CONTINGENCIES FUND BILL (Hansard, 10 December 1970)

EARL JELLICOE

My Lords, I beg to move that this Bill be now read a second time, and perhaps I should briefly explain its background. It is, of course, a basic principle of our system of Parliamentary control that Parliament should vote the money for a service before any expenditure on the service is in fact incurred. But it has long been recognised that there must be occasions when this rule cannot be observed. This applies in two main sets of circumstances; in the first place, when expenditure is necessary to meet urgent and unforeseen commitments—for example, the "Torrey Canyons", and the West Country floods of this world; and, secondly, when it is necessary to meet increases during the year in the cost of existing programmes. Against this sort of eventuality there has been in 1066 existence since 1862 a fund, known as the Civil Contingencies Fund, and the Treasury may authorise issues out of this Fund, up to a limit fixed by statute, to meet expenditure in advance of the granting of authority by Parliament.

It is fundamental to this general concept that the Fund can never finally bear any charge. It is purely a Fund from which money may in certain circumstances be borrowed, and it must always be repaid from one source or another. Thus, while its use may enable the Government to anticipate Parliament's voting of a supplementary estimate, it does not obviate the need to secure Parliamentary authority, which is so fundamental to our whole system of Government. At present, the maximum capital of the Civil Contingencies Fund is £125 million, and the purpose of this Bill is twofold; first, to change the title of the Fund to "Contingencies Fund", and, secondly, to increase the maximum capital to £200 million. Clause 1 of the Bill deals with the change of title, and your Lordships will see that the word "Civil" is dropped. This is because it is necessary to reflect the changes in the Defence Estimates introduced in the current year following the recommendation contained in the Second Report of the Select Committee on Procedure. These changes brought the Defence Estimates into line with the Civil Estimates and involved the abolition of the previous liberal arrangements for virement between Defence Votes. It has to be recognised that greater calls on the Fund in respect of defence will be generated in consequence of these changes.

I now come to Clause 2 of the Bill, which increases the limit on the capital of the Fund from £125 million to £200 million. The reason for this is as follows. The present limit was fixed in 1968 on the basis of Civil Estimates, as presented to Parliament, totalling £8,672 million. Defence Estimates were, of course, then hardly relevant, for the reasons I have just explained in commenting on Clause 1 of the Bill. As from the current year, however, we are faced with a new situation since Defence Estimates of £1,912 million must now be brought into this general reckoning. When this figure is added to the total of Civil Estimates, which has risen to £10,879 million in the current year, the overall total of 1067 Supply expenditure as presented to Parliament becomes £12,791 million. This represents an increase of almost 50 per cent. since the limit of the Fund was fixed at £125 million and, in the Government's view, fully justifies an increase in the size of the Fund to restore the necessary flexibility.

May I say this by way of conclusion? It may be argued that one way of avoiding a need to increase the size of the Fund would be by reducing the size of Supplementary Estimates. But I would remind your Lordships that the Public Accounts Committee, as recently as February of this year, expressed the view that taut estimating is essential to Parliamentary control of expenditure. No doubt, a large number of Supplementaries could be avoided by including in the original Estimates, margins for contingencies but this would not be conducive to financial discipline in Departments and might very well result in Parliament's being asked to authorise expenditure on the basis of inflated and unrealistic Estimates. It could thus be an expensive way of dealing with the matter. It is much more economical to have a central Fund for contingencies rather than allow margins for contingencies over a large number of Votes. I have confidence, in view of that explanation, in commending this Bill to your Lordships' House. I beg to move.