MPs consider the case for a parliamentary Budget Committee
The House of Commons Procedure Committee is looking into whether a Budget Committee of the Commons should be established, to examine government spending plans set out in multiannual spending reviews and annual departmental estimates. The creation of a Budget Committee was recommended by Mr (now Sir) Edward Leigh and Dr John Pugh in a 2011 report commissioned by the then Chancellor of the Exchequer.
The Committee has so far held six evidence sessions. This report covers the three most recent. Transcripts of the three earlier sessions, at which witnesses included the Institute for Government, the OECD, a former Treasury permanent secretary and two public policy academics, are available on the committee website.
The witnesses at the three recent sessions, featured below, were all MPs with an interest in this area.
Among the written evidence submitted to the committee, the Treasury submission sounded a sceptical note, saying that the Government was “not convinced that the advance review of Government spending plans and policies should be separated from the Departmental Committees that hold the expertise and detailed knowledge required for effective scrutiny.” It continued: “In particular, we are concerned that separating issues of economy, effectiveness and efficiency from consideration of the merits of a particular policy is to create an artificial and unnecessary distinction for a Committee while conducting scrutiny at the initial stages of policy formulation.”
Treasury Committee chair Nicky Morgan was also wary of the idea in her written evidence, identifying a potential significant overlap with the work of the Treasury Committee. She thought that it would be ‘very difficult for a Budget Committee to avoid getting into questions of policy as it tries to examine funding each year’.
Should there be a Commons Budget Committee? – 4th oral evidence session - 20 Mar 2019
Conservative MP Charlie Elphicke (a former tax adviser) and Labour MP Angela Eagle appeared in front of the Procedure Committee on 20 March 2019.
Speaking in support of a Budget Committee, Elphicke pointed out that the Treasury Select Committee has done 27 reports, and just two of them cover spending. There should be a Parliamentary Budget Office that answers to the Budget Committee, very similar to, and as well-resourced as, the National Audit Office, he said. Select Committees should be able to call in the Parliamentary Budget Office to help them in their own deliberations. Maybe you bring Public Accounts and the Budget Committee together as they have in Germany, he suggested. “[With] a Budget Committee you can be looking much more carefully at plans, quality of spending, cross-cutting themes, adoption of technology in Government, how you handle projects and avoid the mess of HS2, and Saint Helena, and things like that, and also have a focus on efficiency”, he argued. To avoid overlap, you have a clear mandate and you have drawn the best practice from around the OECD, he added.
Labour’s Gareth Snell asked how you prevent a Budget Committee becoming this ‘monolithic, amorphous’ committee that has so many areas of responsibility that it loses its focus. Elphicke replied that you need to reform the entire spending-review process. You have a rolling review, not once every three years. You make sure that Parliament has the powers to get the information that it needs ahead of decisions being made. Estimates should be published at the time of the Budget, not half-way through the year. If you have a detailed report, like the NAO-type report, before decisions are made, to challenge the Executive, and the civil service, and the officials, you can then start to ask the really detailed, nitty-gritty questions that can bring to the surface some of the deep underlying question, he argued, adding: “We need to change our practices so that we close the stable door before the horse gets away.”
Angela Eagle, who has been on the Public Accounts Committee (PAC) three times and is a former Treasury Minister, believes it is important to create a much more consolidated, transparent approach to government estimates so that all of the expenditure is in one place, and actually calculated on the same basis, so that it is possible to follow every pound through from when it is raised, through to how Parliament decides to approve its expenditure, through to where it is spent, ‘which would be a big improvement’.
Conservative Sir David Evennett said the PAC and the Treasury Committee have built up over the years a reputation for efficiency and excellence, and being non-partisan. Eagle replied that a Budget Committee remit must not be about policy making, rather it should be about the use of money and improving the use of money over time. The role of a Budget Committee would be separate to looking retrospectively at things that have gone wrong, which a Public Accounts Committee does. In fact, the pattern of catastrophes that the Public Accounts Committee highlights, for example, could then be taken in by the Budget Committee to check against what was happening going forwards, she said. Just in preparing evidence and information to put to a Budget Committee, it would probably improve the overall sights of ministers and senior civil servants in departments about what they are doing, she added.
Eagle then criticised the Treasury, calling them bullies. She said: “The Treasury has in general the cream of the civil service intellectually. They are trained within Treasury culture to realise that they are the cream, and they very much enjoy being the largest person in the playground, if I could put it that way. They do, in the end, know that they have the power to put the squeeze on departments and they have a lot of leverage. Obviously, the Chancellor is, in general, the most powerful person in the Government outside of the Prime Minister. That kind of heft is brought to bear in the way in which the civil servants deal with their colleagues in other departments. Also, generally in Whitehall—again, it may have changed, but I doubt it—the Whitehall Departments are very siloed, and so they can be picked off by the Treasury, which has an overall view.”
Read the full debate here.
Should there be a Commons Budget Committee? – 5th oral evidence session - 27 Mar 2019
The witnesses for this session were MPs Kirsty Blackman, SNP Spokesperson on the Economy, Peter Dowd, Shadow Chief Secretary to the Treasury, and Liz Truss, Chief Secretary to the Treasury.
Kirsty Blackman supports calls for a Budget Committee, and said the Budget process in the House of Commons ‘does not work’. Blackman said it feels like not enough scrutiny is done in the run-up to the Budget day and the Chancellor pulls rabbits out of the hat and then sometimes has to reverse and do a U-turn. Then going on from Budget day, it feels like there is also not enough of a scrutiny process, she said. It would benefit from MPs who are experts in scrutinising budgets—for example, people like those on the Treasury Committee. She added that it seems odd that they are the ones who spend an awful lot of time talking about Treasury matters, but then they do not have a formal role in the Budget process in any way, shape or form unless they choose to speak during the course of the Budget debate.
There is no Budget Committee in the Scottish Parliament as such. Blackman said the Scottish Budget process was set up based on a number of principles, including ensuring that MSPs are all involved, that external scrutiny is brought to bear on the Budget, and that those processes are built into the system, to make it completely different to the Westminster model. “The key thing for me is that a lot of that scrutiny of proposals is done in advance, and then there is that scrutiny process where the MSPs are involved. One of the principles of the Scottish Budget process is that all MSPs should be engaged in it.”
Blackman has argued a number of times and moved a number of times during the Finance Bill Committee that that Committee should take evidence from experts (including CIOT). We have seen a number of times tax changes that have been made that have not worked, and have needed to be changed in later years, she told the Procedure Committee. The more evidence we have from people who know what they are talking about, the better decisions we are likely to make, she added.
If we have a Budget Committee that gets around the issue of the lack of adequate scrutiny that is provided by any of those three institutions—the PAC, the Treasury Committee or the estimates process—that means there can be that deep dive into the finances, she said.
Peter Dowd said he is ‘agnostic’ on the idea of a Budget Committee, observing that there is a danger we are coming to the position where the PAC does its bit, Treasury does its bit, but we do not think that either of them necessarily are doing what perhaps they should be doing in looking at budgets. Dowd said ‘if it is just moving the chairs around, basically I do not see the point’, adding that if it is having a Budget Committee that has more power, more authority and resource and is looking proactively at things for the future, fine. He said a Budget Committee should look at the 1,300 tax reliefs the UK has, for example. He is all for a Budget Committee having a strong relationship with the OBR.
Sir Edward Leigh, a member of the Procedure Committee (and former PAC chair), said that if we did not create a Budget Committee he did not think the PAC would ever or could ever look at the Budget process, and he is not sure the Treasury Committee would ever have a real amount of time.
Dowd pointed out that the Government did not allow an amendment to the law resolution in the last Finance Bill. That is unprecedented, he said, adding that if the Government is trying to clamp down on that sort of thing in a Finance Bill outwith a general election, pre or post general election, that is ‘deeply worrying’. If we are going to have a Budget Committee, it must not be trammelled over by the Executive, he said.
Charles Walker, the committee chair, pondered that the problem that governments, and oppositions who hope to become a government, have is that the current system works extremely well because there is not a high level of scrutiny. He said: “The reason why most Select Committees do not get involved in looking at budgets is because it is probably too much like hard work and does not get you in front of the TV cameras talking about interesting things such as doping in sport, or why trains cannot see signals—this, that and the other. That is why I think the Committee’s direction of travel is that a Budget Committee full of absolute obsessives, crashing bores who love nothing but fine detail, would be wonderful. It would be any Government’s worst nightmare.” In times when governments have majorities they could ensure that such ideas never see the light of day because they use their majorities to vote them down. “While we live in a time where there is no majority, in a fractious House and an independent-minded House, perhaps now is the time for us to seize control of this agenda”, he added.
Just because other OECD countries have them is not enough evidence that it would be a good thing for the UK, said Liz Truss, for the government. Truss believes separating issues of economy, effectiveness and efficiency from consideration of the merits of a particular policy is to create an artificial and unnecessary distinction for a Committee. Although sceptical of a Budget Committee she accepts one of the advantages is that it could analyse trade-offs between different areas of spending.
She also made a general point that something ‘I am looking at in the spending review is how much spending contributes to human capital’. She said that there are currently 305 regulatory bodies and quangos in this country which is too many. She added that she is ‘very open’ to representations on where people think savings could be made and where people think extra resources need to be deployed’.
Truss suggested that committees do not fulfil their roles fully because people do not find things like the supplementary estimates document that exciting. She said she was open to Sir David Evenett’s wish for a subcommittee of the Treasury Committee that looks at public spending, especially around times like the spending review.
Truss said: “I have looked at the US system and the way they manage, and they have a separate Treasury from an Office of Management and Budget. They have a separate function managing public spending from the Treasury, so it makes sense to have separate scrutiny of those items, whereas here the Treasury is a single entity and we have the Treasury Select Committee that shadows it. There is a certain logic in the setup that you could then replicate with a subcommittee. It might well be cheaper as well, which is always a consideration as far as I am concerned.”
Sir Edward Leigh said that if the UK is spending £800 billion a year and a Budget Committee just saves one per cent it is worth doing. Truss replied ‘on the basis that it would save that amount of money and be rewarded accordingly, then that is an interesting proposition’.
The full debate can be read here.
Should there be a Commons Budget Committee? – 6th oral evidence session – 10 April 2019
Witnesses in the latest session were MPs Richard Bacon (Conservative), a long-serving member of the PAC, Meg Hillier (Labour), the current chair of the PAC and Clive Betts (Labour), chair of the Housing, Communities and Local Government Committee.
Bacon, who supports calls for a Budget Committee, said that if there was more high-quality scrutiny of public expenditure earlier it would result in better value for money for taxpayers, fewer projects going wrong and would be of public benefit. He would like to see scrutiny and accountability higher up the ‘chronology’ of government projects.
William Wragg asked whether the House of Commons does a good job in scrutinising financial information that is currently available to it. “One of my bugbears in the Public Accounts Committee (PAC) was that, while in the 1970s it used to look only at the accounts, which was almost certainly wrong—by the way, it met in secret—the shift towards looking at value-for-money studies had been at the expense of looking at the accounts at all,” said Bacon. He went on to say, despite having bright and capable people, government continues to have an approach to risk that swings between risk aversion and ‘sheer jaw-dropping risk ignorance’. He blames human behaviour and says that organisations need to address that.
He told Labour’s Melanie Onn that external challenge provides a very useful level of scrutiny that you cannot get internally. Why not use existing committees? Departments produce annual reports and accounts that are at least looked at in many cases by the Select Committees, but with nothing like the detail required, Bacon said. He thought it was too big a matter for a sub-committee of the Treasury Committee - over £800 billion of income and expenditure is a full-time job for a committee, he argued.
Conservative Bob Blackman said the current Chancellor has brought forward the Budget statement from March to November principally on the basis of allowing greater scrutiny of the process. Why do you take the view that a Budget Committee could do that scrutiny better than the departmental Select Committee, he asked Bacon. Bacon replied that he favours those who say that the Budget Committee, were it set up, should be supported by a parliamentary budget office, which he thinks should be financed in the same way as the NAO is by the Public Accounts Commission. The new committee could rotate looking at different departmental estimates in more detail over the cycle. The new committee would ‘pay for itself by cock-ups avoided’ he said.
Meg Hillier is not convinced of the need for a Budget Committee. The NAO now does more investigations, therefore it is much more timely, Hillier said. Budget Committee resourcing is one of her big concerns. There is also a concern about how many members would be available to do the amount of work that needs to be done. Very detailed knowledge of the policy is needed. Some committees look at the annual report and accounts of their own departments and marry together the money and policy they are examining. They have very detailed knowledge of the policy and, therefore, can look at the money in that way. That is in the standing orders of every departmental select committee of the House, but she did not think it is followed through perhaps as assiduously as it could be. “We can work harder and sweat better what we already have” she said.
Clive Betts is also sceptical about a Budget Committee. He is not sure at this stage what it would bring given the amount of resource you would have to put into it. Betts observed that: “One of the problems with the NAO—we get really good help and advice from it—is that it is not allowed to look at the future. It is an auditor, so it looks at the past. I wonder whether expanding its remit to help Select Committees might be another thing we could look at.”
Charles Walker, Procedure Committee chair, pointed out that every other major OECD country has a budget committee. Betts replied that the Brexit Committee, for example, is different from setting up something that cuts across the work of many other select committees as well. He is just not convinced of the added value.
Walker pointed out that Parliament has had outstanding success in setting up committees: the Petitions Committee has exceeded all expectations, he said.
Betts said that a problem on occasions is that departmental ministers will say before a select committee: “It is a bit beyond my pay grade; it is a Treasury matter.” But Treasury Ministers will not come to a non-Treasury departmental select committee. His committee has just done an inquiry into high streets that involves business rates. The only way to get a Treasury Minister to come along on business rates was to do a bit of that inquiry jointly with the Treasury Committee. Scrutiny is held up by that because that is the way the Government resist. The departmental minister says, “It is not my responsibility,” and the Treasury Minister will not come.
Bob Blackman said a solution could be that select committees use the same tactic—individual members or groups of members on select committees inquiring into and accounting for particular aspects of expenditure. Could that model be rolled over into other committees, he asked. Hillier said the lead member system has worked very well for PAC.
On the Spending Review, Hillier added that the NAO is there to resource all of us. It can go through accounts and support committees; it does not just look at things retrospectively. It will happily talk to a committee about the current spending plans of a department.
Walker joked that what we really need is a Budget Committee of ‘nerds, spods and anoraks’, who love numbers but do not much fancy appearing in front of TV cameras, to get under the hood of what government, the Treasury and departments are doing.
The full session can be read here.
By Hamant Verma.