CONTINGENCIES FUND BILL (Hansard, 21 May 1974)

§ LORD JACQUES

My Lords, I beg to move that this Billl be now read a second time. The Bill before the House does three things. First, it provides for an increase in the capital of the Contingencies Fund, which has remained at £200 million since 1970. Under the Bill, the capital in the present financial year would be increased to £386 million. Secondly, the Bill proposes to replace the present arrangement, under which the capital of the Fund is expressed as a fixed sum by an arrangement under which it is expressed as a percentage; namely 2 per cent. of the authorised supply expenditure in the previous year. Thirdly, the Bill repeals certain legislation which is now spent. The provisions in question are those in the Schedule.

It may be for the convenience of the House if I were to explain what the Contingencies Fund is, why it is now proposed to increase the capital, and why it is proposed to introduce a formula for determining the limit on the capital in future. We are concerned here with a technical piece of financial machinery. There is a fundamental principle which has governed relations between Parliament and the Executive for centuries that if Governments wish to spend money they must first come to Parliament for approval. The Contingencies Fund constitutes an exception which Parliament itself has authorised. It is, as its name Implies, an arrangement under which the 1327 Government are given a certain freedom within a prescribed limit, termed the capital, to anticipate Parliamentary approval of expenditure to deal with contingencies. The contingencies can take different forms; for example, they can be a national emergency, or they may simply be the expenses of a State funeral for a public figure. More frequently, the Fund might be used to cover the period between the time when Parliament has given its approval in principle, and the time the money is voted and provided for in a Consolidation Fund Act or Appropriation Act. I emphasise the Contingencies Fund does not enable the Government to escape from Parliamentary control over expenditure. The Fund can never finally bear any charge, and must always be repaid from some source or other. Normally, it is repaid from a supplementary estimate when this has been presented and passed.

I turn now to the Bill itself. The capital of the Contingencies Fund has been varied from time to time over the years. In 1970 the present limit of £200 million was established. Since then there has been an increase in total supply expenditure of something approaching 50 per cent. There is a rough connection between the level of supply expenditure and the appropriate size of the Contingencies Fund, and the Government might have proposed—and I do not say that anyone would see any difficulty about this—to increase the capital of the Fund perhaps to £300 million or £350 million, or something of that order. The reason for bringing forward now a proposal to increase the capital of the Fund is to avoid the risk that the Fund will run out; and there are at present demands on the Fund which are unusual for this time of the year: the need to finance the payment of food subsidies pending the passage into law of the Prices Bill is one such demand.

But your Lordships may also wonder why the Government are proposing this novel device of a formula—why not just a straightforward increase in the capital of the Fund to £300 million, or some similar figure? The answer is that the Government believe it is sensible, given that an increase in the capital of the 1328 Fund is necessary, to take the opportunity of introducing the formula method for calculation of the capital. It means that henceforth the capital of the Fund will always bear a fixed relationship to the level of supply expenditure in the previous year, and therefore make it unnecessary for a Government to come to Parliament from time to time, as has happened frequently in the past, to ask for an increase.

In other words, this is a modest reform which will save Parliament a little time and trouble. It is not perhaps strictly necessary, but it is in no way harmful and, so far as it goes, it is useful. I wish to emphasise that this proposal is not intended to, and does not, in fact, in any way weaken Parliamentary control over expenditure. None of the rules governing the use of the Contingencies Fund which I mentioned earlier is affected. Drawings on the Fund will have to be repaid. The normal processes of Parliamentary scrutiny of Government expenditure continue to operate unimpaired. There is nothing sinister about the Government's intention. The change is simply a modest tidying up process. My Lords, I beg to move.

Moved, That the Bill be now read 2^a. —(Lord Jacques.)