RESOURCE ACCOUNTING AND BUDGETING (PAC
97-98/225)
Memorandum by H M Treasury
The Procedure Committee has asked for a further
explanation of the implications of the Government's proposal to
introduce "trigger points" against which progress in
implementing resource accounting and budgeting (RAB) in central
government can be assessed.
The Committee has asked in particular what would
happen if the trigger points were not successfully passed. As
each trigger point is reached, the Treasury will take a view on
the overall position of departments and determine future action
in the light of that. In practice, this will mean deciding at
each trigger point stage whether the progress of one or more departments
is such that a delay in introducing RAB in all departments
would be justified, or whether specific action could be taken
to rectify the position. The Treasury will take full account of
the views of the NAO at each trigger point stage.
The trigger points are not, however, the only
points at which monitoring RAB implementation will take place.
Both the Treasury and the NAO already have in place a continuing
process of monitoring individual departments' progress. Regular
bilateral meetings take place between the Treasury and the NAO
to discuss implementation, so that any emerging problems can be
identified at an early stage and dealt with as they arise. The
trigger points are intended to act as specific occasions on which
the government can take stock of the overall position, and against
which progress in implementing RAB can be reported back to the
Parliamentary Committees.
The second trigger point—an assessment
of departments' opening balance sheets for 1999-2000—was
included in the Government's proposals for two main reasons: first,
because it represents a useful mid point at which to take stock
of progress between "Stage 1 approval" in 1998 and full
audit by the National Audit Office of departments' dry-run 1998-99
Resource Accounts in the autumn of 1999; and second, because a
view of departments' opening balance sheets for 1999-2000 at that
stage—i.e., prior to full audit of the 1998-99 accounts—will
both provide timely information and be revealing in itself.
The key factors in assessing progress at the
second trigger point stage will be the quality of the balance
sheet information—which inevitably involves a degree of
subjective judgment—and consistency with the policies set
out in the Resource Accounting Manual.
In addressing the issue of the implementation
timetable for RAB, the Committee may be further reassured by the
fact that, as noted in the Treasury's oral evidence, a decision
to postpone the introduction of resource based Estimates beyond
2001-02 could be taken as late as 2000, if necessary. The Treasury
would not hesitate to take such action if it concluded that progress
in implementing RAB warranted it.
The Committee has also asked for more detailed
figures for the overall cost of introducing resource accounting
and budgeting in central government, and for the costs of double
running already planned.
As explained in the Treasury's earlier Memorandum,
there are genuine difficulties in establishing reliable figures
for the additional costs which are attributable solely to the
implementation of RAB. However, in view of the Committee's further
questioning on this matter we have consulted departments again
to establish whether it is possible to provide some illustrative
costs. In doing so, we have also explored whether it would be
feasible to devise "proxy" figures, for example in respect
of the overall cost of departments' finance and related functions
during the years leading up to full implementation of RAB in 2001-02.
There are however two main reasons why the Government
continues to believe that it would be inappropriate to provide
"proxy" figures on this basis. First, for the reasons
set out in the earlier memorandum, even proxy figures risk being
open to misinterpretation because, for example, such costs may
vary between years for a variety of reasons other than the introduction
of RAB. Departments are therefore naturally reluctant to say anything
more specific than was contained in the earlier memorandum, and
the Government is anxious to avoid giving the Committee figures
which it believes are spurious or which could be misleading. Second,
the Committee will appreciate that, even if such figures were
readily available now, they may be open to change in the light
of decisions made about the level of overall provision and allocation
of resources within departments in the CSR. The Government will
review the position at the end of the CSR process, and hopes that
the Committee will accept the arguments against going further
at this stage.
At the Committee's request, the Government has
provided the best available estimate of the cost of a further
year's dual running the present cash system alongside the new
resource based one. While the costs are significant, they are
not in the Government's view the main reason for not delaying
the implementation of resource accounting and budgeting. As outlined
in its earlier memorandum, the Government's case for adhering
to its planned timetable is that there is no evidence at present
to justify deciding at this stage that implementation should be
delayed.
A project of the size and complexity of RAB
requires substantial drive and commitment from all those involved
in order to achieve the significant changes in attitudes to resource
management in central government that RAB will bring. Any sign
that the momentum is slowing down is likely to have a seriously
damaging effect. It is the longer-term benefits arising from RAB
that will lead to real budget savings. The Government believes
that any delay in realising those savings—which would both
confuse and delay the creation of a healthier, more resource conscious
culture in Whitehall—would be of major concern to the Parliamentary
Committees.
This Memorandum has given further clarification
of the safeguards the Government has put in place to ensure the
successful introduction of resource accounting and budgeting,
which offers a significantly enhanced framework for the planning
and control of public expenditure and which will provide Parliament
with far more supporting information on the Government's plans
than has hitherto been available. The Memorandum has also reaffirmed
that implementation of RAB could still be delayed at a number
of points along the route, if the situation justified this.
In the light of these reassurances, the Government
again urges the Committee not to close off the possibility of
the Government proceeding in accordance with its proposed timetable
for implementing RAB, including the trigger points, so that the
successful delivery of the project is not jeopardised.
HM Treasury
March 1998
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