PAC demands inquiry into £7.1bn overspend

3 Mar 05
The chair of the Public Accounts Committee will ask the National Audit Office to investigate how government departments manage their annual budgets, after it emerged that 20 out of 24 have overspent against expenditure estimates this year.

04 March 2005

The chair of the Public Accounts Committee will ask the National Audit Office to investigate how government departments manage their annual budgets, after it emerged that 20 out of 24 have overspent against expenditure estimates this year.

The Office of the Deputy Prime Minister alone is recording an overspend of no less than £1.6bn, blaming the demands of the Sustainable Communities scheme.

PAC chair Edward Leigh MP told Public Finance that he was 'astonished' that departments had overspent by £7.1bn in resource terms during 2004/05.

'This is a matter of great concern. These are very high figures when you consider that the introduction of resource accounting was supposed to prevent poorly calculated spending plans,' he said.

'I intend to approach the comptroller and auditor general [Sir John Bourn] to discuss an NAO investigation.'

The Treasury's annual Spring Supplementary Estimates, published last week, outline how departments have performed against estimated departmental expenditure limits (Dels) submitted last year, and reveals the cash needed to cover overspends before the end of the current financial year.

Covering this year's overspends will not raise total government spending because they could be offset by savings elsewhere across Whitehall, or covered by reserves set aside for adjustments by Chancellor Gordon Brown. However, many departments have delved into the government's End-Year Flexibility fund – cash pooled from previous underspends.

Conservative MP Leigh said Brown should be 'very concerned' that poor financial planning could upset the government's efficiency agenda, which aims to slash government costs by £21.5bn annually by 2008, if departments regularly had to be insured by large reserves.

'Resource accounting means that departments are supposed to have a better idea of what they are doing with their finances. We expect some revisions, but the sheer number of departments missing their estimates by significant sums should concern us all,' he said.

A Treasury spokesman countered that the alternative would be worse. 'Do we really want departments regularly asking Parliament for more money than they spend? I'm not sure taxpayers would approve of that.'

An ODPM spokesman attributed its £1.6bn overspend to 'the expansion of investment schemes such as the Communities Plan, other local government and fire services spending and housing programmes.' But other ODPM cost escalations relate to administration (£25.3m) at a time when the government is seeking to slash red tape.

Shadow chancellor Oliver Letwin said the government's call for an additional £400m to cover administration costs was a 'failure to get value for taxpayers' money'.

Treasury figures also highlight the escalating cost of unfunded pension schemes. The National Health Service Pension Scheme has asked for an extra £1.6bn on top of its initial £6.2bn projection.

Other organisations with large overspends include the Ministry of Defence (£876m) and the Scottish Executive (£417m).

The NAO and PAC scrutinise departmental spending but, usually, only a failure to stay within revised budgets would initiate an investigation into spending not approved by Parliament.

PFmar2005

Did you enjoy this article?

AddToAny

Top