12.The Committee published its Report on 27 April 2017. The Government sent a response to the Committee on 8 June 2018. It is appended as Appendix 1. The National Audit Office also responded separately, on 18 April 2018, and it is appended as Appendix 2. The Government’s guidance to departments (the “Osmotherly rules”) state that Departments should attempt to respond to reports within two months. This has been treated as an aspiration by the Liaison Committee.
13.The Government’s Response is just under a year late and has failed to respond to our individual recommendations. Instead it has provided a narrative response which addresses some of the points raised. Consequently we are treating their response as an interim response to our predecessor Committee’s Report. It proposes a review to examine the accounts which is discussed in paragraphs 20 to 24. We expect a second, formal response to our 2017 Report, once the government’s review is completed, enumerating a response to each one of our 2017 recommendations.
14.It is not satisfactory for the Government to have taken just under a year to respond to our predecessor Committee’s Report. The Cabinet Office’s guidance to civil servants says that departments should respond within two months of the publication of the relevant report. This unusual response underlines how much needs to change in respect of government accounting.
15.The Government has not responded in this interim response to our recommendations in detail and has offered a review instead. We expect the review to respond in full to the recommendations made in our Report. We hope this reflects the seriousness of the issues we have raised, and the government must reiterate their intention to deal properly with PACAC’s 2017 recommendations.
16.The Government responded positively to the overall tone of the Report. They say in their response that they “fully” support “the overall aims and spirit of the report”. The Government agrees “that the main purposes of Government accounts and information should be to enable Parliamentary control and accountability, to enable the public and Parliament to understand and consider the value for money offered by public spending, to provide a credible and accurate record which can be relied upon and to provide managers with the information required for decision making.” The National Audit Office also say in their response that they “support actions to continue to improve the quality, balance, understandability, accessibility and timeliness of reporting by public bodies on their spending and performance.”
17.The Government does not acknowledge in its response that currently these objectives are not being met. The Government says in their response to our Report that “the UK is seen as a proponent of international best practice in financial reporting”. However, our predecessor Committee took evidence that the accounts are barely used as they do not currently serve these purposes.
18.The Government agrees with the Committee about its approach to management information. The Government says that it “is committed to continuously improving how it plans and manages its business”. The Government agrees that it “must give priority to improving management information” and developing “realistic medium terms plans”. The Government says that the Government will continue to work to ensure the senior leadership of departments are committed to good management information and agrees that this should be used. The Government says that with the Cabinet Office it is currently working to identify and spread “best practice”. The National Audit Office says in its response to our inquiry that it supports improved management information within government and is currently conducting an inquiry into Single Departmental plans.
19.We welcome the fact that the Government accepts our four aims for Government annual and management accounts. We expect, and therefore recommend that the Financial Reporting Advisory Board and the Treasury set out that these are the main aims of Government accounts in new guidance to departments. While we agree with the Government about these objectives, it must recognise in its review that the current accounts fail to provide the necessary credible information to hold the Government to account for the commitments it makes or the performance of Departments.
20.We welcome the Government’s comments about management information within Government. We welcome the support of the National Audit Office for our objective that the Government should improve its management information and await with interest the conclusions of the National Audit Office Review into their current progress.
21.The Government announced in their interim response to our Report a review of government accounts which will attempt to build on the recommendations of our Report. The Government says that the review team will comprise staff from the Treasury, the National Audit Office and the House of Commons Scrutiny Unit. Therefore it will not include any users outside Government or Parliament.
22.The Government has responded positively to many of the recommendations in the Report. It agrees that “departments should make concerted efforts to present financial data in a way that clearly links measurable outputs and outcomes”. The Government says that Departments should “consider reporting the unit costs of key services, trend data and time series analysis”. However, in all these cases the Government says that reporting arrangements should be up to individual departments whose reports should be fitted around the different nature of their activity.
24.We believe that the current review team should be widened to include more representatives of the users of accounts. The review should be published within six months of the date on which this Report is published and should lay out the Government’s proposals for reform, as well as its responses to the Report of our predecessor Committee. Evidence submitted to the review should be published so that we and others can scrutinise its findings.
25.Where the Government has said that departments have flexibility to reorganise their accounts to better facilitate scrutiny, we believe that the review of the accounts should identify mechanisms to evaluate departments’ use of this flexibility. The review should identify mechanisms for Treasury and Parliament to hold departments which refuse to make use of this flexibility to account. The National Audit Office should have a role in reporting back to Parliament about departments whose accounts do not meet the purposes described by the Committee and accepted by the Government.
26.The Government outlines three main areas of disagreement with the Committee’s Report. We deal with these individually below.
27.The Government argues against our recommendation that ministerial commitments should be separately identified and reported against in the accounts. It says that the Government “feels that the Annual Report and Accounts are not the best vehicle to track ministerial commitments”. Instead it advocates “well established means for scrutiny… such as departmental select committees and Freedom of Information (FOI) requests.” It also notes that Parliament approves the totals for expenditure through the estimates process.
28.We have collected evidence about the number of ministerial statements which are not formally followed up by an announcement of whether money has been spent according to the announcement. The results of this are disclosed in Annex 1. What this shows is that the sheer volume of financial announcements, and the lack of specific detail often provided make it difficult to see how, without a specific requirement on government to report back against such announcements members or the public could easily establish whether the money was ever spent or the outcomes delivered, using the “well established” methods of scrutiny. It is often not clear whether new money is being offered, or existing money being reallocated. The years in which money is to be spent are not always clear either (for example, this is unclear in 198 of the 209 announcements made in 2017).
29.We are not convinced by the Government’s argument that ministerial commitments can be tracked through normal select committee scrutiny or FOI requests. These mechanisms are not developed to track ministerial commitments and are not systematic. We believe the review that the Government has announced should reconsider the Government’s position on this recommendation.
30.The Government says that “detailed business planning” contained in the unpublished Single Departmental Plans should not be published. They argue that they contain “ongoing policy development and information that is commercially sensitive or secure, which should be protected”. Instead they have committed to giving in the published versions of the SDPs “an accessible, forward looking view of the Government’s objectives”. The Government says that with improvements including signposting other performance information and reflecting departmental collaboration, “the right balance is struck between transparency of information and allowing departments a ‘safe space’ to manage their own affairs.” It says that it will continue to work on this issue with the National Audit Office.
31.The current iterations of the Single Departmental Plans have been criticised by commentators. The Institute for Government [IFG] for example say that the most recent published iteration of the plans includes 1,081 priorities for central government and that many of the priorities “still lack obvious measures”. The Department for Digital, Culture, Media and Sport has over 130 priorities on its own.The IFG do say that there has been “progress” but the published plans need to be more specific and to be prioritised so they are “not just shopping lists of nice-to-haves”.
32.The current published versions of the Single Departmental Plans are inadequate. They contain long lists of “nice to haves” without measures of performance or any statements about which are the main priorities. The Government must review the adequacy of its response to our recommendation on this matter and that of the Public Accounts Committee. If there are elements of the plans that might have to be redacted, the Government needs to explain why. In the currently published versions, it has not got the balance right between transparency and confidentiality.
33.The Government implies there is no need for any further checks on the performance information and commentary in the annual reports and accounts as “each accounting officer is required to confirm that the ARAs [Annual Reports and Accounts] as a whole are fair, balanced and understandable and that he or she takes personal responsibility for them.” In our predecessor Committee’s Inquiry, PACAC heard concerns from a number of commentators that the annual report and accounts were not fair, balanced or understandable. The National Audit Office, the Government’s own auditor, described some of the information in them as “spun”.
34.There is widespread lack of confidence in the accuracy and fairness of the non-financial elements of the annual report and accounts. The Government must include considerations of extra independent checks on the unaudited information, particularly the performance information, as part of its Review into the annual report and accounts as a whole.
24 Cabinet Office (March 2014) p. 21
25 Liaison Committee HC 697 Second Report of Session 2010–12 (November 2012) p. 38
26 Appendix 1: Government Response p. 1
27 Appendix 1: Government Response p. 1
29 Appendix 2: National Audit Office Response
30 Appendix 1: Government Response p. 1
31 Public Administration and Constitutional Affairs Committee p. 11–12, 34–5
32 Appendix 1: Government Response p. 4
33 Ibid. p 5
36 National Audit Office Work In Progress, Appendix 2 National Audit Office Response
37 Appendix 1: Government Response p. 1
38 Appendix 1: Government Response p. 1
39 Ibid. p. 2
40 Ibid. p. 3
41 Ibid. p. 2
42 Appendix 1: Government Response p. 4
45 Appendix 1: Government Response p. 5
46 Appendix 1: Government Response p. 5
47 Ibid. p. 6
50 G. Freeguard Institute for Government Blog (June 2018)
52 G. Freeguard (June 2018)
53 Appendix 1: Government Response p. 4
54 Public Administration and Constitutional Affairs Fourteenth Report of Session 2016–17 HC 95 (April 2017) pp. 42–3
Published: 27 June 2018