Appendix 1: Government Response to the Fifth Report of the Procedure Committee, Session 2016–17, Authorising Government expenditure: steps to more effective scrutiny, HC 190
Introduction
The Government welcomes the Committee’s report into the Estimates process and notes the important work that the Committee has undertaken in this area.
The Government fully recognises the importance and constitutional significance of Estimates and the need for effective Parliamentary Scrutiny.
Recommendations
1.We reiterate the 2009 recommendation of the Liaison Committee—which the Government accepted—that it is essential that the Government allocate a day’s debate on the outcome of each Spending Review. One day’s debate is the bare minimum to be allocated: an allocation of further days to debate these highly significant spending proposals would be highly desirable. (Paragraph 20)
[Leader of the HoC response]
The Government welcomes Parliamentary scrutiny of the Spending Review, and will aim, where business allows, to provide adequate time for the House to debate the review. The Government would call on the Procedure Committee to consider timings of how this might work with the new arrangements for the Budget, which now only takes place in Autumn.
2.Accordingly, we recommend that the Government allows at least five full calendar weeks between publication of Supplementary Estimates and the date allocated for their approval. We consider this to be the likely minimum period necessary for analysis and consideration of proposals, and selection of relevant topics for debate. Without such a change, this House will remain severely constrained in carrying out any effective examination of Supplementary Estimates in advance of their approval. (Paragraph 49)
[HMT response]
The Government understands the need to ensure enough time for scrutiny of the Supplementary Estimates whilst also giving Members enough time to prepare for debates. We have therefore carefully considered the timing of the Supplementary Estimates process and whether it would be possible to create more time for Parliament to scrutinise them.
A key part of the Supplementary Estimates process are the decisions that HM Treasury make around whether to grant access the Reserve and Budget Exchange mechanisms. The Reserve is a small amount of budget left unallocated, normally for unforeseen circumstances that departments cannot absorb within their current budget allocations.
Reserve claims need the approval of the Chief Secretary to the Treasury and are subject to an assessment of need, realism and affordability. This assessment can most easily be made towards the end of the financial year when departments have a more accurate view of the pressures they face and their ability to manage them. Similarly, the Budget Exchange mechanism allows departments to carry over a limited amount of forecast underspend from one year to the next. This depends on the availability of the more accurate in-year forecasts, produced towards the end of the financial year in question.
In order to allow five sitting weeks between the Supplementary Estimates and the Estimates Day debates the processes relating to Reserve claims and Budget Exchange requests would need to be carried out on an earlier timetable or the Estimates Day debates would need to move to a later date.
There are a number of practical difficulties associated with an earlier timetable. To deliver five full sitting weeks, the process would need to commence in early December. In practice, across government, there would be significantly less data available on expenditure and the fiscal position. This means that the requests from departments and subsequent decisions from HM Treasury ministers would be made on the basis of lower quality information. This would impact on the tautness and quality of the Estimates laid before the House.
The alternative option of moving the Estimates Day debates to a later date also has practical difficulties. The delay would put significant cash pressures on departments whilst they await formal clearance of their Supplementary Estimates. As a result, the Contingencies Fund could be in considerable demand and significant operational risks are likely to be created for departments and HM Treasury.
Therefore, despite a desire to maximise the available time for both Select Committees to consider topics and for Members to prepare for debates, it will not be possible to guarantee at least five sitting weeks between the publication of Supplementary Estimates and the Estimates Day debates.
The Government is committed to publishing the Supplementary Estimates as soon as possible within the constraints mentioned above. HM Treasury officials will remind departments of their responsibilities to share their Estimates with their Select Committees ahead of publication, and will also continue to work closely with the Scrutiny Unit to provide them with relevant information in a timely way. We expect that these steps will assist with the scrutiny process.
3.We recommend that, with effect from the 2017–18 Session, two days of debate be allocated to the Main Estimates and that the remaining day be allocated to the Supplementary Estimates. (Paragraph 52)
[Leader of the HoC response]
The Government understands that spending more time debating the Main Estimate, rather than the Supplementary Estimates, may be preferable. The Government accepts this recommendation and will endeavour to implement two days for debate of the Main Estimates and one day for the Supplementary Estimates, if this is in line with the Liaison Committee’s recommendation, for the current Session. It is important that the Liaison Committee lets the Business Managers know, at the earliest opportunity and at least two weeks in advance, whether to have one day’s debate on the Supplementary Estimates.
4.We recommend that the Government review the timetable for preparation and presentation of the Main Supply Estimates in order to enable the consideration and authorisation by the House of these Estimates before the start of the financial year to which they relate. We further recommend that the Government consult this committee, the Treasury Committee and the Public Accounts Committee in drawing up proposals to implement this recommendation. (Paragraph 60)
[HMT response]
The Government has reviewed the timetable for preparation and presentation of the Main Estimates. We have determined that in order for them to be considered and authorised before the start of the financial year to which they relate, they would either need to follow a similar timetable to Supplementary Estimates, or be published before the Supplementary Estimates process begins. Both these options would lead to significant issues in terms of the quality of the Estimates produced, resourcing across government and Parliamentary scrutiny.
The Supplementary Estimates process currently begins after the Budget in autumn. The Main Estimates process follows the Supplementary Estimates, to ensure that any changes to departments’ budgets which affect the later year can be reflected, as well as to take into account the OBR’s March forecast. Production therefore slips into the beginning of the next financial year.
Quality of Information
The earlier publication of Main Estimates would lead to less taut and realistic content. This is due to earlier spending forecasts being used to inform the Estimates, therefore increasing the risks of errors. The Office for Budgetary Responsibility (OBR) forecasts in March currently form the basis of Annually Managed Expenditure (AME) budgetary controls.
Moving to an earlier publication date would mean that this information would not be available in time for Main Estimates. In addition, Estimates would have to include less timely arm’s length body classification decisions from the Office for National Statistics, decreasing their relevance and accuracy. Other classification changes, such as Machinery of Government adjustments, would also be less likely to be picked up in a timely fashion.
HM Treasury makes decisions and policy choices that follow from decisions and agreements in relation to the completed Supplementary Estimates exercise. Schemes such as Budget Exchange would be significantly harder to implement if both Main and Supplementary Estimates were produced simultaneously, or if Main Estimates for the following year were produced before Supplementary Estimates in the current year. This is likely to significantly impact HM Treasury’s ability to control and plan spending. The reduction in quality of the Main Estimates would also increase the need for Out-of-Turn Supplementary Estimates, Contingencies Fund advances and Excess Votes which we are keen to avoid.
Resourcing
Producing Main and Supplementary Estimates at the same or at similar times would have significant impacts on resources across government. This includes the impact on finance teams across government departments, central HM Treasury teams, as well as pressures on IT systems that host the Estimates data.
Delivering the Main and Supplementary Estimates is an extremely demanding process and tends to be carried out by the same individual teams within government departments. The Estimates process covers a range of activities that would overlap including the production of the Designation and Amendment Orders, associated legislation, and production of departmental Estimates Memoranda. The central IT system currently used to put together the Estimates is not capable of producing the two sets of Estimates at the same time.
Therefore, producing Main and Supplementary Estimates at the same or similar times would require a significant increase in staffing across government and major investment in IT infrastructure. The Government is committed to putting the public finances on a sustainable path and does not think that the substantial increase in expenditure required represents value for money.
Parliamentary scrutiny
Currently Parliament has significant time to quality assure and scrutinise the Main Estimates. In a usual year, they are laid in April and voted on in July, allowing around three months for Parliamentary scrutiny. The time available for scrutiny would be significantly reduced if the Main Estimates were considered and authorised before the start of the financial year, as Select Committees and Parliament would need to scrutinise both Main and Supplementary Estimates at the same or similar times.
In addition, departments would not be able to reflect any feedback from Select Committees or Parliament on the Supplementary Estimates in the Main Estimates, if they were produced concurrently. Parliament could of course choose to authorise the Main Estimates at an earlier point than July to bring the authorisation closer to the publication and the start of the financial year, though this would lead to less time being available for scrutiny.
The Government has considered the option of producing draft Main Estimates in order to assist with Parliamentary Scrutiny and transparency. However, we feel that the real strength of the existing system is that the vast majority of government expenditure for a given year is included in the Estimates and voted on by Parliament. The figures presented in Estimates then become the departmental budgets for the year. We are not in favour of changing this well-established system and presenting Parliament with figures that are not accurate and robust and will therefore need to be changed in future. This would suggest that an additional round of Estimates would be required to amend the draft figures, which would have significant practical and resource implications as set out previously. Also, The Clear Line of Sight project, approved by the House, reduced the number of Supplementary Estimates rounds from two or three to one. The Spending Review (SR) is where the overall budgets are agreed and presented to Parliament; it is effectively a draft budget for the future years of the SR.
5.We recommend that in any revision of the timetable for Estimates the Government build in a period of at least five sitting weeks between the presentation of any Estimates and the date on which authorisation is expected to be sought from the House. (Paragraph 61)
6.We reiterate the recommendations made at paragraphs 60 and 61 above concerning a minimum period of five weeks for parliamentary consideration of Supplementary Estimates. (Paragraph 86)
[HMT response]
The Government is committed to achieving this timetable for Main Estimates. In a usual year, they are laid in April and voted on in July, allowing around three months for Parliamentary scrutiny,
The response to Recommendation 2 sets out the reasons why this timetable is not possible for Supplementary Estimates.
7.We recommend that the Backbench Business Committee and the Liaison Committee examine informal arrangements whereby the Backbench Business Committee will receive and determine bids for debates on the three Estimates days to be held each session, while the Liaison Committee will recommend select committee business for debate on three of the days controlled by the Backbench Business Committee in that session. We stand ready to assist those Committees in the practical implementation of any such arrangements. (Paragraph 83)
[Leader of the HoC response]
It is not for the Government to determine the mechanism by which Estimates Days debates are allocated, but there is a process that needs to be followed as set out in Standing Order 145 (3). The Government believes that the Liaison Committee and the Backbench Business Committee should have a further discussion on how this recommendation would work in practice.
8.We recommend that the Treasury work with the House of Commons Scrutiny Unit and the National Audit Office to prepare proposals for change to the format and content of future Estimates, and explanatory material accompanying Estimates, for consideration by the House. The aim should be to produce proposals for reform which, while meeting necessary legal and audit requirements, present information more clearly, simply and in a form more suitable for lay readers; as far as possible use plain English and avoid jargon; and cross-reference information which can be, or is already, provided elsewhere. (Paragraph 99)
[HMT response]
The Government agrees to work with the House of Commons Scrutiny Unit and the National Audit Office to prepare proposals for change to the format and content of future Estimates to help ensure members of Parliament can make best use of them.
9.We recommend that, starting with the Main Estimates for 2017–18, all tabular data in Estimates booklets be published online in spreadsheet format. (Paragraph 100)
[HMT response]
The Government is committed to producing all tabular data in Estimates booklets published online in spreadsheet format. Ahead of this, HM Treasury will continue to provide the Parliamentary Scrutiny Unit with information in a spreadsheet format to assist their work in providing Members with earlier and more complete analysis and infographics.
10.In order for Estimates memoranda to be of wider use to Members in understanding Estimates and identifying topics for debate, we recommend that all Estimates memoranda to select committees are in future laid before Parliament and published on the day of publication of the Estimate to which they relate and on the same web page. Select committees would still be able to use the memoranda to question Departments on their plans, and request specific information to be provided within them in future. (Paragraph 105)
[HMT response]
The Government agrees to support the Scrutiny Unit in achieving the recommendation. HM Treasury will reiterate to departments that memoranda should be published alongside the relevant Estimate on the departmental website as soon as the departmental select committee has published it, or authorised its publication by the Department.
11.To develop this work, and to support the proposals for broader member engagement in the Estimates process that we envisage, we recommend that the Scrutiny Unit collaborate with the Research and Information Team of the House of Commons Library to provide Members with background briefing and analysis of Estimates, and specific briefing for Estimates day debates. (Paragraph 106)
[HMT response]
The Government agrees to support the House of Commons Scrutiny Unit in achieving the recommendation.
12.We recommend that the Treasury and other Government departments work with the Scrutiny Unit to ensure that memoranda better serve the needs of users in explaining and presenting the content and purpose of each Estimate. We recommend that the Scrutiny Unit, acting on behalf of the House of Commons Service, conduct a review of current Estimates memoranda guidance, its application and adherence to it and communicate and disseminate the results of this review and of existing best practice. Select committees should follow up concerns where their departments fail in future to fully meet requirements. (Paragraph 107)
[HMT response]
The Government agrees to support the House of Commons Scrutiny Unit in achieving the recommendation.
13.We recommend, therefore, that the UK Government should, at the time of publication of each Main or Supplementary Estimate, improve the transparency of these links by publishing:
- details of which spending changes set out within which Departmental Estimates
- have led to consequent changes to devolved administrations’ block grant;
- details of the impact each UK Department’s spending changes have had on
- those block grants in each case;
- details of subsequent block grant deductions for devolved taxation revenues; and
- details of how the overall calculations have been made. (Paragraph 119)
[HMT response]
The UK government publishes the block grant funding available to Scottish and Welsh Governments and the Northern Ireland Executive at Spending Reviews and fiscal events. The Barnett Formula and the comparability factors used in the calculation of these figures are published in the Statement for Funding Policy. At Autumn Budget 2017, HM Treasury committed to publishing for the first time a breakdown of changes in the devolved administrations’ block grant funding by the end of the year to increase transparency. This breakdown will be published on an annual basis.
14.We recommend that the Backbench Business Committee, in its allocation of debates on Estimates days, consider reserving at least one debate slot in each session for a debate on an estimate particularly affecting, or affected by, the operation of the Barnett Formula. (Paragraph 120)
[HMT response]
This recommendation is dependent on the new, informal arrangement between the Liaison Committee and the Backbench being implemented. It is a matter for the House to decide what specific subjects are selected for debate on Estimates Days.
18 January 2018