Chapter 6: Strengthening Parliamentary
6.1 Following their meeting on 12 March
2002, the Public Accounts Commission asked the National Audit
Office to consider how it could expand the scope of scrutiny amongst
accountable bodies through extra studies so as to strengthen Parliamentary
oversight of government programmes.
6.2 Chapter 5 of the Plan sets out the background
for a proposed annual increase of 6 per cent in the National Audit
Office's net resource requirement over the period 2003-04 to 2005-06.
Such an increase would ensure that the Office has resources to
support Parliament by:
maintaining its core certification
and value for money programmes;
taking on new statutory certification
work, for example, whole of government accounts;
implementing the recommendations
of the Lord Sharman's Report, including developing a programme
of performance validation and inspection work.
This, however, would be insufficient to expand
the scope of audit coverage as postulated by the Public Accounts
6.3 This section considers what additional
support the National Audit Office could provide to Parliament
and the associated resource implications.
6.4 National Audit Office reports to Parliament
range across departments' activities so that the Public Accounts
Committee can exercise effective scrutiny of how public resources
are used. When new methods of service delivery have been introduced,
such as e-government and the Private Finance Initiative, it has
been important to provide Parliament with an early opportunity
to consider whether these initiatives are likely to deliver value
for money and that public funds are not put at risk.
6.5 The pace of change is continuing and
increasingly public services are being delivered through a range
of different providers from the private and voluntary sectors
and local government, often involving complex arrangements. While
providing good potential to deliver better public services such
approaches also carry risk.
6.6 At the same time public expenditure
is set to increase by an average of just under 8 per cent in 2003-04
and around 6 per cent in 2004-05 and 2005-06. Much of this increase
is targeted on improving the key public serviceseducation,
health, transport and criminal justice.
6.7 There is, therefore, scope to increase
the number of reports to assess how these increases in public
expenditure and other initiatives are delivering both value for
money and sustainable improvements in public services.
6.8 In addition, the National Audit Office
could enhance Parliamentary scrutiny of non-departmental public
bodies by producing more reports on these organisations, which
are often involved with service delivery. This would not only
reflect the interests of the Public Accounts Committee, but also
be in keeping with the recommendations of Lord Sharman's report
and with the report of the Public Administration Committee, which
recommended strengthening Parliamentary accountability for non-departmental
6.9 The National Audit Office could also
strengthen Parliamentary scrutiny by increasing the number of
reports on action taken by departments in response to recommendations
by the Public Accounts Committee. These reports would form the
basis for the Committee to question Accounting Officers on the
progress they had made.
6.10 The number of hearings by the Public
Accounts Committee has risen by around a third in the current
Session of Parliament. Increasing the number of National Audit
Office reports would provide the Committee with greater choice
on topics for examination. Members are also increasingly asking
the National Audit Office for briefing on current issues and for
ad hoc pieces of work.
6.11 The additional cost of extending the
scope of the National Audit Office's value for money work would
depend on the number of extra reports produced. An investment
of £1.6 million in 2003-04 would enable the Office to produce
up to 10 extra value for money reports a year, although there
would be a time lag in achieving this level of output. The Office
would, of course, expect to secure savings of at least £8
for every £1 extra spent on additional reports.
6.12 The main focus of Parliamentary scrutiny
is on the Government's expenditure programmes; on a pound for
pound basis there is relatively less scrutiny of revenue assessment
and collection arrangements. Parliament, however, also needs assurance
about the management of risk attached to the assessment and collection
of revenue, which is matching the growth in public expenditure.
6.13 Recent National Audit Office reports,
such as those on income tax self assessment and hydrocarbon oils,
have drawn attention to the size of the tax gap, the difference
between the amount of tax that could be collected and what is
actually collected. Others have highlighted areas, such as duties
on alcohol, tobacco, and hydrocarbon oils, where significant amounts
of tax are being lost through fraud and evasion.
6.14 In addition, the tax system is increasingly
being used to provide support to families through tax credits,
replacing benefits previously paid through the social security
system. The arrangements for the payment of new types of tax credit
include employers, who act as paying agents on behalf of the Inland
Revenue through the PAYE system. Tax credits, which are set off
against revenue in the Inland Revenue's accounts, represent a
growing area of expenditure on which the National Audit Office
will need to provide Parliament with assurance.
6.15 There is a case, therefore, for increasing
and strengthening audit coverage and Parliamentary scrutiny of
this important but increasingly complex field. An expansion of
work in this area would:
allow the National Audit Office to
focus more attention on looking into significant revenue losses
arising from activities such as smuggling and evasion;
help Parliament scrutinise new areas
of taxation and developments in tax administration, for example
the electronic submission of returns; and
ensure that important areas of spending
on new tax credit programmes, where expenditure is set off against
revenue, receive the same level of scrutiny as money voted by
Parliament through Supply Estimates and accounted for through
departmental resource accounts.
6.16 An increase in the National Audit Office's
work in this area would enable it to provide Parliament with wider
and more in-depth coverage of the whole range of taxes in the
Office's annual reports on Customs and Excise and the Inland Revenue.
It could also result in additional reports to Parliament on individual
aspects of the tax system.
6.17 It is estimated that expanding work
in this complex field to enhance Parliamentary scrutiny would
require an investment of an additional £500,000 in 2003-04.
6.18 The table below summarises the impact
of the proposals on the net resource requirement requested by
the National Audit Office for 2003-04.
6.19 The proposals would add approximately
£2.1 million (4 per cent) to the National Audit Office's
forecast net resource requirement for 2003-04, representing an
aggregate increase of 10 per cent over 2002-03. In subsequent
years, the increase would remain at 6 per cent, as proposed in
Chapter 5 of the corporate plan.
9. National Audit Office: Alternative
net resource requirement 2001-02 TO 2005-06
|Other Running costs||23.1
|Gross resource requirement||59.4
|Net resource requirement||48.5