The purpose of financial scrutiny
7. There has been no decline in the financial powers
of the House of Commons. The House could still, if it chose, reject
the Budget or the Estimates. The reason why the House is unlikely
ever to do so (except in a hung Parliament) is that rejection
of such major parts of a party's programme would be a matter of
confidence, leading to the Government's resignation. This applies
in any Westminster-style parliamentary system, and is a fundamental
difference from, among others, the US system. Moreover, some of
the major decisions on tax raising and spending, such as whether
to reduce income tax or to spend more on education, have often
been proposed by parties in election manifestos and endorsed by
the electorate, so it is unlikely that a majority in the House
would wish to change them. Improving financial scrutiny is not
about finding ways to force through major changes to the Government's
overall revenue-raising and spending plans.[6]
8. What improving financial scrutiny is about
is making the Government, individual Departments and other public
bodies accountable for their financial decisions—in other
words, requiring them to justify their revenue-raising and spending
plans and, later, to explain whether the expenditure achieved
its objectives and, if not, why not. The current problem is
not the House's powers but the willingness and (even more) the
ability of the House and its Members to scrutinise financial matters
in the degree of detail required to hold the Government to account,
as explained below.[7]
9. In the light of this, we define the purpose
of financial scrutiny as follows:
- to make the Government's
financial decisions transparent, including the relationship between
its stated priorities and its funding decisions;
- to engage bodies and individuals outside Parliament
and give them the opportunity to comment;
- to have the opportunity to influence the Government's
financial decisions;
- to hold the Government, individual Departments
and other public bodies to account for their financial decisions
and financial management; and thereby
- to contribute to an improvement in the quality
of Departments' financial decisions and management and improved
value for money in public services.
10. Financial scrutiny matters because the quality
of financial decisions and financial management is likely to be
higher if they are made transparent and if those responsible for
them know that they will be scrutinised rigorously and mismanagement
will be exposed. Better financial scrutiny should therefore result
in more efficient and effective public services; to paraphrase
the late Robin Cook, former Leader of the House, "Good [financial]
scrutiny makes for good Government".[8]
Financial scrutiny is not a narrow exercise of poring over
figures on a balance sheet but is about ensuring the effective
management of finite resources to achieve purposes such as better
hospitals or better-equipped troops. Better financial scrutiny
would have advantages for the Government as well as for the public
and for Parliament.
11. Although we deal only with financial scrutiny
in this Report, that does not mean we regard it as necessarily
a separate aspect of scrutiny. In select committee work, financial
scrutiny is often most effective when conducted in conjunction
with analysis of the policies which result in the expenditure
and of the outcomes of that expenditure. Finance and performance
are inseparable, and examination of performance provides a link
to administration and policy. Knowledge of the Department's
finances should underlie and inform much of a departmental select
committee's activity, including examination of policy and administration,
and knowledge of the Government's finances should similarly underlie
and inform much of the House's own work.
What is needed
12. Our assessment of the factors which make financial
scrutiny difficult and unattractive underlies this Report. Those
factors are:
- the unnecessary complexity
of government finances;
- the fact that the financial information presented
by Government to Parliament is often hard to understand and does
not provide all the information needed for scrutiny;
- the difficulty of pursuing financial matters
on the floor of the House and attracting wider interest among
the media, the public and Members in general.
13. The reason why we question the ability at
present of Members to hold the Government to account for its financial
decisions is that, as just indicated, several of the fundamental
requirements for doing so are missing. These missing requirements
are:
- a financial system which
is coherently organised and comprehensible;
- provision to Parliament of information suited
to the purpose set out in paragraph 9 above;
- the opportunity to debate on the floor of
the House specific items of expenditure or the objectives of expenditure
and if necessary to vote on them.
14. There are many other calls on Members' time,
and there is no point in exhorting them to devote more time to
financial scrutiny unless these basic requirements are met. On
the other hand, it is up to Members to ensure that they are. After
a brief survey of the historical background, our Report looks
in turn at each of the basic requirements and indicates how they
could be met.
1 By Alex Brazier and Vidya Ram. Back
2
Committee of Public Accounts, Press Notice, Improving financial
scrutiny, 3 July 2006 Back
3
The most recent select committee reports devoted to this subject
are Procedure Committee, Second Report of 1997-98, Resource
Accounting and Budgeting, HC 438, and Sixth Report of1998-99,
Procedure for Debate on the Government's Expenditure Plans,
HC 295. But see also para 33 below. Back
4
Votes and Proceedings, 14 May 2002 Back
5
Alex Brazier and Vidya Ram, The Fiscal Maze: Parliament, Government
and Public Money (2006), paras 4.1, 15.2 Back
6
The IMF league table of the powers of legislatures to review and
amend budgets is therefore not a useful guide to the adequacy
of financial scrutiny. Back
7
See para 13. Back
8
Select Committee on Modernisation of the House of Commons, Session
2001-02, Memorandum submitted by the Leader of the House of
Commons, HC 440, para 2 Back
