ANNEX A
FRAMEWORK FOR LIVE TESTING AND DEVELOPMENT
OF CONTROL ARRANGEMENTS
A1. The Government recognises that Parliament
has thus far consented to the further development of RAB on the
basis of theoretical models of a full resource accounting and
budgeting system. In particular, the arrangements for the Supply
process and in-year control have not been fully articulated. This
annex describes the current working assumptions for "live
testing" by departments and the Treasury of a possible structure
of resource-based Estimates.
A2. The Treasury plans to operate a "live
test" based on illustrative resource Estimates and track
income and expenditure flows within that model. This process will
take place between September 1997 and April 1998. There will be
an intermediate and a full evaluation of the results. The live
testing will be based around spreadsheet templates for participating
departments on which actual 1997-98 data will be used, tracking
the impact of expenditure switches under the new resource estimates
structure and the application of other elements of in-year control,
such as Supplementary Estimates and end-year flexibility. Where
the information is available, the impact of resource-only items
such as asset write-downs and valuation changes will be monitored.
The main structural assumptions and features of the testing regime
are set out below.
Proposed structure of Estimates
A3. An illustrative structure for the fictitious
Department Yellow is shown at Annex B. The format is broadly similar
to that used for Simplified Estimates. The columns reflect public
expenditure classifications. The horizontal structure of rows
will depend on factors such as whether a department has one or
more Votes at present. As working assumptions, the pilot assumes
that:
— there will be one resource-based
Estimate per department;
— departments will request resource
provision from Parliament at broadly the same level as existing
Votes; and
— unless the underpinning lines can
be readily grouped by objective, requests for resources will be
based on functional lines.
A4. Some departments — such as Defence,
Education and Employment, Health, Scottish Office and Cabinet
Office — have significant public service pension schemes.
The Government has proposed that such schemes will have resource
Estimates and accounts which are separate from those of their
parent departments. This follows the arrangements foreshadowed
in the Treasury and Civil Service Committee Fourth Report (Session
1994-95), advocating the development of separate scheme statements
for public service pension schemes.
Parliamentary and Treasury controls
A5. For the purposes of the pilot, the working
assumptions for Parliamentary and Treasury controls are that:
— Switches between requests for resources
during the year would require Parliamentary approval through a
Supplementary Estimate.
— Beneath the level of the request
for resource, switches between functional lines would continue
to require Treasury approval, or Parliamentary approval if they
were significant or involved new services.
— Demand-led spending would be ring-fenced
in order to prevent underspends leaking into resource limited
or new capital expenditure.
— Existing instruments, such as end-year
flexibility, continue and are applied as now in such a way as
to ensure the operational flexibility required by managers and
good value for money.
Cash management systems
A6. Another of the key skills needed under RAB
is first rate management of working capital. The Treasury is undertaking
field trials with a group of departments to develop a system that
will create incentives to manage cash in a businesslike manner.
The intention is not only to underline departments' responsibility
for managing their own cash flows but also to assist the Treasury
in managing government cash flows at an aggregate level. Seven
departments have participated in the initial fact finding and
the majority are also taking part in field trials. The work is
progressing well and the results of the next stage should be available
in autumn 1997.
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