Plans for reform
33. The Treasury Committee, chaired by a member of
the working group, commented in June on the disjunction between
the sums formally authorised by the House and those set out in
the Comprehensive Spending Review, and recommended:
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.
34. The Government responded in its Governance
of Britain Green Paper that it would improve the transparency
and accountability of government expenditure, in line with the
Treasury Committee's recommendations. In particular it "will
... simplify its reporting to Parliament, ensuring that it reports
in a more consistent fashion, in line with the fiscal rules, at
all three stages in the process; on plans, Estimates and actual
expenditure outturns." It notes that this "will make
it easier for Parliament to understand how the Government has
used the resources voted to it, and thus to hold the Government
to account. It will also mean greater administrative efficiency."
35. The Treasury has established a project known
as the "Clear line of sight" or the Alignment Project.
Its objectives are to:
- "align budgets, Estimates
and accounts in a way that allows [the Treasury] to control what
is needed to deliver the fiscal rules, incentivises value for
money, and reduces burdens on government departments.
- "combine and/or align the timing of publication
of government financial reporting documents ... in order to avoid
duplication and make them more coherent, and simplify the language/terminology
used in them to bring it more into line with commercial practice."
36. The Project's "vision" (which awaits
approval by stakeholders) is "to create a single, coherent
financial regime, that is effective, efficient and transparent,
enhances accountability to Parliament and the public, and underpins
the Government's fiscal framework, incentivises good value for
money and supports delivery of excellent public services by allowing
managers to manage."
37. The Project is highly ambitious. It is likely
to result in proposals for changing the whole basis of Parliament's
financial control, shifting this to a system based on the controls
currently used in budgets (Departmental Expenditure Limits, or
DELs, and Annually Managed Expenditure, or AME, together with
the Net Cash Requirement), and for a recasting and consolidation
of the entire range of reporting documents. It may not be possible
to remedy all the misalignments, and there are likely to be some
difficult issues to resolve. The extent to which the House approves
any breakdown within the overall departmental totals and the level
of detail which the House is informed of will need to be considered.
The Project will take time: detailed project planning took place
from January to March 2008, the new system will be designed in
2008-09, implementation planning will take place in 2009-10, and
implementation of the new system is intended to begin in 2010-11,
subject to resolving legislative and other issues.
38. We regard removing complexity from the Government's
financial system as fundamental to improving financial scrutiny,
as well as to improving financial management in Departments. The
Alignment Project offers the possibility of achieving this. In
revising the basis of Parliament's financial control and the system
of reporting to Parliament, it is potentially a historic development
in the long story of Parliament's scrutiny of government finances.
39. The Alignment Project is still at a very early
stage, and much will depend on the detail of any proposals. We
cannot speak for the House as a whole in this matter. The Treasury
has undertaken to consult "key stakeholders", including
the House, and we would be happy to assist in that consultative
process, which needs to extend beyond members of select committees.
Any change in the form of the Estimates requires approval by the
PAC and the Treasury Committee, but the scope of the changes which
may be proposed suggests that approval by the House will be needed.
We note that the Steering Committee includes one of the Principal
Clerks of Select Committees and a representative of the NAO. We
particularly welcome the involvement of the NAO.
40. In the meantime we emphasise
the magnitude of the prize which is 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.
We commend the Alignment Project to the House.
17 For a description of the system (and scrutiny of
it) see Committee Office Scrutiny Unit, Financial Scrutiny
Uncovered: How the Government Manages its Finances and how Parliament
Scrutinises them (www.parliament.uk/parliamentary_committees/scrutinyunit/reports_pubs.cfm). Back
A fourth framework is that of the National Accounts, used in fiscal
and monetary policy (e.g. for the Chancellor's "golden rule"). Back
Spending Reviews determine Departmental Expenditure Limits (DELs),
but not Annually Managed Expenditure (AME), such as social security
benefits, which the Government does not think it appropriate to
subject to firm multi-year limits. Back
In 2006-07, the Estimate for the Department for Environment,
Food and Rural Affairs was under-spent by £751 million (12%),
while its budget was over-spent by £17 million. Back
Ministry of Justice, The Governance of Britain, Cm 7170
(July 2007), para 110. See National Audit Office, Managing
Resources to Deliver Better Public Services, HC 61 (2003-04). Back
Each Department has a budget - DEL (Departmental Expenditure Limits).
This does not cover Annually Managed Expenditure (AME), but the
Government's overall expenditure plans encompass aggregate AME. Back
Treasury Committee, Sixth Report of 2006-07, The 2007 Comprehensive
Spending Review: Prospects and Processes, HC 279, para 110 Back
Ministry of Justice, The Governance of Britain, Cm 7170
(July 2007), paras 109-111 Back