Summary
The House of Commons is supreme in matters of finance. Parliament however can only exercise this supremacy if it understands how the Government spends money and on what it spends money. Ministers and their Departments can only give Parliament this information if they too know what their Departments spend money on and why. For these reason, this report concerns both the published Departmental Annual Reports and Accounts (hereafter simply referred to as Annual Reports and Accounts), designed for Parliament and the public, and management Accounts, designed for the use of Ministers and officials in managing their Departments.
Citizens should be able to use Annual Reports and Accounts to assess the effectiveness of Government spending. Parliamentarians should be able to use Annual Reports and Accounts to scrutinise the Government’s commitments and hold the Government to account for its policies. Both citizens and Parliamentarians should be able to rely upon and be able to understand the information which is published. The Government itself should become better at using financial information to manage its business.
In recent years, the Treasury has made reforms to published Annual Reports and Accounts. However in our view, whilst the reforms are in the right direction, they do not go far enough. While Government accounting has improved, and the UK is a world leader in accruals accounting and the adoption of international standards, accounts are still not being read or used by MPs or citizens as much as they should be. What we currently have is a good base of solid reporting: the Treasury now needs to take the next step and make these documents a cornerstone of democratic accountability, both to citizens and Parliament.
This report lays out a number of steps that the Government should take to make accounts central to accountability in the public sector. Our vision is that accounts should report on the value for money of government services, the commitments made to Parliament by Government and provide a credible record of expenditure and the balance sheet. Currently we believe that they are only meeting the last requirement.
We have made a series of recommendations which we believe will improve government accounting. To ensure citizens are able to work out the value for money of policies and services, we have recommended that Departments report separately about each policy or service that they offer the public (so that we can tell how much was spent on individual services like Child and Adolescent Mental Health). We recommend that they report the unit costs of those services (so that citizens could see the cost of a school place or a police officer visit). To ensure Parliamentarians are able to hold ministers to account, we recommend that the accounts include a statement which sets out ministerial promises of funding and saving and what was achieved against that. To improve the credibility of the accounts, we recommend that the Government should make sure that the performance information in the accounts is independently audited. Lastly we recommend that the Government should ensure that its management Accounts reforms last for more than a single Parliament by ensuring that the political and bureaucratic leadership of all Departments are focused on improving it.
Financial accountability lies at the heart of Parliamentary sovereignty and of democratic government. Parliament can only be what Gladstone described it as - the real authoritative steward of the public finances - if the Government improves the accounts.
26 April 2017