25 April 2008
It is ironic that a government that has striven to court business over the years has apparently missed one of the commercial sector's principal lessons – always keep a sharp eye on the bottom line.
Compare a typical company's reports with the confused financial data generated by Whitehall departments and the lack of clarity in public expenditure becomes painfully clear. But moves are at last being made to put the nation's finances on a more business-like footing.
The Treasury has launched a project intended to cut through the fog of confusion that has settled upon departments' financial statements and rendered them impenetrable – not least to their own managers.
And this week MPs weighed in to try to restore some clarity to the public finances – and wrest back a meaningful role in scrutinising and approving spending.
The liaison committee, which speaks with the combined authority of the House of Commons' 31 select committee chairs, published a report on April 21 called Parliament and government finance: recreating financial scrutiny.
In an interview with Public Finance, Michael Jack, chair of the environment, food and rural affairs committee and one of the liaison committee members most engaged with the issue, pithily encapsulates the failings of the current regime.
'I can sum it up in one word – incomprehensible,' Jack says, his frustration evident. '[We need to] break out from the language and era of Samuel Pepys in terms of the methodology by which the public finances are currently administered. The methods you would employ to see if a company is in good financial health are just not possible when it comes to government expenditure.'
The MPs' report ruefully acknowledges that 'there never was a golden age' when the Commons routinely took a magnifying glass to government spending.
'The problem is not in the House's powers in financial matters, but the ability and willingness of the House and members to scrutinise such matters in the degree of detail required to hold the government to account,' it admits.
'For too long the House has shirked the task of providing itself with the means to carry out that duty effectively.'
But the buck does not quite stop there. The financial data provided to Parliament is, the MPs say politely, 'extremely complex'. Their plea is for clearer and better – but not more – information.
'I think what this report is about is first of all trying to reassert Parliament's interest in financial scrutiny, and secondly to make recommendations as to how we might have a more modern system, which would allow it to probe what the government is doing,' Jack explains.
The architecture of public finance is certainly bewildering. Spending Reviews set out ministries' three-year spending allocations; departmental 'supply estimates' are presented to Parliament to seek authorisation for specific items of spending; and resource accounts explain how funds have been used.
But these documents are not compiled on a consistent basis and nor are they reconciled. Unsurprisingly, the regime prevents all but the most dogged backbencher from tracking public spending to establish whether it has brought about the promised outcomes.
The other main barrier to proper financial scrutiny is the paltry amount of Commons time allocated to debates and votes on government expenditure. 'Parliament really is a rubber-stamping operation when it comes to spending public money. We vote on taxes and we vote on the Finance Bill, but that's it,' Jack says.
The liaison committee report points out that the Comprehensive Spending Review was discussed for just 90 minutes in the Commons and was not put to a vote. That 'makes a mockery of the House's right to scrutinise government expenditure', it says.
Senior MPs have now had enough. They say select committees should examine the spending plans and MPs should debate them, reviving the dormant right to vote on individual expenditure programmes.
Jack believes MPs are 'pushing at an open door' with demands for clearer information. But on voting rights, which require government business managers to allocate parliamentary time, he says: 'Ask Treasury ministers whether or not they fancy more scrutiny.'
Alex Brazier, director of the Parliament and government programme at democracy think-tank the Hansard Society, is also optimistic that the MPs' call for better information, at least, will be heard.
'The report is going to have a lot more clout because of who they are. Given it's the liaison committee, which has been working on this for a long time, I'm hopeful it will be implemented,' he tells PF.
What is less clear is how the government will respond to the demand for more parliamentary time on spending matters. Hopes probably should not rise too high. But this could be a chance for select committees to prove their worth. Armed with comprehensible data, they would be able to pose probing financial questions to ministries.
This might not end fiascos such as that at the Rural Payments Agency, or the budget overspends seen on a variety of defence projects, but it seems logical that better scrutiny would promote stronger financial management within departments.
Jack believes that the more committees get into the financial detail, the more attention departments will give to this aspect of their activities. He would like committees to be able to examine departments' performance against their allocated budgets, to identify any overspends at an early stage.
A former minister, Jack thinks it is likely to focus ministers' minds too. 'If you're going to be answering far more detailed financial questions, you're going to be taking far more interest in how your cash flow is going, what your investment patterns are – all the questions you would find being discussed around the top table of a modern plc.'
And Brazier thinks that if the necessary improvements were made to financial reporting, committees could concentrate on probing the decisions underpinning the data rather than scratching their heads over the numbers.
'I don't think it's going to require extra staff or funding. The liaison committee is actually calling on the government to do a lot of the work themselves,' he says. 'If committees had comprehensible information, they could spend more time asking detailed questions about the reasons for departments' financial performance rather than trying to understand the data.'
The National Audit Office, which provides specialist support for the Public Accounts Committee, has indicated its willingness to provide more analysis for other select committees. Parliament's own scrutiny unit, a team of around 20 finance and legal specialists providing technical analysis to committees, is also ready to expand its activities.
For the moment, the Treasury is not giving much away. A spokesman tells PF: 'The government will respond to the report in due course.'
He adds: 'The government announced in the Governance of Britain green paper in July 2007 that it would simplify its reporting to Parliament by aligning budgets, estimates and resource accounts so far as practicable, and simplifying and rationalising the time of financial documents presented to Parliament.'
But Brazier says it is time government spending was given the scrutiny that is long overdue. 'The public thinks it is important, so it should be much higher up MPs' priorities. It is our money being spent and it matters.'
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