Select Committee on Treasury Sixth Report

7  The national debate and the role of Parliament

The national debate

96. In the 2006 Budget, the Government announced that it planned to initiate a national debate on the future priorities for public spending and public services, to inform the Comprehensive Spending Review.[201] Treasury officials indicated to us then that this national debate would be in two stages, with an initial debate on the long-term challenges followed by a wider debate on the implications of those challenges for future spending priorities. The Chancellor of the Exchequer told us at that time that the Government "will be taking measures over the next few months to stimulate" the national debate, and provided instances of the way such a debate might be presented, for example in terms of the weekly cost to an average family of the provision of particular services.[202]

97. The Government published two documents in 2006 relating to the Comprehensive Spending Review, one focused principally on departmental efforts to secure improved value for money,[203] and one concentrating on very long-term issues with little direct reference to spending decisions within a three-year timeframe.[204] Professor David Heald argued that the two documents "contain much interesting contextual material but do not address how to prioritise public expenditure or how to manage it when the inevitable slowdown of real growth bites from 2008-09".[205] He suggested that "there is no sign of a national debate" and pointed out that some departments had agreed settlements in advance of such a debate, so that

Even if there were a national debate, there is no mechanism for that to feed into decision-making on future spending priorities, especially when early settlers include the Home Office whose recent service-delivery and financial performance have attracted much criticism and public concern.[206]

98. The Chief Secretary told us on 30 January that the Treasury was that day launching an interactive website on the Comprehensive Spending Review to solicit the views of the public.[207] He conceded that

at the moment the level of knowledge of the likely changes [in terms of overall levels of public spending] is fairly limited. I think that is going to change over the period ahead and the website today will help.[208]

He also referred to the range of input the Government had received as part of its discussion on long-term challenges and opportunities and to the panel to work alongside the Prime Minister's working groups leading to the "people's summit" in March 2007.[209]

99. The website to which the Chief Secretary referred invites individuals to have their say about the Comprehensive Spending Review. The website sets out six questions on which the Government wishes to hear views:

  • "What are the key opportunities and challenges facing the country in the decade ahead, and how should we respond to them?
  • How can we ensure public services equip individuals to meet these challenges?
  • What role do citizens and businesses have to play, and how can the state support and encourage changes in behaviour which deliver better outcomes for individuals and society as a whole?
  • What is the role of local communities in responding to the challenges ahead, and what can be done to support them?
  • How would you like to be engaged in the delivery of public services in your local area?
  • What is the best way to secure the international cooperation necessary to make progress on key global challenges, such as climate change and international terrorism?"[210]

There is an opportunity for an individual to submit comments, but it is not immediately clear from the website how interactivity extends beyond the opportunity to make discrete submissions. The questions on the website are broad in nature, and their relevance to decisions to be taken in the Comprehensive Spending Review is not always immediately clear. The content of the website remained essentially unchanged between January and May 2007.

100. The Government has been too timid in taking forward the national debate on the Comprehensive Spending Review to which it committed itself as long ago as March 2006. If a genuine debate is to take place, the Government must take the risk of putting in the public domain clear indications of some of the decisions it is considering taking, including those areas to which the Government proposes to accord a lower priority in the forthcoming Spending Review. It must also seek to engage the public in the debate about spending priorities.

The role of the House of Commons and its select committees

101. In our Report on the 2005 Pre-Budget Report which followed the Government's announcement that there would be a Comprehensive Spending Review in 2007 rather than a Spending Review in 2006, we welcomed the Government's commitment to a two-stage process, with a report on spending challenges published in 2006. We recommended that that report be framed so as to maximise opportunities for discussion within the House of Commons and consideration by its select committees on the spending options and challenges before final decisions were announced in 2007.[211] Following the launching of the national debate in the 2006 Budget, we drew attention to the fact that the announcement made no reference to Parliament. We were assured at that time by Treasury officials that "we and Ministers always take Parliament into account".[212]

102. At the time of the 2004 Spending Review, the then Treasury Committee received a firm undertaking from Mr Nick Macpherson, then Managing Director, Public Services at the Treasury and now Permanent Secretary, to consult the Treasury Committee about the specification and measurement of Public Service Agreement targets.[213] During the present inquiry, the Chief Secretary indicated that select committees would be "central" to the consultation process in relation to Delivery Agreements and would have "a very important role".[214] The Chief Secretary made no reference to the involvement of select committees with regard to either Public Service Agreements themselves or the new Departmental Strategic Objectives.[215] We are concerned that the Treasury has yet to take any action to honour its commitment made in 2004 to consult this Committee about its proposed Public Service Agreement targets. We recommend that the Treasury, no later than mid-July 2007, send this Committee a draft of each proposed new Public Service Agreement for which it has direct responsibility for delivery, explaining its thinking in relation to each Public Service Agreement providing further information about the proposed data to be used for measuring progress against targets in each Agreement and seeking this Committee's views.

103. With regard to the role of select committees more generally, we are concerned at the emphasis that the Chief Secretary appeared to put upon consultation with select committees about Delivery Agreements. While these documents will be of undoubted importance, they seem likely to flow from decisions about Public Service Agreements that will already have been taken. We recommend that each Government department consult the relevant select committee or select committees of the House of Commons about both proposed new Public Service Agreements for which that department will have lead responsibility and about Departmental Strategic Objectives. We further recommend that the process of consultation be started by each department sending drafts of those documents with accompanying commentaries no later than mid-July 2007.

104. Select committees ought to be informed not only about the evolving performance framework for the Comprehensive Spending Review but also about the financial considerations that underpin them. We would not expect departments to be in a position to disclose in advance the likely scale of final settlements. However, the Comprehensive Spending Review is intended to be a zero-based exercise which, in the Treasury's words, "provides an important opportunity—with many past objectives achieved and supporting programmes and spending potentially available for reallocation—for a more fundamental review of the balance and pattern of expenditure within and across departments".[216] We recommend that each Government department inform the relevant select committee or select committees of the House of Commons no later than mid-July about the Government's emerging views on those past objectives which have been achieved and those supporting programmes from which spending is potentially available for reallocation.


105. As we noted above, a distinguishing feature of the current year's Spending Review has been the range and number of settlements that have been announced in advance of the final outcome.[217] There has been a marked variation in the quality of the information provided about these settlements. At one end, the Department for Education and Skills settlement includes full figures on Departmental Expenditure Limits up to 2010-11.[218] At the other end, the Home Office settlement was announced in a single sentence in the 2006 Budget statement with no additional information in the Red Book.[219] We recommend that, before mid-July 2007, the Treasury provide to this Committee and make publicly available a full list of the early settlements agreed as part of the 2007 Comprehensive Spending Review, including in each case the baseline figure for 2007-08 that will be used for determining subsequent increases or reductions expressed in percentage terms and, where appropriate, an indication of the consequences for those early settlements of any subsequent machinery of Government changes.

106. In his 2007 Budget statement, the Chancellor of the Exchequer talked about the additional expenditure available for allocation in the Comprehensive Spending Review as a result of the combined effect of the reductions in administration budgets, of the early spending settlements for certain departments incorporating a real terms reduction in expenditure and of the new targets for 3% efficiency savings:

I have agreed with Departments savings in administrative costs worth £1 billion a year by 2011, which will also release money for front-line services. The same front-line services will benefit from below-inflation spending review settlements for the Department for Work and Pensions, Her Majesty's Revenue and Customs, the Cabinet Office, the Treasury, the Department for Constitutional Affairs and the Attorney-General's Department. That will release for front-line services £2 billion, and with efficiency savings of 3% a year, we release, in total, £26 billion a year by 2010 for front-line services.[220]

He went on to say:

Just over a decade ago, when unemployment and debt were high and as much as three quarters of all new public spending went to pay for debt and social security costs, it left only one quarter of new spending for health, education, transport, defence and policing. But because of our success in cutting debt by a quarter and claimant count unemployment by a half, those front-line services will, in the coming spending round, receive not 25% of all new spending as in the past, but 75% of all new spending. In this new spending round, our aim has also been—in line with the Gershon report and with continuing reform—to ensure that resources for improving the front-line services, our service priorities, will continue to grow at the 4 to 4.5% yearly rate of this spending round.[221]

107. Professor Talbot observed that "it is unclear how front-line services are defined in relation to both redistribution of money and redistribution of personnel, and it would be interesting to see what those definitions are".[222] In the context of staff reallocations to front-line roles, the National Audit Office observed in February 2007 that "there is also no overall agreed definition of what constitutes a 'front-line' role".[223] Treasury officials suggested to us in March that the term "front-line services" was used to refer to all departmental expenditure, as opposed to expenditure on social security and debt interest.[224] In the Gershon review in 2004, the term "front-line" was used to distinguish expenditure directly involved in the provision of services to the public from expenditure on administration within departmental budgets.[225] In his oral evidence to us on the 2007 Budget, the Chancellor of the Exchequer made a similar point to that he had made in his Budget statement, namely that, in 1994-95, 75% of all new expenditure has been committed to debt interest and unemployment, whereas "75% or so of most new public expenditure is actually going to health, education, transport, infrastructure and investment in our future".[226]

108. The Government, in its accounts of public spending, appears to use the term "front-line" in three different contexts—to refer to expenditure within Departmental Expenditure Limits as opposed to that within Annually Managed Expenditure or to certain components of Annually Managed Expenditure, to distinguish spending on services to the public from expenditure within administration budgets, and to distinguish spending on high priorities relating to investment broadly understood from lower priority expenditure. Each of these concepts are legitimate distinctions to make, but the varying use of the term "front-line" blurs rather than illuminates these distinctions. We recommend that the Government, in reporting the outcome of the Comprehensive Spending Review, adopt a single and consistent use of the term "front-line".

Parliamentary authorisation

109. On at least three occasions each year the House of Commons is required to authorise public spending on the basis of Estimates and Supplementary Estimates. The figures presented on such occasions are not easy to reconcile with the more politically important totals established in Spending Reviews, and subsequently revised. Although most spending within Total Managed Expenditure is subject to formal authorisation arising from proceedings in the House of Commons, a significant proportion is not. Equally, some spending requiring parliamentary authorisation does not form part of Total Managed Expenditure. Overall, Total Managed Expenditure is significantly larger than total spending for which authorisation is sought from the House of Commons through Estimates.[227]

110. The disjunction between the amounts that the House of Commons is formally expected to authorise and the totals to be set out in the Comprehensive Spending Review that will form the centrepiece of the political process of resource allocation in the current Parliament does little to enhance understanding of the role of the House of Commons in financial scrutiny and authorisation. We accept that the differences between the two processes are of long-standing and are accounted for by several considerations of long-standing. We do not expect a remedy within the timescale of the Comprehensive Spending Review now underway. However, the Government and the House of Commons should aspire to such a remedy in the longer term. We recommend that the Government set itself the ambition to replace the current system of authorisation based primarily on Estimates with one linked more clearly with the public expenditure planning and control system, so that the House of Commons would eventually be in a position to consider and, should it so choose, authorise Departmental Expenditure Limits and an annual total for Annually Managed Expenditure, giving greater relevance to subsequent consideration of expenditure in excess of such limits requiring subsequent approval. We further recommend that the Government commit itself to working with select committees of the House of Commons, the National Audit Office and other interested parties to improve the clarity, consistency and comprehensibility of the documents placed before the House of Commons to seek authorisation for expenditure and to report on that expenditure.

The future of the public expenditure planning and control system

111. The 2007 Comprehensive Spending Review represents a departure from the previous two-yearly pattern of Spending Reviews under the new system for planning and control of public expenditure which was put in place in 1998 with effect from 1999-2000. The Chief Secretary indicated that no decision had been reached as to whether the two yearly pattern would resume with another Spending Review in 2009, or whether the 2007 Review marked a change to a three-yearly system.[228] A decision on that matter has a significant effect on perceptions of the 2007 settlement, not least because that decision affects whether the "firm" figures for 2010-11 will be viewed as final. We recommend that, in announcing the outcome of the 2007 Comprehensive Spending Review, the Government clarify whether the subsequent Spending Review will take place in 2009 or 2010.

201   Budget 2006, Box 6.1, p 131 Back

202   HC (2005-06) 994-I, para 67 Back

203   Releasing the resources Back

204   Long-term opportunities and challenges Back

205   Ev 119 Back

206   Ev 118 Back

207   Q 3 Back

208   Q 4 Back

209   Qq 15, 19 Back

210 Back

211   HC (2005-06) 739, para 70 Back

212   HC (2005-06) 994-I, para 68  Back

213   HC (2003-04) 906-i and ii, Q 252 Back

214   Ev 121; Qq 16, 130 Back

215   On which see paragraph 92. Back

216   Releasing the resources, para 3.14, p 24 Back

217   See paragraph 11. Back

218   Budget 2007, Table 6.3, p 157 Back

219   HC (2005-06) 994-I, para 66 Back

220   HC Deb, 21 March 2007, cols 817-818 Back

221   HC Deb, 21 March 2007, col 818 Back

222   HC (2006-07) 389-II, Q 103 Back

223   HC (2006-07) 156-I, Executive Summary, para 10, p 6 Back

224   HC (2006-07) 389-II, Q 208 Back

225   Releasing resources to the front line, paras 2.2-2.3, p 10 Back

226   HC (2006-07) 389-II, Q 295 Back

227   Erskine May, 23rd edition, p 859 Back

228   Q 14 Back

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