House of Commons - Procedure

Notification to Parliament of DEL changes, which departments currently make through written statements, would in future be included in such memoranda, replacing the need for written statements;
The proposed template for the Introduction to each Estimate should limit the detail to the changes to the various control limits (Treasury and parliamentary). Any detailed explanation of the reasons for these changes, how they are funded, etc, would be included in the memorandum;
Your suggestion of a new Note to the Estimates relating to the department's DEL EYF position would be replaced by the provision of such information in the Introduction (how much is being taken-up) and the memorandum (what it is being used for and how much is left).

Beyond the above requirements, the detail of what was included in each memorandum would be a matter for agreement between each department and its Select Committee.

A similar Memorandum should be produced by departments that are not seeking a Supplementary Estimate but are, with Treasury approval, switching spending within voted limits.

Government Accounting already sets out criteria under which the Treasury can agree virement within an Estimate. This allows switches of resources only where the spending is, for example, not large in relation to the sections concerned, does not arise from a major change of policy, and is neither novel nor contentious. Since such virement is limited in this way, and often takes place after the year-end, it is unlikely to be of significant interest to many Select Committees.

However, I am content that any guidance relating to the "Estimate Memorandum" dealt with above should also set out the requirement for a similar memorandum in these circumstances where this has been agreed between the department and its Select Committee. If you accept my proposals relating to the "Estimate Memorandum" above, such a memorandum would also be submitted to the Select Committee where there are DEL changes to report even when no Supplementary Estimate is required.

Responses to the further letter, of 24 November, jointly from the Public Accounts and Treasury Committees:

A request for information on what measures are, or will be, in place to ensure that departments meet the July 2005 deadline for closure of the 2004-05 resource accounts, and the planned timetable for 2003-04 accounts.

As mentioned in my 30 September letter, the aim is for departments to have their resource accounts signed, certified and laid before the summer recess by 2005-06—in other words, for the 2005-06 accounts to be published by July 2006. Departments will use the intervening years leading up to 2005-06 to advance their own timetables in order to achieve the July 2006 deadline.

Departments are, of course, at very different stages of progress towards achieving this. Nine departments succeeded in laying and publishing their 2002-03 accounts before the summer recess this year. Most departments are showing an improvement—in some cases significant—compared with their 2001-02 accounts. The Treasury is working closely with the National Audit Office and departments to ensure that further improvements are made for the 2003-04 accounts.

Detailed guidance on accelerated closure was set out in the "Mauve Guide" in the Managing Resources series "Faster closing" (copies attached). The Guide explains the benefits to departments and others (including Parliament) of faster closing, and how the barriers can be overcome. It also sets out 10 ways in which departments can help smooth progress towards faster closure, working closely in partnership with the NAO. This message has been reinforced at various conferences and seminars with departments.

Whether the proposals relating to Machinery of Government changes would involve backdating changes to the start of the financial year.

Machinery of Government changes are currently treated as mergers in both resource accounts and Estimates. This means that where a transfer takes place mid-year responsibility for spending in relation to the transferred activity lies with the receiving department in respect of the whole financial year. The suggested changes, to allow the Estimate of the transferring department to show a reduction in resources and cash following the transfer, will not affect this position.

Allowing "negative Estimates" (ie Estimates seeking a reduction in already voted limits) to be extended to cover not only Machinery of Government changes but also to other changes, such as switches of provision between RfRs in an Estimate.

I support this suggestion. My initial proposal restricted the use of negative Estimates to Machinery of Government changes because this is where the current rules cause greatest difficulty, and the process of adjusting Estimates is straight-forward, with completely off-setting movements between Estimates. However, there would certainly be benefits in extending this proposal to cover situations where a department is reducing spending in one RfR in order to finance additional spending in another. There would be no overall reduction in resources or cash voted in the departmental Estimate. If these were the only changes taking place in the Estimate the department would need to ensure that a token increase in resources of £1,000 remained to be voted by Parliament.

I suggest that the use of "negative" Estimates (or RfRs) is limited to these specific circumstances, at least for the present. To move to a position where voted limits on departmental spending might be reduced overall would need careful consideration. There would possibly be legal and procedural issues to address.

Appendix: Draft Template for introductory section of Estimate

Supplementary Estimate 200X-0X [Department Name]