PUBLIC EXPENDITURE

HC Deb 02 August 1972 vol 842 cc885-98

8.10 a.m.

Mr. George Cunningham (Islington, South-West)

The tail end of the Consolidated Fund Bill debate is probably as appropriate an occasion as there can be for registering some criticism of the manner in which the House conducts its scrutiny of public expenditure. Although there might be some disagreement about the perfect way for the House to fulfill its duties in this respect, the one thing which no one can possibly doubt is that the way we do it now, the sort of performance which we maintained yesterday and through the night, cannot possibly be the right way for the legislature to exercise its supervision over Government expenditure.

Whatever changes anyone might suggest, they are certain to constitute an improvement over the manner in which we now do these things. I am sorry that the Chief Secretary to the Treasury is being kept here at this hour of the morning. My remarks are addressed to him only because there is no one else to whom to address them. My criticisms are levelled at the House and not at the Government. This morning I have no criticism to express of the way in which the Whitehall machine conducts its scrutiny of expenditure. If the House were half as competent in doing its job as Whitehall, we should all be in a much better position than we are now.

The truth of the matter, although it should not be so, is that the way in which the House conducts its job is determined by the wishes of the executive. In 1970–71 the Government decided not to accept in the same form the proposals put forward by the Procedure Committee in 1969. That is the normal process. It is the Government who decide how the House will organise its business in this respect. I ask the Government to use their influence to make the procedures of the House and the control of public expenditure more in keeping with our pretensions on the Parliamentary control of the executive, and more appropriate to the vast sums of money and the importance of the issues covered.

I am not suggesting that we require a major shift of power. All I am suggesting is that the scrutiny by the House, which in theory exists over Governmental expenditure, should also exist in practice. It is scrutiny and not great control over the executive for which I am pleading. We are voting the Government £16,000 million approximately £10,000 million. It is curious that the House of Commons, which prides itself on its control over the executive, particularly on money matters, should be prepared to vote that kind of money without the least attention to the matter. It gives far less attention to this subject than it gives to almost any other.

Not only are we voting a total of £10,000 million but we are voting the detail in approximately 500 pages of the main Estimates. The authority of the House goes down to the level of £10,000 on various items. The House is technically deciding and putting its authority behind detailed provisions of that kind as well as the total figures. All these matters pass without any oversight by the House except if a Member cares to raise an issue in which he happens to be interested. If there happened to be in the Estimates a figure of £10 million for donkey fodder, or something silly like that, there would be no institution of the House which would be responsible for the oversight of voting that money. No one Member would be more responsible than any other for a boob of that character. The Expenditure Committee would not be more responsible than onyone else because the Estimates are not referred to it.

We rely, in so far as we do not have boobs of that character, entirely upon the efficiency of the Government machine to ensure that they do not happen. We do not impose upon that efficiency the House's own efficiency to make sure that the Government are doing their job. In the end we shall come a cropper by doing it this way. I do not want to give examples of the kind of thing we are putting authority behind today, but in the Estimate I know best—overseas aid—we come down to detailed figures as low as £30,000, £10,000 and even in one case £1,000 for a gift to the Asian Development Bank. Yet that has not been scrutinised by any House Committee.

What is wrong with the system? It is that estimates are not automatically referred to any Committee of the House. We have the Expenditure Committee, but unlike the expenditure committees I know about in any other legislature, the Estimates do not stand automatically referred to it. In Canada, the Estimates when they come to the House of Commons are referred to the subject Committees of the House. Often the subject committees do not look very carefully at them but they have the capacity to do so and to call witnesses if they wish in order to illuminate the Estimates, and from time to time they make use of their powers. That is quite a considerable safeguard.

In Germany, there is a more elaborate system in subject committees and expenditure committees, and individual members of those committees are told off to cover particular sections of the appropriations. There is a process of dialogue between these individual members and the executive so that one member may feel that if there is something wrong or questionable about the proposal for expenditure by the Government it is his duty more than any other member's duty to find it. In the United States the system is even more extreme, but it would be a false comparison to compare the American parliamentary democracy with our system, because it is not a parliamentary democracy in anything but name.

But one does not have to invoke the practices of other legislatures in order to justify referring the Estimates to Committees of this House. It surely stands to common sense that a House of 630 Members cannot do an effective job of scrutinising detailed expenditure proposals. It stands to reason that one either passes up the chance of looking at the matter at all, which is what we do now, or one refers it to Committees. People will say that the Expenditure Committee could look at the Estimates if it wanted to and so could the subject sub-committees of the Expenditure Committee. So they could. But they do not, and they never will unless the House puts upon us in the Expenditure Committee the obligation to do so.

Another difficulty is that the Expenditure Committee is obsessed with public expenditure survey operation. Ever since the House discovered the public service expenditure operation in 1968–69, it has felt that should take its eyes off the Estimates and look at the public expenditure service figures. It was sensible of the House finally to realise that Whitehall did not bother at all about the Estimates and made its planning on the basis of the public expenditure service figures.

It was quite right that the 1969 Committee should indicate that one can examine long-term planning only on the basis of the PESC figures, but it is not right that one should therefore not look at individual proposals in the annual cash appropriations in the Estimates because between the PESC figures and the Estimates there is an enormous gap.

In the aid field, for example, we are told hardly anything about aid expenditure in the Public Expenditure White Paper which comes out every year. We are told only the amount to be spent and a few indicators of the breakdown between grants and loans and so on, and between that and the great detail of 500 items of aid expenditure in the Estimate, there is room for study by a Committee of the House. We have a sub-committee of the Expenditure Committee told off to cover foreign affairs and defence, including overseas aid. Yet these Estimates come to the House without ever having been looked at by that sub-committee of the Expenditure Committee at all. No sane institution runs its affairs in that way. If Whitehall were to run its affairs in that way, this House would be the first to come down on it like a ton of bricks and say that it was not doing its job properly.

We are not doing our job properly by not even using the Committees with which we have provided ourselves to look carefully at the Estimates. We shall not get this right until we formally commit Estimates to the Expenditure Committee.

The 1969 Blue Book—the first report of the Procedure Committee—which the Government, regrettably, declined to implement as it stood, suggested terms of reference for the Expenditure Committee which would have read: To consider public expenditure, and to examine the form of the papers relating to public expenditure presented to this House. The Expenditure Committee, as set up over the last 18 months, has not done that. The 1969 Blue Book suggested terms of reference for each subject subcommittee of its Expenditure Committee: To consider the activities of Departments of State concerned with "—subject X—" and the Estimates of their expenditure presented to this House; and to examine the efficiency with which they are administered. The 1969 Procedure Committee Report stressed strongly the necessity for looking at the long-term PESC figures. Nevertheless, in the terms of reference which the Committee suggested for the subcommittees, it continued to stress the necessity for looking at the Estimates of expenditure presented to the House.

I am suggesting that what needs to be done is that when any proposal for expenditure comes to the House, the House should formally refer it to the Expenditure Committee. By a proposal for expenditure, I mean Estimates, Supplementary Estimates, revised Estimates and Votes on Account. They should stand referred to the Expenditure Committee with a requirement that a return should be made by a specified date.

The Expenditure Committee should then refer them immediately to the subcommittees of which it is composed. It would be up to the subject committees to do something or nothing as they saw fit, and I am not suggesting that the subject sub-committees of the Expenditure Committee should go through these every time one comes forward, not even if they are asked to do so. What would happen, if we had a formal reference, is that they would tend to look at them more often than they do now and to recognise that it was their job to look at them, and if there turned out to be something wrong with them, the blame would not lie equally distributed between all Members of the House but within the framework of the Expenditure Committee on which it happens to serve. I should feel a greater obligation to study the Estimates if I knew that the blame would ultimately lie with me more than with anyone else if something had gone wrong.

There is also the consideration that studying the Estimates is an educating process. If one wants a degree of specialisation in committees of the House, as we have to some extent in the subcommittees of the Expenditure Committee, one of the ways of increasing the expertise of members of those committees is to get them one way or another to take more interest in the Estimates, because there is a great deal of information about the activities of the Departments with which they are concerned which they will not find other than by studying the Estimates.

Finally, if Committees of the House had to study the Estimates, the form of the Estimates would be likely to be improved faster than the improvements which have been adopted over the past few years. Even typographically the Estimates are a mess. If Committees had to study them, what is wrong with them would be likely to be improved more quickly.

The House is guilty of gross neglect in the manner in which it supervises enormous sums of public money. It takes the view that the Government will get their way in the end anyway and that therefore hon. Members need not look at either the totals requested or the detailed purposes for which they are requested. We rely for auditing control on the Public Accounts Committee after the event to see that the money has gone on the purposes for which Parliament said it should be spent, but we do not before the event try, to ensure that the purposes for which it is requested are correct.

I think that we shall put this right in the end, but our methods at the moment are unprofessional and incompetent. They will be put right. It is only a question of timing and we need in this respect to move much faster. Immediately after the creation of the Expenditure Committee we could not have expected faster changes, but the Expenditure Committee has been in existence for 18 months and it has not resulted in any more rigorous scrutiny of proposals for expenditure.

It is about time in this limited respect to change things so that the Estimates are formally referred to the Expenditure Committee and its sub-committees, so that the House gets a report, which may be a "nothing to report" report, on any proposal for expenditure by the Government.

8.28 a.m.

The Chief Secretary to the Treasury (Mr. Patrick Jenkin)

As the hon. Member for Islington, South-West (Mr. George Cunningham) recognised, I am not the most appropriate person to reply to the brief debate that he has initiated. He recognised from the outset that his remarks were addressed rather to the House as a whole than to the Government.

I acknowledge the compliment that he paid the Treasury and those officials of Departments who work on the control of public expenditure. He acknowledged that this has reached a very high pitch of efficiency, one of which Parliament and the country as a whole may be proud. I think it is true to say that the system of control of public expenditure within government that we have evolved over the past ten years—which is a relatively short period—for the vast system of Government spending, puts us, if not in the van, at the forefront of nations in the manner in which we approach the problem.

I listened with great interest to what the hon. Member said, but his remarks were addressed to matters that were not for the Government, and he recognised that, although we might have an influence upon them, they were matters for the House and in particular for the Expenditure Committee.

Of course, Treasury Ministers are bound to be concerned with the manner and the effectiveness with which the House of Commons scrutinises the various documents which we lay before the House covering public expenditure. As Chief Secretary, naturally I have a particular interest in this. Perhaps that is why it was felt appropriate that I should offer a few comments this morning on what the hon. Gentleman said.

I think that it would perhaps be helpful here if I were to look at some of the recent developments in the manner in which the House scrutinises public expenditure, in order to put the hon. Gentleman's comments, if he is looking for further improvements, in a proper context. When the Procedure Committee considered this whole area in 1968–69 it had a number of complimentary things, quite rightly, to say about the Estimates Committee which was the predecessor of the present Expenditure Committee. That Committee was in no doubt about the continuing importance of the annual Supply Estimates. But the main core of the Procedure Committee's Report was the recognition that the expansion of Government activities, for which not only the central Government but other bodies—nationalised industries and local authorities in particular—were responsible and the extension of the time scale over which the plans for public spending now have to be made, had not been matched by the corresponding development of the parliamentary institutions necessary to scrutinise all this expenditure.

Mr. George Cunningham

They still have not.

Mr. Jenkin

The hon. Gentleman says that they still have not. In fact, very important strides have been made to bring our institutions up to date. The Procedure Committee gave a very warm welcome for the then Labour Government's proposals to publish an annual White Paper covering the whole of public expenditure. They added a couple of proposals of their own. The first was that the White Paper should be subject to an annual two-day debate in the House, and the second was that the Estimates Committee should be changed into an Expenditure Committee. Our predecessors did not get round to making decisions on the second proposal and this fell to us. I acknowledge that we did not wholly follow the details of the proposals of the Procedure Committee, but we followed the great substance of them. We agreed that a fuller scrutiny of expenditure was desirable and accordingly the Expenditure Committee was established at the beginning of last year.

This was much more than just a change in name, although I sometimes wonder whether the House of Commons recognises how important the change is in strengthening the means available to Parliament to exercise control over the executive. First, the change of name reflected a change in the Committee's terms of reference. These now enable the Committee to give attention to the whole area of public expenditure and to plans for future spending up to five years ahead. This represents a very great extension of the work done by this Committee over that which was done by the Estimates Committee before.

Of course, the Supply Estimates remain within the ambit of the Committee's work and this is made perfectly clear in Standing Order No. 87 which is the order establishing the Expenditure Committee and which says: There shall be a select committee … to consider any papers on public expenditure presented to this House and such of the estimates as may seem fit to the committee and in particular. … The Estimates are and were always intended to remain within the ambit of the Committee's work. But the essence of the Procedure Committee's proposals was that the Estimates cover only part of the field of public expenditure. The hon. Gentleman will recognise this. For a great many subjects one needs to know what other public bodies were doing before forming a view on the contribution made by voted expenditure.

Furthermore, the Estimates cover only one year, and it is now recognised that, if one wants to scrutinise expenditure properly, one must do it over a period. As has often been said, it is only in the fourth or fifth years of the period that one can seek to alter the direction of expenditure. The first three years of the five-year rolling programme tend to be pretty well set, and one can make changes only towards the end of the five-year period.

Second—this is, perhaps, an even more significant change—the Expenditure Committee has the right, which the Estimates Committee never had, to scrutinise policy. It is only when one can look reasonably far ahead that it makes sense to consider proposed levels of spending in terms of the policies which they are intended to serve.

Mr. Cunningham

The hon. Gentleman must recognise, however, that although the Estimates Committee was not supposed to look at policy, it did so. For example, the 1968–69 Sub-Committee on Aid certainly looked at policy, although it was not supposed to do so. But no sub-committee of the Expenditure Committee has looked at any of the 1972–73 Estimates. It might be free, under its terms of reference, to do so, but, in fact, no part of the Expenditure Committee has looked at—or, rather, reported upon—any part of these Estimates. That is so, is it not?

Mr. Jenkin

I am glad that the hon. Gentleman changed the wording of his question, since I am not a member of the Committee—no member of the Government is—and I have no knowledge of what work it may have in hand. The hon. Gentleman is quite right in saying that the Committee has not reported on the Estimates, and I have no doubt that he made that point to the Committee. But I return to the point which I made at the beginning, that this must be a matter for the Expenditure Committee. The hon. Gentleman asks that the House give instructions to the Committee. That is a matter for the House to decide, not for the Government.

I was referring to the changes between the Estimates Committee and the Expenditure Committee. One other change is that the numbers were substantially increased, and this has enabled the Expenditure Committee to organise itself in functional sub-committees and to conduct a number of wide-ranging inquiries at the same time.

I have said that I do not believe that the work of the Expenditure Committee has yet received, either from the House or outside, the recognition which its importance deserves. The reason is simple. The Committee is breaking new ground. It has been in existence for only 18 months or so, and it has produced relatively few reports. But, if I may say so, it is extremely encouraging for those of us who are particularly concerned with the work of the Expenditure Committee to see the quality of the reports which have been produced, and I pay tribute to the members of it, and, in particular, to my right hon. Friend the Member for Taunton (Mr. du Cann), its distinguished Chairman. There will be a steady flow of reports, and I hope that they will have a progressively more powerful and deeper impact as time goes on.

Where does consideration of the Estimates fit into this? As I suggested at the outset, it is not for me to pronounce on how the Expenditure Committee should conduct its activities. Indeed, if I tried to do so, I should, no doubt, be sharply told where to get off. But, clearly, there is a judgment to be exercised about how the Committee should deploy its resources to take the fullest advantage of the opportunities for scrutiny now available to it. My understanding is that the Committee has scrutinised some recent Supplementary Estimates; and there are standing arrangements under which the Treasury draws the Committee's attention to the main features of each set of Supplementaries as it is published.

This may help. It may not be enough. We are very willing to consider any proposals which the Committee puts before us if it wants the matter to be handled in some other way.

One suggestion, which, I think, under lay a lot of what the hon. Gentleman said, is that sometimes the Supply Estimates are in much greater detail than the figures which appear in the annual Public Expenditure White Paper. That is quite right, and, naturally, the hon. Gentleman is anxious to scrutinise some of the detail of the expenditure programmes. What I can tell him—I am sure that, as a member of the Committee he is aware of it—is that the Expenditure Committee has been taking full advantage of its increased opportunities to call for detailed comments on a variety of expenditure programmes.

At the latest count Government Departments had submitted about 150 memoranda in response to requests by the Committee. I am not complaining about this: in fact I am entitled to say that it reflects a genuine willingness on the part of the Government to ensure that the House can exercise a more effective scrutiny over public spending.

The hon. Gentleman referred to the form. We are aware of the complaint, and a great deal of work is going on to try to change the form, because clearly it ought to reflect the arrangement of public spending that appears in the White Paper so that the figures can be tied up and the detailed expenditure by functions rather than by spending authorities can be reflected in the Estimates. But one has always to recognise that the Estimates have the function of enabling Parliament to vote expenditure by a spending authority, and therefore that vote has to be reflected in the Estimates. A good deal of work is going on, and we hope eventually to be able to put some proposals before the House for consideration.

The Expenditure Committee goes out of its way to see that the material provided by Government Departments is published, but I do not think that right hon. and hon. Members who do not happen to be members of the subcommittees begin to be aware of how much material is available, both as evidence tendered to the Expenditure Committee and its sub-committees and in the sub-committees' own reports. The most worrying aspect of the matter is the limited extent to which the House of Commons as yet appears to have taken on board the significance of the changes that have been made.

It may be that if we changed the Standing Order, and if we gave an instruction to the Committee to look at the detailed Estimates, somehow this would change the position. But I doubt it, because what the House of Commons is primarily concerned with is policy, and policy is far more effectively scrutinised in the programmes set out over the five-year period involving all the spending authorities concerned with a particular head of expenditure. If one considers education, one has the local authorities as well as the Department. I merely mention that as one example. By scrutinising central Government Estimates one gets only the vote figures for one year.

Mr. George Cunningham

That is all very well. The Government ask us to vote this lot, not to vote the PESC figure. If the Government say that they will not ask hon. Members to vote all that detail because they know that hon. Members do not read it, we can make other arrangements, but as long as we are asked to vote it, we have to look at it. That is the weakness of the stress being placed by the Minister on the rationality of looking into this.

Mr. Jenkin

I believe that the hon. Gentleman is paying more attention to the form than to the substance. The substance of the matter is to be found in the policies which find their expression in the programme in the public sector over the years, with all the spending of the spending authorities lumped together. That is in the White Paper and is elaborated by the memorandum. The Estimates are the form in which the authority to spend can be conferred by the House on a spending authority, and there is nothing to prevent the hon. Gentleman or any of his hon. Friends from devoting such scrutiny to these Estimates as he chooses. No doubt he will seek every opportunity to pursue those areas in the Estimates which attract his attention.

I would place much greater importance on trying to get the House as a whole to recognise the importance of the work being done by the Expenditure Committee, the significance of the reports it produces, the effect they can have upon the evolution of policy within Government Departments. This is a much more important part of the function of scrutinising public expenditure than to comb through the detailed Estimates which are produced for one year's expenditure and only for the central Government expenditure which is sanctioned by vote.

I listened carefully to what the hon. Gentleman said. No doubt he will use his influence in the Committee to seek to persuade it to devote more of its resources to the Estimates. But I believe, bearing in mind the appropriate degree of importance which attaches to the functions which I have outlined, that the Government will find it difficult to introduce a Motion of the sort for which I think the hon. Gentleman was asking. The Expenditure Committee is in its early stages, producing valuable reports. I am sure that its work will become of greater importance as it gathers experience and as the whole process becomes more familiar. I should like the House to feel that it can take a greater interest in the reports of the Committee before obliging the Committee to take on board new functions of the sort the hon. Gentleman suggested.

I have probably not answered all the hon. Gentleman's points. That would be difficult in this short debate. But we shall study most carefully what he said. I hope that he will at any rate feel that if we carry on as we are for the present we are evolving a vastly better machine for scrutiny than the House has ever had before.