CHAPTER 2: GOVERNMENT CONTROLS ON PRE-LEGISLATIVE
ACTION AND EXPENDITURE |
10. A central aspect of our inquiry has been
the role played by the Treasury in authorising Government action
and (particularly) expenditure before legislation. We recognise
the key role played by the House of Commons Public Accounts Committee
in scrutinising Government expenditure; in this chapter we focus
on the constitutional implications of expenditure in anticipation
The 1932 concordat
11. The Treasury's role in ensuring appropriate
parliamentary authorisation for Government expenditure is reflected
in a concordat agreed between the Treasury and the House of Commons
Public Accounts Committee in 1932 ("the 1932 concordat").
This concordat established the principle that, where possible,
the authority for Government expenditure should flow from a specific
Act of Parliament, rather than from the general authority of the
Appropriation Acts or the use of the Contingencies Fund. The position
set out in the 1932 concordat is that
"while it is competent to Parliament, by means
of an annual vote embodied in the Appropriation Acts, in effect
to extend powers specifically limited by statute, constitutional
propriety requires that such extensions should be regularised
at the earliest possible date by amending legislation, unless
they are of a purely emergency or non-continuing character
while the executive Government must continue to be allowed a certain
measure of discretion in asking Parliament to exercise a power
which undoubtedly belongs to it, [the Treasury] agree that practice
should normally accord with the view expressed by the [Public
Accounts] Committee that, where it is desired that continuing
functions should be exercised by a Government department
it is proper that the powers and duties to be exercised should
be defined by specific statute."
12. The Attorney General, Dominic Grieve QC MP,
informed us that: "the 1932 concordat is in a sense the recorded
bottom line of the way in which the Treasury works to ensure,
on a day-to-day basis, that there is proper accountability of
Government expenditure to Parliament."
The Treasury Solicitor, Sir Paul Jenkins KCB QC, added that
"there is, almost inevitably, statutory authority
for spending money
that is contained in the Appropriation
Acts every year. The 1932 concordat recognises that, in that case,
mere statutory authority is generally not enough. If you just
rely on the Appropriation Acts, it is very difficult to say that
Parliament is getting rigorous and thorough scrutiny of the spending".
13. It seems, therefore, that the 1932 concordat
amounts to a self-denying ordinance by the Treasury, which has
in general worked well. Although the Government could apparently
rely on the Appropriation Acts to authorise lawful expenditure,
they will in general not do so, in the interests of constitutional
The Treasury framework: Managing
14. The 1932 concordat sets out the principle
of parliamentary authorisation of Government expenditure, but
it does not set out detailed rules on how that principle is to
be applied. Such rules have been contained in a series of Treasury
documents, the current iteration of which is Managing Public
Money, with the latest version produced in October 2007.
15. In order to engage in pre-emptive activity
that involves public money, the Government must have the legal
authority both to act
and to spend. Managing Public Money provides the rules
under which the Treasury will authorise expenditure before a bill
becomes law. These rules, known as the "new services rules",
set out the specific requirements which departments must meet
in order to fund pre-emptive activities.
In the words of Managing Public Money, these requirements
- "the proposed expenditure
must be genuinely urgent and in the public interesti.e.
there must be wider benefits to outweigh the convention of awaiting
- the relevant bill must have successfully passed
second reading in the House of Commons;
- Parliament must have been made aware of the intended
steps in appropriate detail when relevant previous legislative
steps were taken;
- the planned legislation must be certain, or virtually
certain, to pass into law in the near future, and usually within
the financial year; and
- the department responsible must explain clearly
to Parliament what is taking place, why, and by when matters should
be placed on a normal footing."
16. These requirements clearly raise constitutional
issues; from Parliament's perspective the third and fifth requirements
seem particularly important.
17. The Treasury Officer of Accounts, Mrs Paula
Diggle, informed us that: "We take [Managing Public Money]
as the essence of what Parliament wants. Parliament knows about
it because it is a published document. We have no reason to think
that it is not what Parliament wants, and I am sure that the PAC
[Public Accounts Committee] would tell us very quickly if it was
The Treasury's role: "Parliament's
guardian in Whitehall"
18. The Treasury is one of the oldest Government
departments, and exercises a number of functions which are not
analogous to those of other departments. The Treasury told us
that, "there is an ancient convention that the Treasury should
strive to look after Parliament's interests in Whitehall."
The Treasury Officer of Accounts also described the Treasury as
acting "as the guardian of Parliament."
She drew our attention to a passage from a report of the House
of Commons Public Accounts Committee from 1884
"the Treasury is primarily responsible to Parliament
for the maintenance of financial order and regularity in all the
accounting Departments of the State, and in the exercise of functions
it is the duty of the Treasury to lay down, or require to be laid
down in the various Departments, such regulations as provide for
the exercise of proper checks and precautions."
19. The Treasury Officer of Accounts informed
us that no documentation exists in support of the convention's
ancient originsshe thought any such documents were "lost
in the mists of time."
She accepted that Parliament itself had probably never debated
the Treasury's practice,
but she believed "that it is a long-standing arrangement
that the PAC has understood and accepted."
We know of no evidence to the contrary.
20. Several witnesses considered that the Treasury's
description of its role in terms of "guarding" or "looking
after" Parliament may not be appropriate. They thought it
better to consider the Treasury as a watchdog within Whitehall,
which is then held to account by Parliament.
21. We recognise the role of the Treasury as
the department responsible for policing the proper use of public
money within Government, and welcome the seriousness and diligence
with which this role is performed by the Treasury Officer of Accounts.
We also acknowledge that the Treasury is the principal department
through which the Government are held to account by Parliament
for public expenditure. However, it does not follow that the Treasury
should regard itself as seeking to guard or protect the interests
of Parliament. Parliament, using its undoubted power to hold ministers
and accounting officers to account, can guard its own interests
against inappropriate executive action, and regularly does so.
We also note that, should a Government department act in contravention
of the Managing Public Money conditions in this area, the
Comptroller and Auditor General (as an officer of the House of
Commons and auditor of the Government's accounts) would bring
this to Parliament's attention.
22. Indeed, there will often be cases where Treasury
ministers themselves wish to engage in actions which pre-empt
legislation; in such cases the interests of Parliament and the
interests of Treasury ministers may conflict. For example, we
were informed of two occasions in recent years when Treasury ministers
issued ministerial directions to require expenditure on projects
which the Treasury's accounting officer did not think met the
tests of regularity and propriety.
23. The Treasury is responsible to Parliament
for the regularity and propriety of Government expenditure; it
follows that the Treasury will wish to police these areas within
Whitehall. However, it should be recognised that Parliament's
interests are primarily guarded by Parliament itself.
24. A second aspect of the Treasury's evidence
in this area to draw criticism was the suggestion that its watchdog
role arises from an ancient convention.
25. The word "convention" is, in constitutional
parlance, a term of art. Although there is no universally accepted
definition of the term, the feature common to all definitions
is that, whilst a convention is not justiciable, it is nevertheless
regarded by all relevant parties as binding. Constitutional conventions
may therefore be regarded as practices which are politically binding
on all involved, but not legally binding.
26. Given that Parliament has not delegated the
protection of its interests to the Treasury, the Treasury's practice
of taking responsibility for financial regularity and propriety
within the executive cannot be considered a constitutional convention
in the strict sense. In supplementary written evidence, the Treasury
Officer of Accounts confirmed that, when using the term convention,
she was: "using [it] in the primary sense in the OED [Oxford
English Dictionary], i.e. to denote common practice rather than
We accept that the Treasury was not seeking to elevate its internal
practices to the status of constitutional conventions. However,
clarity in this area is important. We recommend that the Treasury's
practices should not be described as "conventions".
The "second reading convention"
27. Managing Public Money
sets out a number of tests which must be passed before the Treasury
will authorise pre-legislative expenditure under the new services
rules (see paragraph 15). One of these tests is that the bill
concerned must have received its second reading in the House of
Commons. This test was described by the Economic Secretary to
the Treasury, Sajid Javid MP, as the "second reading convention".
A true convention?
28. It is questionable whether the second reading
convention is a true constitutional convention. Sir Stephen Laws
KCB QC, former First Parliamentary Counsel, commented that, "whether
or not the second reading rule is a convention, I would say it
is a rule of thumb."
29. We are of the view that the Treasury's practice
in this area is just that: a practice. Parliament is not, and
does not regard itself as, bound by the Treasury's guidance. The
second reading practice is not a convention, and should no longer
be described as such.
Operation of the second reading
30. A number of points have arisen about the
scope of the second reading practice, and its enforcement by the
31. First, it is clear that, whilst a bill passing
second reading in the House of Commons is a useful indicator of
its prospects of becoming law, it is not a foolproof indicator.
A bill which has received second reading in the House of Commons
can be abandoned or defeated at a later stage in the parliamentary
process. We were
pleased, therefore, to be informed that the Treasury's approach
recognises these uncertainties: "It is a matter of judgement
whether a bill is likely to get through. If a bill has gone through
second reading in the Commons with a large majority, we normally
take that as a strong indication. If it is a closely fought bill
and lots of questions have been raised, that is a warning flag
and we would exercise caution."
Sir Stephen Laws also told us that Commons second reading: "is
not a green light to do whatever you want. You will not get permission
[for pre-legislative expenditure] before second reading in the
House of Commons. You may not get permission then."
Indeed, a bill may receive a large majority for its second reading,
yet a particular clause (relevant to pre-emption) may be highly
contentious and its passage through Parliament open to considerable
32. Secondly, the Treasury's practice is restricted
to second reading in the House of Commons. The result is that
expenditure can take place for bills introduced in the Commons
at a much earlier stage than for those introduced in the Lords.
The Treasury's view is that this is because the power to grant
supply to the executive is vested in the House of Commons alone.
Yet the House of Commons is not asked to authorise such expenditure.
33. Thirdly, the second reading practice is clearly
limited to cases where the pre-emption is to occur under new powers
proposed in a bill. It does not apply to pre-emptive reorganisation
within Government departments (and public bodies for which they
are responsible) carried out under existing powers and not involving
There is, therefore, a potentially wide range of pre-emptive activity
to which the second reading practice does not apply.
34. Second reading in the House of Commons
may, in certain circumstances, be a useful indicator of a bill's
prospects of becoming law, but it is not sufficient to justify
pre-empting the legislative process. The practice of allowing
expenditure after a bill's second reading in the Commons has been
developed by the Treasury; it has not been endorsed by Parliament,
and carries no independent constitutional force.
35. In order to hold ministers properly to account,
it is essential that Parliament receives full and timely information
on Government activity. This principle applies to actions taken
and expenditure incurred in advance of legislation, as it does
to all other Government functions.
36. We were told that Parliament currently receives
a considerable amount of information about pre-emptive activities
from the Government. The Treasury told us that, where the new
services rules are engaged, "a minister must warn Parliament
of what action is intended, e.g. in a written ministerial statement,
explaining the urgency, and setting out when matters will be normalised."
Where it is not possible to notify Parliament in advance of such
expenditure, the expectation is that Parliament must be notified
37. Others, however, thought that the information
provided by Government to Parliament lacked transparency. Dr Katharine
Dommett, Research Fellow at the University of Sheffield, argued
that many of the difficulties that arose in organisational pre-emption
did so because of a lack of clarity about what was happening.
38. The Treasury Officer of Accounts told us
that there is no general procedure for how Parliament is notified
of pre-emption, though she stressed that written ministerial statements
are usually issued where expenditure is involved.
The Economic Secretary to the Treasury accepted that, "there
may be a more transparent way of doing this, and I would be happy
to look at any suggestions."
39. We received a number of suggestions on how
to inform Parliament of pre-emption. They include
- a statement made orally during
the second reading debate in each House on the bill;
- an oral statement to the relevant House;
- a statement in the explanatory notes to the bill;
- a statement in the relevant impact assessment.
40. These could be used instead of or in addition
to a written ministerial statement. It might also be necessary
to inform a pre-legislative scrutiny committee of action taken
in preparation for a draft bill becoming law.
41. An oral declaration of pre-emptive activity
during the second reading debate in each House would ensure that,
in granting the bill a second reading, the relevant House would
have the details of pre-emptive actions firmly in mind. It would
add legitimacy to the Treasury's treatment of Commons second reading
as a requirement for authorising reliance on the Contingencies
Fund to pay for pre-emption. What is most important, however,
is that the process by which the information is provided is regular
42. Although ministers usually inform Parliament
of the fact of pre-emption, the power under which the pre-emption
occurs may not always be clear. For example, the Treasury Solicitor
told us that in relation to the Health and Social Care Act 2012,
"the clarity about what was going on in terms of pre-emption
and the viresthe powersthat were being used
by Lord Owen writing to the Cabinet Secretary
and getting a detailed response setting out what the vires
the Treasury Solicitor gave this as an example of how parliamentarians
can obtain the information they require, we note that it took
a letter to the Cabinet Secretary to secure this information.
Details of the powers under which ministers are acting should
always be made clear to Parliament.
43. Information should be provided to Parliament
on pre-emptive activities in a consistent manner. There are a
number of options as to how this might occur; the key is to enable
Parliament to scrutinise the Government's actions effectively.
Whatever approach is adopted, it should ensure that Parliament
is fully informed in a timely manner of what activities have taken
place, when, how much they cost and under what powers ministers
acted. We invite ministers to decide which of the options in paragraph
39 (or other possibilities) to adopt as a practice to enhance
scrutiny and transparency in this context.
44. In addition, the Government should at
the end of each session provide Parliament with a summary of pre-emptive
activity undertaken across all departments. This should be provided
in a written ministerial statement, and should summarise the amounts
spent and the powers under which ministers acted. This statement
should be in addition to information given on each individual
instance of pre-emption. Such a statement
would assist Parliament in ensuring that the Government are not
engaging in excessive pre-emption, and will allow Parliament to
hold ministers to account for their decisions.
45. We heard evidence that, where a minister
wishes to incur expenditure in contravention of the rules in Managing
Public Money, the relevant departmental permanent secretary
will seek a written ministerial direction from the minister allowing
the permanent secretary to proceed.
In a previous report we commented on the importance of ministerial
directions as a safeguard against impropriety;
this function of the ministerial direction is also pertinent to
pre-emption. In particular, where a permanent secretary receives
a ministerial direction, he or she must copy it to the Comptroller
and Auditor General, who in turn will usually forward it to Parliament
via the Public Accounts Committee. This provides an important
mechanism for ensuring transparency of and accountability for
46. We are concerned that information on the
nature and frequency of ministerial directions may not be readily
available to parliamentarians. The Treasury Officer of Accounts
helpfully provided us with a list of all ministerial directions
made since 199737 in total.
We consider, however, that summaries of this nature should be
provided to Parliament on a regular basis.
47. At the end of each session the Government
should provide Parliament with a list of all ministerial directions
made, across all departments. This should be provided in a written
Restatement of principles and
practices governing pre-emption
48. Our inquiry has revealed that there is imperfect
understanding in Government and in Parliament of when pre-emption
may properly take place. There is also a lack of clarity about
how best to inform Parliament of pre-emption when it occurs. This
is in part a result of the diffuse sources of information on current
Government practice, some of which are over 80 years old. We have
set out a number of possibilities for improving the current arrangements.
It would be helpful if the Government would consolidate the
principles and practices which govern pre-emption into a single,
authoritative restatement. This could usefully be added to the
Cabinet Manual, which aims to set out the main laws, rules and
conventions affecting the conduct and operation of government,
but which is currently silent on pre-emption.
8 Managing Public Money, A.2.1.6. Back
Q 71. Back
Q 72. Back
Managing Public Money replaced the HM Treasury guidance
Public Accounting. Back
The Government's legal authority to act is considered in chapter
This is done by borrowing from the Contingencies Fund under the
authority of the Appropriation Acts. Back
Managing Public Money, para 2.4.3. Back
Q 39. Back
HM Treasury, para 6. Back
Q 47. The Treasury's functions in this area are primarily
performed by the Treasury Officer of Accounts, who leads a discrete
unit for this purpose. The Treasury Officer of Accounts' functions
include liaising with the House of Commons Public Accounts Committee
and the National Audit Office, setting out financial control and
accounting frameworks for Government departments, and advising
within Government on financial control and propriety generally. Back
Q 39. Back
Q 40. Back
Q 39. Back
Q 40. Back
QQ 66 and 81. Back
HM Treasury, para 17. Back
Q 53; HM Treasury, supplementary evidence, annex 2. Please
see below for more on ministerial directions. Back
HM Treasury supplementary evidence, para 7. Back
Q 45. HM Treasury's written evidence also used the term. Back
Q 33. Back
For example, in the current parliamentary session the House of
Lords Reform Bill was withdrawn by the Government despite having
received a second reading in the House of Commons. Back
Q 46. HM Treasury's written evidence states that "Proposals
to anticipate Royal Assent are always declined where the bill
in question is sufficiently controversial that its passage cannot
be assured" (para 18). Back
Q 33. HM Treasury gave examples of bills where it might have
been useful for there to be expenditure in advance of Royal Assent,
but none was given: supplementary evidence, annex 1. Back
HM Treasury, para 16. Back
A money resolution moved after the second reading of a bill in
the Commons only authorises expenditure arising from any Act resulting
from the bill. Back
An example being some of the reorganisation undertaken in anticipation
of the Public Bodies Bill becoming law (on which see HM Treasury,
para 20). See also footnote 1. Back
For example, the National Rivers Authority Advisory Committee
was established to advise ministers on preparations being made
by water authorities for privatisation. The water authorities'
preparations were done under the Public Utility Transfers and
Water Charges Act 1988; but the Advisory Committee was not established
under that Act. Both that Act and the Advisory Committee were
in preparation for what became the Water Act 1989. Back
HM Treasury, para 16. Back
HM Treasury supplementary evidence, para 6. Back
Q 12. Christopher Skelcher, Professor of Public Governance
at the University of Birmingham, agreed (Q 82). Back
Q 49. Back
Q 45. Back
Q 49. Back
Q 10. Back
Q 82. Back
Q 41; Laws, para 21. Back
Constitution Committee, 6th report (2012-13): The accountability
of civil servants (HL Paper 61), para 49. Back
HM Treasury, supplementary evidence, annex 2. Back