There is universal agreement that parliamentary scrutiny of the Government's finances (especially planned expenditure) needs to be improved. Recent changes have made the House's financial scrutiny better, but have not transformed it.
The problem is not the House's powers in financial matters but the ability and willingness of the House and Members to scrutinise such matters in the degree of detail required to hold the Government to account. The purpose of financial scrutiny is to make the Government's financial decisions transparent, to give those outside Parliament the opportunity to comment, to have the opportunity to influence the Government's financial decisions, and to hold the Government, individual departments and other public bodies to account, thereby contributing to an improvement in financial decisions and management and improved value for money in public services.
Financial scrutiny is not a narrow exercise of poring over figures, but is about ensuring effective management of finite resources to achieve purposes such as better hospitals or better-equipped troops. Knowledge of Departments' or the Government's finances should underlie and inform much of the work of departmental select committees and the House.
The history of financial scrutiny shows that there was never a golden age in which the House rigorously scrutinised every line of the Government's Estimates and routinely rejected or reduced requests for funding.
The complexity of the Government's financial system
The Government's financial arrangements and reporting are extremely complex, mainly because they bring together three different frameworks created at different times for different purposes: departmental budgets determined in Spending Reviews; Estimates, which seek parliamentary authority for spending which Parliament has not authorised in other ways; and resource accounts. Complicated reconciliations are needed to relate one to another.
This has damaging consequences, including the difficulty of understanding the various reporting documents and of following through from planned spending to actual spending and what it has achieved. Also, parliamentary control is based on Estimates, which are the least comprehensible reporting documents and reflect decisions already made in Spending Reviews. Departments themselves struggle to compile and understand the figures.
Following recommendations by the Treasury Committee, the Treasury has established the Alignment Project to improve consistency between spending plans, Estimates and accounts, making it possible to follow the figures from one document to another. The Treasury will consult "key stakeholders", including the House. The Project will probably result in proposals for major changes in the basis of Parliament's financial control and in the ways the Government reports financial information to the House.
Reducing complexity is fundamental to improving financial scrutiny, as well as financial management in Departments. Much will depend on the detail of the Alignment Project's proposals, but we emphasise the magnitude of the prize potentially available: a comprehensible and coherent system of planning, authorising and reporting government expenditure, making it possible for the House and select committees to scrutinise the Government's finances far more effectively.
Parliament is not currently receiving the information required for effective financial scrutiny. Better-quality information is needed rather than greater quantity. The Alignment Project may provide some help, but will not be enough on its own.
The principles which should underlie the Government's financial reporting to Parliament are that it should: include the sort of information which a Department's managers use to monitor performance, rather than just financial control and audit information; enable an overall view of planned expenditure; highlight the information which is significant; relate the information to objectives and to what is achieved by spending the money; identify key risks; use graphs; be provided in good time; use plain English; and enable an assessment of the quality of financial management. The Report makes more specific proposals based on these principles, and invites the Treasury to enter into a dialogue about implementing them.
Improved financial information combined with increased scrutiny by select committees would be a powerful influence in raising the quality of Departments' financial management.
Making financial scrutiny worthwhile
Financial scrutiny will not flourish unless Members regard it as a worthwhile use of their time. This requires: a sensible division of tasks between select committees and the House; ability to engage with financial issues before the Government makes decisions; opportunities to debate and vote on financial decisions after the Government has made them; and expert assistance for Members. The recent Comprehensive Spending Review illustrates the scope for improvement.
The only days available on the floor of the House for debating individual Estimates are the three Estimates Days a year, but these have failed to achieve their potential because of the artificiality of the link with Estimates. The House has too many general debates, in which the Government is rarely challenged, and too few opportunities to challenge the Government on specific matters. The House should take back the right to debate and vote on individual government programmes or items of expenditure. The selection of programmes or items should be made by select committees, and more than the present three days a year should be available for this purpose.
Financial scrutiny is a fundamental part of the House's duty. For too long the House has shirked the task of providing itself with the means to carry out that duty effectively, and it needs to be more assertive. The practical steps we have proposed are achievable, and would benefit the Government as well as the House.