Parliament has a unique constitutional role in authorising and scrutinising government finance but the current system for financial scrutiny does not work effectively. This report explores how Parliament holds government to account for the money it raises and spends on our behalf and recommends reforms to improve the process.
Parliamentary Specialist , Global Partners Governance
Parliamentary Specialist , Global Partners Governance
Alex was Senior Research Fellow on the Society's Parliament and Government Programme and subsequently Director of the Programme until 2008. Previously, he was a Committee Specialist for a House of Commons Select Committee and also worked in the House of Commons Library. He s a specialist in parliamentary procedure and reform, including legislative process and financial scrutiny, parliamentary committees, and parliamentary and constitutional reform. He now works internationally on parliamentary strengthening programmes for Global Partners Governance.
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Parliament’s scrutiny of taxation, expenditure and public services is fundamental to our political system and to the relationship between Parliament, government and the public.
Parliament has a unique constitutional role in authorising and scrutinising government finance but the current system for financial scrutiny does not work effectively.
Parliament has a responsibility to restate and reassert its constitutional role in all aspects relating to financial scrutiny. Government has a responsibility to engage constructively with Parliament in this work. Both sides should recognise that good scrutiny makes for good government.
Parliament is uniquely placed to put pressure on government to secure openness about its activities and to press for improvement and efficiency in public services. It should institute mechanisms to ensure that this pressure is applied to get the best results possible. Parliament could and should do more to secure a full level of openness and accountability. We hope that this report stimulates debate and encourages reform in this crucially important area. It is therefore to Parliament that we direct our options for reform and put forward recommendations for change.
This report identifies solutions and options for reform based on two main themes:
the mechanisms which would strengthen Parliament’s ability to carry out financial scrutiny; and
the changes needed to ensure that this scrutiny work has more of an impact.
Our conclusions and recommendations focus on the following areas:
Parliament should increase its impact on the Budget process, to secure explanation from government for its priorities and to scrutinise better the legislation that enacts government taxation proposals.
The advent of the Pre-Budget Report has reduced the need for traditional Budget secrecy. The timetable for consideration of both reports by Parliament should allow for thorough parliamentary scrutiny.
In the period between the Pre-Budget and the main Budget, parliamentary committees should take expert and public evidence on the government’s plans, make a case for the priorities it wishes government to consider, and ensure the government provides full information and explanation for its proposals. There should also be more opportunities to debate and question government spending proposals. [paragraph 3.3]
Financial legislation has not benefited from the procedural reforms which now give Parliament an opportunity to comment on and influence many draft bills.
The entire Finance Bill should be subject to pre-legislative scrutiny by a parliamentary committee. [paragraph 3.9]
Parliament should also improve the way that it scrutinises tax legislation and administration.
Alternative options for reform include: the establishment of separate Tax Administration or Taxation Committees in the House of Commons or a Joint Committee on Tax Administration. In addition, a Tax Law Commission could be established to overview the effectiveness of tax legislation and make proposals for change. [paragraph 3.12]
The Treasury Committee is overburdened and unable to scrutinise government policy and activity, most particularly in relation to scrutiny of HM Revenue and Customs (HMRC).
We recommend the establishment of a separate HMRC Committee in the Commons, building on the Treasury Committee’s HMRC sub-committee. [paragraph 3.15]
When it comes to authorising government spending proposals, Parliament is seen as little more than an acquiescent bystander. On estimate days, billions of pounds of public spending are authorised without sufficient scrutiny or debate. More opportunities are needed for the House of Commons to be involved in the scrutiny of government spending plans.
More scrutiny of government expenditure plans should take place within parliamentary committees, particularly through consideration of Departmental Annual Reports (DARs). [paragraph 4.9]
Select committee reports on DARs should link to the formal processes of the House, through debates in the main chamber, to strengthen scrutiny of spending plans. [paragraph 4.17]
Departmental estimates should also be sent to committees at the earliest possible date so that committees have the opportunity to thoroughly examine them before they are voted on in Parliament. [paragraph 4.10]
Spending reviews provide the ideal opportunity for Parliament to scrutinise government spending plans at both the macro and micro level.
Parliament should become fully involved in the process leading up to the Comprehensive Spending Review (CSR) 2007 and should subject the forthcoming interim report on the CSR to detailed scrutiny. [paragraph 4.14]
The combined work of the National Audit Office (NAO) / Public Accounts Committee (PAC) and the departmental select committees results in significant savings for government, but considerably more could be achieved.
However, the fundamental question is whether long term improvements in outcomes are achieved, wider lessons are learned and mistakes not repeated.
There should be a move towards a deeper notion of accountability to ensure that individual lessons are translated into general reforms of public institutions that are found to be flawed. [paragraph 5.12]
There should be a more co-ordinated approach to follow up the work of the PAC.
The introduction of a regular trigger for review of NAO/PAC reports would mean that their recommendations were more systematically followed up. [paragraphs 5.13-16]
DARs should also include a specific section on progress made in implementing recommendations and the outcomes of the changes made. [paragraph 5.22]
To give a higher priority to financial scrutiny within select committees, designated sub-committees should carry out a wide range of functions, including following up NAO/PAC recommendations as well as scrutinising spending plans, DARs and departmental estimates.
Parliament should consider piloting a Finance and Audit Sub-Committee in a number of departmental select committees. [paragraphs 4.18 & 5.20]
The work of the Audit Commission should be subject to closer consideration by Parliament. Select committees should seek to forge closer relationships and make greater use of its evidence to strengthen their work.
We recommend that the appropriate select committees consider Audit Commission reports on a more systematic basis. [paragraph 6.4]
Parliament’s system of financial scrutiny must respond to changes to the system of governance in the UK, including the Private Finance Initiative (PFI).
PFI contracts should be subject to full select committee scrutiny and ‘commercial confidentiality’ should not be used to block full parliamentary scrutiny. [paragraph 8.8]
The need for better parliamentary scrutiny of European Union spending is made all the more urgent by the continuing controversy over the EU’s accounts.
More consideration of EU spending should take place in parliamentary committees, supported by the NAO, including a greater role for the European Union Committee of the House of Lords. [paragraphs 9.6-9.8]
The House of Lords should play a more active role in carrying out financial scrutiny while respecting the financial precedence of the Commons. Members of the Lords have expertise and understanding that could strengthen the scrutiny work of Parliament.
In the area of tax administration and the follow up of PAC recommendations, further scrutiny could be conducted by the Lords. [paragraphs 10.4-6]
Financial scrutiny should be considered as one of the most fundamental tasks of MPs. The recommendations in this report will only be effective if accompanied by a greater willingness from MPs and Peers to engage in financial scrutiny work.
Over the past few years the government has introduced a range of innovations designed to increase transparency of the financial and expenditure system, including Public Service Agreements, Whole of Government Accounts and Resource Accounting and Budgeting.
It is essential that Parliament responds by making full use of the information and opportunities presented by these innovations to strengthen its scrutiny work. [paragraph 12.7]
Parliament would benefit from a more systematic approach to scrutiny. It should ensure that all the different processes and procedures it adopts are suitable for the purpose for which they are intended and link together to offer a complete picture of government activity.
Parliament should adopt a set of best practice guidelines to ensure that its scrutiny methods are fit for purpose, comprehensive and result in improvements in government performance. Its scrutiny processes should be continually monitored and adapted if necessary. [paragraph 11.5]
The House of Commons Scrutiny Unit already provides valuable support to select committees.
We recommend that this work should be built upon, either through an expansion of its role or through its evolution into a Parliamentary Finance Office to provide comprehensive support on all financial matters to individual parliamentarians and select committees. [paragraph 13.6]
Parliament has a responsibility to the public to ensure that financial scrutiny is carried out in the public interest and reflective of their concerns.
Parliament should provide a document which sets out the operation of financial scrutiny which is publicly available. Where relevant, the views and experiences of members of the public and interested groups should be sought and should feed into the parliamentary process. [paragraph 14.4]
Brazier, A. & Ram, V. (2006), The Fiscal Maze; Parliament, Government and Public Money, (Hansard Society: London)
The Fiscal Maze project was generously funded by PricewaterhouseCoopers (PwC) and the Chartered Institute of Public Finance and Accountancy (CIPFA).