Select Committee on Liaison Second Report

2  A short history of financial control and scrutiny


15. The requirement for Parliament's consent to taxation was of course the basis of Parliament's early development, and more particularly of the origins and development of the House of Commons, which monarchs summoned mainly to agree to taxes.[9] It was finally established definitively in the seventeenth century that no tax or other levy could be imposed without Parliament's consent. Following the Glorious Revolution of 1688-89 the Crown's ordinary revenue was kept short of what was required, and the extra needed, including any required for the army, navy and ordnance, was authorised by Parliament for only one year at a time. At about the same time it became established that requests for expenditure should be initiated only by the Government. But the gradual establishment in the eighteenth and early nineteenth centuries of the principle that Governments must be able to command a majority in the Commons made it unlikely that the House would use its hard-won control over taxation to reject a Government's tax proposals. Nevertheless the existence of that control over taxation continues to underpin the House's relationship with the Government.


16. Control and scrutiny of expenditure required five things:

17. Appropriation of the revenues granted to specific uses occurred intermittently in the 1660s and 1670s and consistently from the early eighteenth century. Estimates indicating the sums needed began to be presented systematically in the 1690s, at first only for the army and navy and as a means of justifying the grant rather than controlling expenditure. The Committee of Supply (a form of the Committee of the Whole House) considered the need for supply and the sums to be granted, though apparently not in much detail. But this process was limited in two ways. First, the House had not established a right to examine and control Civil List expenditure (which then covered the ordinary expenses of the Government, as opposed to extraordinary expenses such as wars). Secondly, in the absence of adequate and prompt accounts (some accounts took 20 years to be presented) it was difficult to link a specific tax with the spending it was supposed to have been used for. In practice appropriation applied only to military expenditure, where, for example, the Commons could control the size of the army. Moreover, by 1715 the scrutinising of accounts came to be seen as politically partisan, and was largely abandoned until the 1780s.


18. Control and scrutiny of expenditure was gradually established between the 1780s and the 1860s. In 1782 the Commons established its right to control civil expenditure, and the practice of appropriation was gradually extended to civil expenditure, a process largely completed by 1837. A Consolidated Fund, replacing innumerable separate accounts which were hard to supervise, was created in 1787, but some taxes and loans continued to bypass it until the 1850s, by which time it was accepted that (with few exceptions) all public revenue should contribute to the Fund and all public payments be provided from it. From 1802 an overall statement of receipts into and payments out of the Exchequer was made annually. Estimates became both more comprehensive, as they were extended to civil expenditure, and more detailed.

19. Estimates were considered in the Committee of Supply, which could reduce or reject them, and the Committee occupied an increasing amount of the House's time (231 hours in 1887). However, a body of 600 or so Members was ill-suited to detailed financial scrutiny, and there was no mechanism for selecting for debate those Estimates which raised new or significant issues. As the Chairman of Ways and Means pointed out in 1888, debates were seldom of a financial character, but were concerned mainly with policy. Estimates were sometimes reduced, and 30 instances of government defeats have been listed from 1858 to 1921,[10] but these were sometimes very specific matters, such as refusal to continue provision for a Travelling Agent of the National Gallery in 1858, and refusal of provision for a second bathroom for the Lord Chancellor in 1919. The Committee which examined supply procedure in 1888 concluded that "the actual reductions of the Votes by the Committee of Supply have been apparently slight in proportion to the amount of Parliamentary time occupied in the consideration of the Estimates", though it had no doubt that "discussion in the Committee of Supply has had a considerable effect in preventing increase of expenditure".[11]

20. The Balfour reforms of 1896-1902 broke the link between the votes on Estimates and debate. On the grounds that the Committee of Supply was in fact used to discuss policy, and that most Members preferred to discuss policy, 20 days known as Supply Days[12] were allocated to discussion of policy, whether or not connected with an Estimate, and votes on the Estimates were to be put without debate at the end of that time. Once the Government had a guaranteed vote, it ceased to be concerned about the subjects of debate, and the days became, in effect, Opposition days, which is how the bulk of them are now described. Even so, it remained possible to have a separate vote on individual Estimates until 1982.

21. In 1912 the House began to experiment with select committees as a way of examining Estimates, and an Estimates Committee or similar body has existed almost continuously since then. However, there was no link between these committees' proceedings and Supply Days on the floor of the House. The Estimates Committee was subsequently replaced by the Expenditure Committee, which, with its sub-committees, was the precursor of the departmental select committees, set up in 1979 with the role of examining the "expenditure, administration and policy" of each Department.[13] The latter change has been the most important development in financial scrutiny in the past half-century.

22. In 1998 the Government introduced Spending Reviews, which set budgets for Departments for three years, but these are separate from the Estimates system, contain figures compiled on a different basis, and are not submitted to Parliament for approval.[14]


23. Examination of actual expenditure was on an ad hoc basis until the nineteenth century. Even the annual accounts of all receipts into and payments out of the Exchequer (legislated for in 1802) did not show the actual expenditure made using those funds. In 1857 the Select Committee on Public Monies recommended that annual accounts of each civil department or military service be submitted to Parliament and audited, and that a committee be appointed to consider the audited accounts. The recommendations were eventually implemented and gave rise to the system which continues little changed in its essential features today: the Committee of Public Accounts (PAC) came into existence in 1861 and the Exchequer and Audit Departments Act was passed in 1866, establishing the Comptroller and Auditor General (C&AG) and the Exchequer and Audit Department (the predecessor of the National Audit Office). The first complete audited accounts of the whole of the Government were laid before Parliament in 1869. The accounts were intended to be consistent with the Estimates.

24. The PAC and the C&AG initially concentrated on the regularity of expenditure, contributing greatly to improved standards of accounting, but from the late nineteenth century they were increasingly concerned with the economy and efficiency of expenditure. However, it was not until the National Audit Act of 1983 that the C&AG's value for money work was put on a statutory basis and he was permitted to make such reports independently of audited accounts. Since then, value for money studies have formed the basis of most PAC hearings.

25. The National Expenditure Committee noted in 1917 that the system of Estimates and Accounts was inadequate for any real control of expenditure because they recorded only the cash actually paid and received in a specific year (the so-called "penny notebook" system of accounting). This and the way expenditure was classed under Votes and Subheads made it impossible to determine what the real total expenditure was or would be for any specific purpose. The problem noted by the Committee was resolved only in 2001-02, with the replacement of cash-based Appropriation Accounts by Resource Accounts, compiled on an accruals basis similar to that of commercial accounts.[15]


26. Several conclusions can be drawn from this historical survey:

9   This chapter is based on Paul Einzig, The Control of the Purse: Progress and Decline of Parliament's Financial Control (1959); Kenneth Mackenzie, The English Parliament (1951); Public Bill Office, Supply Procedure and the Work of the Clerk of Supply (2005), Appendix A. Back

10   Einzig, Control of the Purse, pp. 266-75 Back

11   HC (1888) 281, p. iii, quoted in Public Bill Office, Supply Procedure, p. 227 Back

12   The successors of these days are the current Opposition Days, Estimates Days and debates on defence. Back

13   Standing Order No. 152 Back

14   See para 27 below. Back

15   From 2009-10, Resource Accounts will follow international, rather than UK, financial reporting standards, and a set of "whole of Government accounts" will be presented for the first time, bringing together the financial position of central government, local authorities and the National Health Service. Back

16   See para 16 above. Back

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