House of Commons - Procedure

Select Committee on Procedure Third Report

THIRD REPORT

The Procedure Committee has agreed to the following Report:—

SECTION 82 OF THE WELFARE REFORM AND PENSIONS ACT 1999

1. We have conducted an inquiry into the Government's exercise of its powers under Section 82 of the Welfare Reform and Pensions Act 1999. Section 82 raises significant issues in relation to the parliamentary scrutiny of government expenditure. The section (originally Clause 67 of the Welfare Reform and Pensions Bill) empowers the Secretary of State for Social Security to place a Report before the House seeking approval for expenditure on new services for a period of up to two years in advance of Royal Assent to the primary legislation creating those services. The full text of the section is set out in an annex to this report.

The enactment of Section 82

2. As a matter of law, expenditure can normally be incurred by departments if provision for that expenditure has been included in an Estimate which has been approved by the House of Commons, and the type of expenditure falls within the ambit of the Vote. Under a Concordat agreed between the Public Accounts Committee and the Treasury in 1932, any functions of a government department that continue beyond a given year—particularly where there are financial liabilities—should normally be defined by specific statute, rather than rely solely on the authority of the annual Appropriation Act.

3. The Government's argument in bringing forward Section 82 was that new social security services, such as a new benefit or major changes to existing provisions (such as those that would be required if the UK joined the Single European Currency), require significant preparatory work—for instance, developing computer systems or preparing manuals for use by staff. If expenditure on such preparatory work could not be incurred till Royal Assent to the legislation creating the new service, so the Government argued, considerable delay would ensue in implementing the service. The clause in the bill was designed to avoid such unnecessary delay. The Government claimed that this provision would be consistent with the 1932 concordat because the clause itself constituted the specific statutory authority there referred to.

4. The Government further argued that a number of safeguards were built into their proposed provision. These were that:—

(1) the power could only be exercised by the Secretary of State for Social Security, not by any other Secretary of State;

(2) the Government would be required to lay, and seek the House's approval by resolution to, a report setting out the purposes and amount of expenditure;

(3) expenditure authorised under the clause would still need to be included in an Estimate and voted by Parliament before it could be incurred;

(4) such expenditure could only be incurred for a period of two years; and

(5) expenditure could only be incurred on preparing for the change in question, not on implementing it.

5. Prior to the passage of the 1999 Act, it was possible for the Government to secure parliamentary approval for preparatory expenditure in connection with a new service, but only by means of a separate piece of primary legislation, a 'paving Act'. The Government claimed that passage of a separate paving bill in relation to each new service was not necessarily a good use of parliamentary time.

6. During the passage of the Welfare Reform and Pensions Bill in 1999, the Committee of Public Accounts (PAC), the Social Security Committee and the Procedure Committee all expressed anxiety about the implications of the new provision. The Clerk of the Procedure Committee wrote to her counterpart on PAC stating that "the Committee shares your concern that, although technically within the terms of the concordat between the PAC and the Treasury, the provisions are in essence in breach of it and at this stage is inclined to consider that, in principle, authority for expenditure should be given by primary legislation".[9]

7. There was no debate on the clause in standing committee. At report stage, the Chairman of the Social Security Committee, Mr Archy Kirkwood, tabled an amendment to delete the clause. Under the guillotine imposed on the bill, there was no opportunity to debate this amendment, but the relevant Minister, Mr Timms, informed the House on a point of order that he was willing to make a concession whereby a report seeking approval of expenditure would, "in normal circumstances, be looked at by the [Public Accounts and Social Security] Committees before the House reaches a decision".[10] A similar undertaking was subsequently given by the relevant Minister in the Lords, Baroness Hollis.[11] The bill received Royal Assent on 11 November 1999.

The first use of powers under Section 82

8. At a meeting in July 1999, the chairman of the two select committees discussed with the Minister of State at the Department of Social Security (DSS), Mr Jeff Rooker, how the Government's undertaking should be implemented. It was agreed that the Social Security Committee would take the lead in scrutinising draft reports under Section 82. In a letter to Mr Kirkwood dated 3 September 1999, Mr Rooker undertook that the Government would supply a draft of any report to the two committees in all (not just "normal") circumstances, but reserved the right in an "emergency situation"—described as being a "very unlikely" scenario—to lay the report formally shortly thereafter even if the committees had not completed their scrutiny of the draft.[12]

9. So far the Government has put forward one report to the House under Section 82. It sought approval for expenditure on a new information technology system for the Child Support Agency. This was in anticipation of the enactment of the Child Support, Pensions and Social Security Bill, and sought to enable the signing of a contract with the DSS's preferred contractors, the Affinity consortium, to deliver a new computer system. The report was submitted in draft to the two committees in December 1999.

10. On 11 January 2000 the Social Security Committee took evidence in private from DSS officials. The Committee published its report on 27 January.[13] This expressed dissatisfaction with the information supplied in the Secretary of State's draft report. In particular, it called for the final report to contain a detailed breakdown of the proposed expenditure together with the expected timing of that expenditure,[14] it recommended that the amount, nature and timing of the financial liabilities that would be accrued by signing a contract with Affinity should be stated on the face of the report,[15] together with information as to how the risks of signing a contract prior to Royal Assent would be minimised,[16] what unavoidable expenditure would arise in the event of the bill not being enacted or being substantively amended,[17] and when Affinity would begin work specifically related to the Child Support, Pensions and Social Security Bill.[18]

11. The Social Security Committee concluded that the expenditure sought in the draft report was acceptable in principle, though they noted that since the first draft was put before them the amount of expenditure sought had been significantly reduced: in respect of internal DSS expenditure, from £60 million to £6 million, a reduction of 90 per cent.[19] They also commented that the draft report "did not give us sufficiently accurate information on which we could make an unequivocal recommendation to the House" and that the draft "bore little or no relation to the likely final version". They recommended that a further draft be supplied to them before the instrument was finally laid.[20]

12. They also commented that the procedure under Section 82 was an "unusual" one which, even though approved by the House, deserved further consideration:

13. In March 2000 the Social Security Committee published a second report on the subject.[22] This gave the Committee's views on the final draft version of the Secretary of State's report. They welcomed the inclusion of many of their recommendations. They listed three recommendations which the Secretary of State did not fully accept, but stated that "we believe that the information contained in the Secretary of State's report is a reasonable compromise and provides sufficient protection to the taxpayer".[23] Overall, the Committee recommended that the House should now approve the report. However, they repeated their previous recommendation that the Procedure Committee should review the whole subject.[24]

14. The Government's first report under Section 82 was laid before Parliament on 13 March 2000.[25] This sought approval for expenditure on child support reform of up to £45 million, divided into two elements:

(ii) a maximum of £39 million of accruing liability under a PFI contract, also on the "legislative-dependent" elements of child support reform.[26]

15. The report was not debated on the Floor of the House, but was considered in the First Standing Committee on Delegated Legislation on 5 April 2000 and approved without debate by the House on 11 April. During the debate in standing committee, several Members expressed continuing concern about the use of Section 82 powers.

16. In November 2000 the Government announced that, of the £45 million expenditure authorised under the Section 82 powers in relation to child support reform, only £2.6 million had actually been spent (all by the Child Support Agency). The Government explained that the reason why such a small proportion of the authorised amount had been spent was that Royal Assent to the Child Support, Pensions and Social Security Act had been secured before rather than after the parliamentary summer recess, and that the PFI contract had been signed in early August; as a result less Section 82 expenditure was needed than would have been the case had either of these events been delayed till later in the year.[27]

The Procedure Committee's inquiry

17. In our report on delegated legislation, published in March 2000, we announced that we would examine the Government's use of its powers under Section 82.[28] We subsequently took written and oral evidence from the Chairman of the Social Security Committee, Mr Archy Kirkwood MP, and the Chairman of PAC, Mr David Davis MP, written evidence from the DSS and from HM Treasury, and oral evidence from Angela Eagle MP, Parliamentary Under-Secretary of State for Social Security, and Mr Simon Judge, Head of Departmental Finance and Planning at the DSS.

18. In our inquiry we have addressed the following questions:—

WAS THE GOVERNMENT RIGHT TO INTRODUCE SECTION 82?

19. The DSS argued that it was desirable to secure approval for preliminary spending on new IT systems in order to avoid delay. The traditional means of securing such approval is through a paving bill. This has the advantage over a Section 82 report that it is amendable and that there is greater opportunity for debate. We asked whether any significant delays had occurred in the past through the need to secure passage of a paving bill. The DSS conceded that "a lack of parliamentary time for paving legislation has not in the past caused delays". However, they added that "time for the legislation does have to be found from within an already crowded parliamentary timetable and the House would find the time available for general debates curtailed". They also stated that "the Department's heavy welfare reform programme could have meant that the need for paving legislation would have been greater in the future".[29]

20. We asked about past precedents for Section 82. It appears from the Government's answer that there are no close precedents. Section 88B of the Local Government Finance Act 1988 sets up a procedure for authorising expenditure by means of a report laid before the House for approval by resolution, but the DSS acknowledge that "this is the only real link between the powers".[30] The Parliamentary Under-Secretary in evidence confirmed that Section 82 powers are unprecedented.[31]

21. The Chairman of PAC told us that "even with thorough select committee scrutiny of expenditure reports, the implementation of Section 82 results in a diminution of the effectiveness of Parliament's scrutiny of expenditure".[32] In oral evidence, he told us that in his judgement Section 82 was "probably unnecessary".[33] The Chairman of the Social Security Committee said that "the House of Commons had not been properly apprised of what the full consequence and extent of this new power was", and that "you could perfectly well argue, in my view, that a paving bill would have been a more elegant way and a transparent way to proceed".[34]

22. We conclude that the Government has not made out a particularly strong case for the transfer of significant decision-making on expenditure from primary to secondary legislation. We believe that a paving bill, which would have been amendable, should have been the means whereby the Government sought power to incur this expenditure. In the first and so far only use of the powers granted under the section, the actual expenditure has proved to be considerably less than that originally expected: only 5.9 per cent of that authorised, in fact. This suggests that the DSS may have miscalculated both the urgency of its need for preliminary spending on IT, and the extent of that spending, and that it thus sought extraordinary powers to override normal parliamentary procedures on the basis of claims which have, with the benefit of hindsight, proved to be somewhat exaggerated.

DID SECTION 82 RECEIVE ADEQUATE SCRUTINY AT THE TIME OF THE PASSAGE OF THE 1999 ACT?

23. It is generally agreed that the lack of scrutiny of Section 82 at the time of its original passage was unfortunate. As we have seen, owing to the operation of guillotines on the bill there was no opportunity for debate on the clause either in standing committee or at report stage; the Government's concession in relation to the clause had therefore to be announced to the House using the unsatisfactory contrivance of a point of order; and subsequent debate in the Lords was very brief.[35] The Chairman of PAC commented that "the issue was not debated properly, not thought through properly".[36] The Parliamentary Under-Secretary agreed that "guillotines which prevent discussion on any procedural change are regrettable" and that "it is always better to discuss procedural changes than not".[37] We concur: if Section 82 had been subject to adequate scrutiny at the time of its original passage, some of its deficiencies could have been addressed at that stage and it might not have been necessary for us to conduct our present inquiry.

9 Letter dated 31 March 1999. Back

10 Official Report, 20 May 1999, col. 1338. Back

11 Official Report (Lords), 20 July 1999, col. 945-46. Back

12 Social Security Committee, First Report of 1999-2000, Power to Incur Expenditure under Section 82 of the Welfare Reform and Pensions Act 1999: New Information Technology System for the Child Support Agency (HC 180), p xi. Back

13 See previous footnote. Back

14 Para 9. Back

15 Para 10. Back

16 Para 11. Back

17 Ibid. Back

18 Para 12. Back