidence instead from a panel of expert witnesses. The Committee has also exercised its power to appoint specialist advisers for specific inquiries. A full list of advisers is published in the annual Sessional Returns.

Specific Budgetary and accounting role

  9. As noted above, the Committee takes evidence and reports on every Budget. This places considerable demands on Members, with five sessions of oral evidence being taken within a period of ten working days, requiring everyone concerned to absorb a great deal of information in a very short time. A Report is produced in time for the Committee's findings to be used by Members in the debate on the second reading of the Finance Bill.[162] The Committee's latest Report on the Budget[163] graphically illustrated the tight timetable within which the Committee sometimes has to operate, being agreed on the afternoon of 13 January and published at ten pm that evening in time for the debate on the Finance Bill the following day.

  10. The Committee is also entrusted, jointly with the Public Accounts Committee, on behalf of the House, with the task of commenting on and approving substantive changes in the form of the Estimates.[164] In 1994 the Committee produced an initial Report on the Government's proposals for the simplification of the Supply Estimates.[165] In the light of the Committee's recommendations, the Government agreed to defer a decision about the introduction of the new-style Estimates for a year and to use that time to allow detailed consultations between Departments and committees to take place. In our subsequent Report on Simplified Estimates and Resource Accounting we acknowledged the wholly cooperative manner in which the exercise had been conducted by the Treasury officials concerned.[166] We were pleased to acknowledge in our latest Report on Resource Accounting and Budgeting[167] that this cooperation and process of genuine consultation have continued.

  11. In our Report on the Simplified Estimates and Resource Accounting we recommended that "the oversight and approval of accounting standards for central government should be conducted independently of HM Treasury."[168] We therefore welcomed the Government's decision to establish the Financial Reporting Advisory Board (FRAB) as a means of introducing "an independent element into the process of setting financial reporting standards for Government."[169] We also noted the importance of ensuring that Parliament was kept fully informed of the progress in implementing resource accounting and budgeting and recommended, as an initial step, that a Member of Parliament be nominated to attend meetings of the Board as an observer.[170] We are pleased to record that the Government accepted that recommendation and also agreed to take into account our wish that this status should be extended to full membership at the time of the review of the operation of the Board.[171]

Attendance of Members as witnesses and production of confidential papers

  12. The Committee has encountered no difficulties in arranging for witnesses, including Members of both Houses, to give evidence. With the exception of information about the Private Finance Initiative in relation to the Treasury Building, on which negotiations are still in progress, and some documents whose disclosure would, in the Bank of England's view, have breached the confidentiality provisions of the Banking Act 1987, no significant problems have been encountered in obtaining confidential papers. The Sub-Committee, however, did encounter a difficulty in relation to its wish to commission an attitude survey of civil servants to be carried out on a confidential basis by a professional opinion survey organisation. The proposal was endorsed by the main Committee but the "Government declined to agree to the proposal". The circumstances were set out in a Special Report to the House.[172] No further action was taken.

Debates on Committee Reports

  13. On fourteen occasions Reports or Minutes of Evidence have been tagged as relevant to debates in the House. Subjects have included the second readings of various Finance Bills and the Bank of England (Amendment) Bill and debates on the Civil Service, the Private Finance Initiative and financial services regulation. Up to seven members of the Committee spoke in the second reading debates and even in the debates which were limited to 1½ or 3 hours between two and six members were called to speak. This illustrates the contribution which their specialised knowledge enables members of select committees to make to proceedings in the House.

Government Responses

  14. No problems have been encountered by the Committee in this Parliament with the timing of Government responses, although not all the responses have been equally helpful. Following the Government's response to the Report on Self-Regulation at Lloyd's of London,[173] which the Committee felt, in some areas, suggested "apparent complacency", we took additional evidence from the Minister for Trade and published a further short Report.[174]

  15. It has been the Committee's usual practice to publish Government responses as Special Reports. One disadvantage of this system, however, is that responses cannot be published without a prior meeting of the Committee. The publication of any response received during a recess might thus be delayed. The practice of publishing Government responses as Special Reports can also give the impression that a Committee is satisfied with a response rather than merely making the response public as quickly as possible. At present Government responses are published in a variety of ways: it might be for the convenience of the House if in a future Parliament a system of special House of Commons printing numbers was to be introduced, allocated in sequence, for Government responses to Select Committee Reports. The Government could then lay the response itself, after agreeing the timing with the Committee concerned.

Other issues

Scrutiny of Supervisory and Regulatory Bodies

  16. The Committee has maintained its interest in the operation of bodies such as the Bank of England, the Securities and Investment Board, the Securities and Futures Authority, the Personal Investment Authority, the Investment Management Regulatory Organisation, etc, and has taken both written and oral evidence from them during this Parliament.[175]

  17. In its inquiry into the Role of the Bank of England, the Committee took evidence from the Governor-designate and Deputy Governor-designate of the Bank.[176] This was a useful exercise and one which the Committee may wish to repeat in the future when senior appointments are made to the bodies in which it has an interest.

Nomination of Committees

  18. It was not until some three months after the 1992 election that the Treasury and other departmental select committees were nominated. In view of the continuing responsibilities of committees and the backlog of correspondence and inquiries which inevitably builds-up while they are awaiting reappointment, we hope that the delay in setting up departmental committees after the next election will be kept to an irreducible minimum.

148   The first Summer Economic Statement was published in June 1994. Before that date, Statements were published in the Autumn.  Back

149   First Report, The 1992 Autumn Statement and the Conduct of Economic Policy, HC (1992-93) 201. Back

150   First Report, Barings Bank and International Regulation, HC (Session 1996-97) 65. Back

151   Sixth Report, HC (1995-96) 146.  Back

152   Eighth Report, HC (1995-96) 283. Back

153   Transfer of Functions (Financial Services) Order 1992 (SI,1992, No 1315). Back

154   Fourth Report, HC (1993-94) 236. Back

155   Second Report, HC (1994-95) 26. Back

156   Fifth Report, HC (1994-95) 187. Back

157   Sixth Report, HC (1994-95) 332.  Back

158   Minutes of Proceedings, HC (1992-93) 976, p 6. Back

159   Second Report, HC (1992-93) 250.  Back

160   Minutes of Proceedings, HC (1992-93) 976, p 13.  Back

161   HC (1993-94) 27. Back

162   See, for example, HC Debs, 14 January 1997. Back

163   Third Report, HC (1996-97) 129. Back

164   Erskine May (21st Edition), p 696. Back

165   Third Report, The Form of the Estimates, HC (1993-94) 192. Back

166   Fourth Report, HC (1994-95) 212. Back

167   Second Report, HC (1996-97) 186. Back

168   Op. cit., para 32. Back

169   Fifth Report, Resource Accounting and Budgeting in Government: The Financial Reporting Advisory Board, HC (1995-96) 309, para. 14. Back

170   Op. cit., para 23. Back

171   Fifth Special Report, HC (1995-96) 685. Mr Tim Smith MP was appointed to attend the meetings of FRAB as an observer on 21 May 1996.  Back

172   Fourth Special Report, Proposed Attitude Survey of the Civil Service, HC (1993-94) 460. Back

173   Fifth Special Report, HC (Session 1994-95) 745. Back

174   Fourth Report, Financial Services Regulation: Self-Regulation at Lloyd's of London, HC (1995-96) 223, para 2.  Back

175   See, eg, Sixth Report, The Regulation of Financial Services in the U.K., HC (1994-95) 332; First Report, Barings Bank and International Regulation, HC (1996-97) 65. Back

176   First Report, HC (1993-94) 98-II, Evidence pp 22-37. Back

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Prepared 13 March 1997