III. PLANNED
CHANGES IN
CONTROLS WHICH
HMT WISH TO
NOTIFY TO
THE PAC
A. STAFF
BENEFITS
34. Treasury approval is required for expenditure
on certain categories of staff benefits—chiefly where there
is uncertainty as to whether any such expenditure would be considered
by Parliament as an appropriate use of public funds. The current
arrangements were introduced in response to the qualification
of a department's accounts by the Comptroller and Auditor General
for the misuse of an efficiency incentive award scheme to provide
staff benefits. Examples of staff benefits include expenditure
on a recreational facility, or on entertainment for staff.
Transfer of responsibility
35. The Treasury takes the view that departments
are as well placed as the Treasury itself to judge whether any
such expenditure would be considered by Parliament as an appropriate
use of public funds. It therefore intends to delegate the responsibility
for deciding whether to approve expenditure on staff benefits.
However, Treasury approval will continue to be required for any
proposals which fall under one or more of the strategic criteria
for Treasury approval, namely those which could increase pressure
on the provision in Estimates, or set a potentially expensive
precedent, or cause repercussions for other departments.
36. The Office of Public Service (OPS), which
has responsibility for approving pay and grading arrangements
in the Civil Service, is and will remain responsible for approving
the payment of benefits in kind to civil servants, because benefits
in kind are essentially a substitute for pay (examples include
health insurance or subscriptions to a sports club).
37. Elsewhere in the public sector the responsibility
for approving all staff benefits, including benefits in kind,
will be as follows: in the Armed Forces the responsibility will
be exercised by the MoD; in the NHS by the Department of Health;
and in NDPBs by sponsoring departments (unless different arrangements
are required by statute).
38. The OPS, in consultation with the Treasury,
will issue consolidated guidance for the Civil Service covering
all aspects of staff benefits and benefits in kind. The guidance
will particularly stress the need for departments to be satisfied
that any proposed expenditure on staff benefits would be considered
by Parliament as an appropriate use of public funds.
B. SINGLE TENDERING
39. Departments are currently required to consult
the Treasury if a decision to let a contract without competition
appears to raise important issues of principle which could affect
purchasing policy generally. The requirement dates from 1985.
The requirement is additional to the individual threshold which
are included in departmental delegations for the awarding of single
tenders without Treasury approval.
The Treasury's intention concerning single tendering
40. The Treasury notes that:
— in practice the requirement has not
led to any detectable amount of information being passed by departments
to the Treasury—indeed, the Treasury has no record of any
such consultation having taken place;
— the case for single tendering is
already carefully examined by departments both in discharging
their responsibility to obtain value for money in procurement,
normally through competition, and in complying with the EC procurement
rules where these apply. In addition, thresholds for single tender
decisions are prescribed in the delegations of individual departments.
41. In the light of these considerations the
Treasury plans to discontinue this requirement. The Treasury is
reviewing its guidance to departments on procurement policy matters.
The change will take effect when revised guidance is issued on
completion of the review. The existing provision is expected to
be replaced by a more general provision inviting departments to
notify the Treasury of any decisions which they consider may have
wider implications for procurement policy. However, the change
will not affect the application of departments' delegation limits
for single tenders.
C. STANDARD FINANCIAL
MEMORANDA FOR
SMALLER NDPBS
42. Every NDPB must have its own financial memorandum
approved not only by the sponsor department but also by the Treasury.
The financial memorandum sets out the operational framework of
control and accountability within which the NDPB must operate,
including the conditions on which any grant-in-aids is paid to
the NDPB by the sponsor department, the roles and responsibilities
of the sponsor department, the Chief Executive, and the NDPB's
planning, reporting and accounting and auditing arrangements.
The Treasury scrutinises up to 100 or so financial memoranda a
year. The control is long standing. In a number of cases it is
enshrined in statute.
The Treasury's intention concerning financial
memoranda
43. The Treasury believes that:
— NDPBs are accountable to their sponsor
departments. It makes sense for departments to have as much responsibility
as possible for overseeing the financial memoranda under which
their NDPBs will operate;
— many NDPBs are very small, and the
work involved for the Treasury can be disproportionately detailed,
given the low level of resources at stake. Greater operational
discretion for departments would lead to more effective use of
resources in departments and the Treasury;
— the process of setting up Next Steps
agencies, which are rather akin to NDPBs, is well established.
There is now widespread agreement and understanding on the sorts
of issues that need to be covered in Agency framework documents,
and correspondingly in financial memoranda. Thus the need for
detailed Treasury oversight no longer applies on most cases.
44. In the light of these considerations the
Treasury now intends to distinguish between, on the one hand,
the large and significant NDPBs in relation to which the Treasury
will continue to exercise existing controls, including the approval
of their financial memoranda; and, on the other hand, the many
other and smaller NDPBs where the Treasury's strategic interest
is not at stake.
45. In practice, NDPBs whose current and/or
expected gross annual expenditure is greater than, say, £40
million will continue to be subject to current Treasury controls,
including the need for their financial memoranda to be individually
approved by the Treasury. The threshold of £40 million would
maintain under Treasury scrutiny approximately 50 such bodies
who account for 90 per cent of all NDPB gross expenditures. Exceptionally,
certain smaller NDPBs might also be subject to individual Treasury
scrutiny if the relevant Expenditure Team has good reason to maintain
or reintroduce more detailed controls for the time being. The
Treasury will also continue to exercise detailed controls where
statute requires this.
46. For the remainder of NDPBs (over a 1,000
in number) the Treasury will leave departments to draw up individual
financial memoranda on the basis of a model or standard memorandum
drawn up by the Treasury in consultation with departments. Thereafter
only departures from the model would need the approval of the
Treasury. Work is currently in hand on preparing such a model.
47. Examples of NDPBs with current and/or expected
gross annual expenditure below £40 million include the Equal
Opportunities Commission (£6.8 million) and the Royal Botanic
Gardens, Kew (£27.0 million). Examples of NDPBs with expenditure
above £40 million include the Economic and Social Research
Council (£62.7 million) and the Environment Agency (£456.7
million).
D. NEW SERVICES:
THE DE
MINIMIS THRESHOLD
48. A new service is one which Parliament has
not yet authorised, either specifically by way of enabling legislation
or, in appropriate cases, through the annual Supply procedure.
49. In 1932, replying to a recommendation by
the PAC, the Treasury said that:
"While they think that the Executive Government
must continue to be allowed a certain measure of discretion in
asking Parliament to exercise a power which undoubtedly belongs
to it, they agree that practice should normally accord with the
view expressed by the Committee that, where it is desired that
continuing functions should be exercised by a government department
(particularly where such functions involve financial liabilities
extending beyond a given year) it is proper that the powers and
duties to be exercised should be defined by specific statute.
The Treasury for their part will continue to aim for the observance
of this principle."
50. In 1984, as part of an exercise to clarify
and tighten up the application of this principle in practice,
the Treasury issued internal guidance to departments which suggested,
among other things, a de minimis threshold of £0.5 million
annual provision as a guide for helping departments to judge whether
specific statutory provision beyond the Appropriation Act should
be sought for any new and continuing service. The threshold was
offered as a guide to departments, not as a control, although
in practice the Treasury is regularly consulted on new and continuing
services—perhaps in about 25 to 30 cases each year.
The Treasury's intention concerning the threshold
for new and continuing services
51. The Treasury believes that:
— a threshold of £2 million would
now be a more appropriate level for this threshold;
— this figure is consistent with the
figure proposed elsewhere in this memorandum for the reporting
to Parliament of losses and special payments, contingent liabilities,
and fees and charges;
— the threshold is still low enough
to ensure that new and continuing services involving anything
other than relatively small amounts of expenditure would normally
require specific legislation.
52. The Treasury therefore plans to raise the
guideline threshold for new and continuing services to £2
million, and more generally to clarify the guidance in this area.
HM Treasury
30 October 1997
| 
