The problems of scrutiny are even more pronounced with finance. There are two are two parts to the Government’s finances:-
The Budget in the spring sets out the Government’s proposals for taxation and are approved as the Finance Act. The Budget debates are mostly a battle between Government and Opposition over the Government’s general economic policy rather the detailed Budget proposals. Areas such as company taxation are very complex and hardly any MPs have any understanding of it.
The Public Expenditure Estimates set out proposed public expenditure in the autumn and are passed as the Consolidated Funds Act and Appropriations Act. Although Governments try to set out proposals more than a year ahead, debates are also set piece arguments between Government and Opposition. In any case, the Estimates are presented in large blocks and it is difficult to get at the details of expenditure with only three days to discuss them.
The report by A. Brazier and V. Ram, The Fiscal Maze; Parliament, Government and Public Money by the Hansard Society in 2006 gives a good detailed explanation of the limitations of financial scrutiny and has suggestions for improvement.
The Liaison Committee set up a sub-committee working group in 2008 to look at ideas. Their report, Parliament and Government Finance: Recreating Financial Scrutiny concluded that the Commons had not taken the task of financial scrutiny seriously enough. They recommended:-
- simplification of the Government's over-complex financial system.
- improving the quality of the financial information provided to Parliament and the Committee felt that the Treasury's Alignment Project was a step toward this.
- increasing the information available to select committees about PFI contracts
- creating more opportunities for Members to challenge the Government in financial matters and hold it to account, including the right to debate and, if necessary, to vote on, individual Government programmes, or items of expenditure.
The Government has made some changes, including clearer financial information and mid-year estimates for Select Committees to look at but there has not been a fundamental change in the ability of MPs as a whole to scrutinise Government spending. The Coalition Government set up the Office of Budget Responsibility in 2010 but this assesses the overall state of the public finances and the overall performance of the economy and does not scrutinise individual spending programmes.
Much more effective are:-
The Public Accounts Committee
This is a Committee of backbench MPs with the Chair always an experienced Opposition MP, normally an ex-Minister.
The Committee was set up in 1861 but remained fairly ineffective until the 1980s when new Conservative MPs took an interest in looking carefully at public expenditure.
It is able to look at any area affecting the nation’s finances and has established a reputation for vigorous investigation of issues, particularly under its former chair, Margaret Hodge.
The recent investigation of the failure of Starbucks, Google and Amazon to pay tax on their operations in the UK attracted considerable publicity and led Starbucks to change its practices. The biggest problem for the Committee is that it only looks at a handful of areas of public expenditure and taxation each year and only after the money has been spent or, in the Starbucks case, the tax has been avoided.
The National Audit Office
This is a public body but independent of Government and reporting to the Public Accounts Committee and was created as a result of a Private Member’s Bill in 1983.
It has teams of experts who can investigate an area of Government spending in detail. It has regularly been critical of Government Departments.
It does, however, seek to clear its report with the Government before publication and so there is always the danger that its criticisms get watered down.