The Fiscal Responsibility Bill will give Parliament real powers to scrutinise ministers’ spending plans – and not before time
Overseas policy makers have been fascinated by UK governments’ use of multi-year budgets (Spending Reviews) and performance quasi-contracts (Public Service Agreements). We’ve had five Spending Reviews since 1998, and five rounds of PSAs.
Now, the system seems to be in serious jeopardy. The government has been messing about with schedules of Spending Reviews, while the Conservatives have been less than transparent about what they’d keep of the current system.
There are two particular points in our quaint system that confuse international audiences: first, why Parliament exercises no control over spending plans, despite legally and constitutionally approving annual budgets; and, secondly, that the whole multi-year Spending Review process has no legal basis and is not approved by Parliament, even notionally, as is the case with annual budgets.
So you could have metaphorically knocked me down with a feather when the Fiscal Responsibility Bill was announced in the Queen’s Speech.
Even though we have to wait until the chancellor’s Pre-Budget Report on December 9 to get the detail, what we do know already is intriguing.
Most of the press coverage has focused on the deficit reduction plan, which is obviously going to be central to the political battle in the run-up to the general election. The decision to put some legally binding rules in place on the deficit has caught most attention, with some experts sceptical, mainly on the grounds that there are no ‘deficit police’ with the equivalent of a budget speed gun to catch the government at it.
But proposals about how public spending decisions are to be made might be a bit more revolutionary, at least potentially, than first meets the eye.
The first major change would be to give Parliament the right to approve Spending Reviews. As the Downing Street press release puts it, this ‘constitutes a major change to the structure of fiscal policy, especially through giving Parliament power to approve multi-year fiscal plans’.
Of course, Parliament currently approves annual spending and taxation plans, but this is largely a formal exercise. The convention has been that governments always get their ‘money Bills’ nodded through. Parliament could anytime overturn this convention and almost did over the 10p tax rate but, if this amendment had gone to vote, it would have been the first time in three decades or more that a budget amendment had been voted on – a situation unique among legislatures.
Until we see the detail, it is not clear if the new Bill will change this. But it is hard to see how government could make such a large change without the possibility of Parliament having a real say in multi-year plans.
The new Bill also proposes to empower Parliament to hold the executive to account. ‘Accountability and scrutiny is through Parliament rather than in any new external body,’ the government’s press release says. This is clearly meant to counter the Tory proposals for an independent body to take on this role.
Two crucial additional things would be needed to make this new system real. First, Parliament would have to be able to adequately scrutinise both spending plans and their implementation. This needs something like the Congressional Budget Office in the US.
Secondly, if Parliament is to be consulted over multi-year spending plans, then it needs to be given space and time to give the proposals serious consideration. That should include the opportunity for select committees to hold hearings on spending proposals – as is currently done on an annual basis in Scotland. Two- or three-year spending cycles, as we’ve had for more than a decade, give ample opportunity for such consultation.
If Parliament really is to be given a significant new role in determining and monitoring spending plans, it might just help to restore public confidence in our legislature after the expenses scandal.
Colin Talbot is professor of public policy and management at the University of Manchester
