Accountability and the Public Accounts Committee: Lessons in Parliamentary Oversight- the United Kingdom experience
John F. McEldowney, School of Law, University of Warwick, England[1].
Abstract
Constitutions provide a framework for defining the relationship between the legislature, executive and judiciary. Systems of accountability, to be effective, require constitutional protection and independence in their function. Fundamental to the Constitution are the various constitutional watchdogs that provide an impartial scrutiny of government and an assessment of its policy, administration, legislation and public finance. In that regard the judicial power is the most authoritative in terms of defining and interpreting the law. Many constitutional lawyers give priority to the role of the courts and the independence of the judiciary. They often overlook the additional safeguards that are linked to the scrutiny of government outside the role of judges. Courts are not best equipped to look into how financial accountability and how financial control operates in intra governmental relationships. Good financial controls provide high standards in public life and engage with the public interest. Accountability and good governance are essential for the development of the state that encourages citizen participation and building political consent. In a parliamentary form of government the ability of the elected house to hold government to account is central to the role of politicians and the strengthening of political accountability is axiomatic to the health of the political life of the state. Well informed politicians educated in the technical details of financial scrutiny are a safeguard against abuse and provide a powerful oversight of government. Financial control is at the apex of the parliamentary system. Central to the working of financial control is the work of the various financial bodies. This paper provides a case study of the work of the Public Accounts Committee (PAC) and the independent National Audit Office (NAO) in the United Kingdom system of financial control. The setting up of the PAC is examined in its historical background showing how the need for a PAC was recognised as a necessity to provide the House of Commons with political authority for its financial decisions. Serving the national interest in ensuring propriety in government accounts is a cornerstone of institutional building that embraces the need for independent assessment outside government interests in financial matters. The PAC provides a wealth of experience gained over many years and consequently this sets the political culture for it to operate with the Treasury and government departments.
The role of the NAO in the control of public expenditure is also examined as is the tripartite relationship between Treasury, PAC, and the NAO. Finally, the working of the PAC is scrutinised and assessed through some case studies. In actively engaging with constitutional governance the institutions and systems of accountability have to become responsive to the changing needs of society, the impact of the market economy and the sustainable development of democracy. Institutions that are designed to act responsively and prudently are most likely to address such challenges. The PAC offers scrutiny that is political in nature that is linked to independent audit through the NAO that is financial in remit and actuarial in style. The paper offers a critical analysis that questions whether or not the PAC provides a sufficiently innovative approach to the improvement of public services and the reputation of the Commons. The PAC may offer a particular form of scrutiny but perhaps this is not best suited to improving public administration. It is instructive to discover how the PAC has built its reputation and how the unique combination of political oversight and financial information may act as powerful bulwark against financial abuse.
Introduction
Parliamentary scrutiny over the Executive is fundamental in terms of providing the means to hold government to account. Broad issues of constitutional propriety and scrutiny are raised when considering the operation of Parliamentary scrutiny. In the United Kingdom the extent of any effective financial scrutiny of the Executive largely falls on the work of the Public Accounts Committee (PAC) with some input from department select committees. The role and procedures of the PAC are examined in the context of understanding how effective the PAC is in carrying out its role. The evaluation of the PAC is timely. There are many issues that are currently under review in the United Kingdom, not least the ability of the government of the day to show good stewardship of public funds. There is also a large degree of public scepticism about the workings of Parliament, the funding of political parties and the ability of Parliament to self-regulate its own procedures. Despite public unease at the financial allowances and salaries of MPs there remains a strong reputation for financial probity in public life. One reason for this, is the high esteem given to the work of the National Audit Office( NAO) and the PAC. There are many reasons why the PAC is highly regarded by parliamentarians. A significant feature of the current arrangements is that the PAC receives reports from the National Audit Office (NA0) an independent watchdog headed by the Comptroller and Auditor General who is an Officer of the House of Commons and undertakes value for money investigations on behalf of Parliament. The NAO enables the PAC to carry out its role with access to expertise and also access to departmental information. The result allows a more systematic and analytical approach to government accountability than is possible by various departmental select committees. Is the high reputation of the PAC well deserved? What are the lessons to be gained from the PAC and its work in addressing questions about accountability over the government of the day? Does the PAC embrace change and encourage risk taking as part of improving public services? Are there lessons from the PAC that are helpful in considering overseas experiences[2]?
Historical overview
The Committee of Public Accounts, more fashionably called the Public Accounts Committee, was established in 1861 as a” circle of control” during William Gladstone’s period as Chancellor of the Exchequer. The PAC operates as a key part of Parliament’s control over public spending that combines political oversight with technical expertise. The Committee of Public Accounts (PAC) was first established on 8th April 1861. It owes its origins to the earlier appointment of the Commissioners of Public Account in 1780. The appointment of Commissioners regularized past practice as Parliament was concerned that there should be adequate accounts to show how grants and monies had been paid. The nature of this ex post form of control was the main way of bringing transparency to financial processes that were largely a matter of internal control. There were many experimental forms of committees established to take forward the matter of accountability. A select committee to scrutinize public accounts was formed from 1797-98 and then again in 1822. A select committee on public accounts was set up in 1831 and another was established in 1832. Then there was a period of years when little was done other than when MPs raised financial matters when the opportunity arose. A Committee on Public Moneys of 1856 and 1857 was established. This was a very ad hoc basis for proper financial control. There was little continuity from one year to the next and overall little consistency in approach. In a Memorandum by the then Chancellor of the Exchequer in 1857 it was recommended that “… there should be audited accounts annually submitted to the revision of a Committee of the House of Commons nominated by the Speaker”[3]. Under Gladstone’s inspiration this recommendation was later accepted and implemented by resolution in 1861. A year later the annual resolution was turned into a Standing Order of the House of Commons. Standing Order No 86 has the terms of reference for the Committee to conduct an examination of the accounts showing the sums granted by Parliament to met public expenditure “ and of such accounts laid before Parliament as the Committee may think fit.” The impact of setting up the PAC and its constitutional significance was realized at the time. John Morley, biographer of Gladstone, recorded that 1861 was a landmark by creating a unified budget and a set of principles of accountability: The House of Commons had asserted its authority that signaled to the House of Lords, the primacy of the Commons over public finance. Undoubtedly the linking of parliamentary accountability to financial control strengthened the House of Commons and focused the working of government departments to the need for accountability. This coincided with the House of Commons taking its own authority very seriously and asserting Commons pre-eminence over the Lords. This pre-eminence originated from the 17th century when the Lords were disabled to amend financial bills for taxation and public expenditure. The Lords were weakened but not subservient as there remained the possibility of the Lords rejecting a Financial Bill in its entirety. The growing political power of the Commons made conflict with the Lords inevitable. The growth in party political government after the electoral reform of 1832 with popular suffrage left the Commons with a widening popular Liberal majority while the Lords retained an inbuilt permanent Conservative majority based on hereditary. The basis for conflict between the two Houses was later resolved in the Parliament Acts 1911 and 1949. But much earlier in the 1860’s it was recognized that if the Commons was to act as a pre-eminent chamber it needed to consolidate its role and make its authority legitimate in terms of ensuring regularity in government accounts. As Morley noted:
The abiding feature of constitutional interest in the budget of 1861 was this inclusion of the various financial proposals in a single bill, so that the lords must either accept the whole of them, or try the impossible performance of rejecting the whole of them. This was affirmation in practical shape of the resolution of the House of Commons in the previous year, that it possessed in its own hands the power to remit and impose taxes, and that this right to frame bills of supply in its own measure, manner, time and matter, is a right to be kept inviolable[4].
Undoubtedly the foundations of political scrutiny over government finances gave the Commons, and in particular the PAC, an importance that was in touch with the need for political legitimacy as well as the right to exercise power. The role of the PAC and the primary purpose of the inquires it undertook on behalf of Parliament were to ensure that the sums of money voted for a particular purpose were not exceeded and also were incurred for the purpose intended. From the outset this role included the constitutional function of ensuring that there was adequate legal authority for any expenditure and that propriety was observed in the performance of the duties set by Parliament. One interesting feature of the PAC is that when it makes reports to Parliament, the Government responds in the following session through a Treasury Minute laid before the House of Commons. A Treasury Minute is the Government’s response to the recommendations or observations made by the PAC. The PAC soon made its mark and reputation. Major changes to the audit and scrutiny of accounts were introduced by the Exchequer and Audit Departments Act 1866, the Bill had been subject to scrutiny by the PAC, who took evidence, and was then considered in Committee of the whole House of Commons – a sign of the constitutional importance of the 1866 Bill. The reputation of the PAC having been established, allowed it to maintain a significant role in financial scrutiny.
Currently, the PAC consists of up to sixteen members of Parliament and by long standing constitutional convention the PAC is chaired by a senior opposition MP[5]. The choice of opposition MP is usually determined by prior ministerial experience or at least a senior politician with status and experience commensurate with the role. There are several procedural anomalies that determine the role of the PAC. The PAC may not meet when the House of Commons is adjourned. This is unlike other select committees. The PAC does not appoint specialist advisers - a common strategy adopted by many other select committees. This means that the PAC is heavily dependant on the work of the NAO and this is its strength in terms of external and independent expertise. Current constitutional practice is for the PAC to meet regularly on Mondays and Wednesdays around 4pm. The main achievement in its role is to work in a non- party political or partisan way. This is taken seriously by the PAC and also distinguishes its work from that of the other select committees. Usually at its regular meetings the Comptroller and Auditor General or his deputy is in attendance. Technically when considering the estimates of account, the PAC is required to report on the basis that there is no formal objection to the accounts and this includes any Excess Vote. The PAC has around 46 meetings and publishes over 40 reports annually.
The traditional working of the PAC developed over time as part of the annual cycle of financial control. Once expenditure is settled the question of scrutiny and audit arises. Since 1861 the PAC acts on behalf of Parliament to examine and report on accounts and the regularity and propriety of expenditure, which are matters usually covered by the Comptroller and Auditor General's (C & AG) certification audit. In more recent times value for money audit (VFM) examinations have become a major part of the work of the PAC. In that regard the PAC works with the assistance of the C & AG. The constitutional importance of the PAC is beyond question.
Select Committees generally may exercise ex post facto control over public expenditure. The Select Committee on Procedure and the Treasury and Civil Service Committee have been particularly active in assisting in developing strategies for obtaining more information on public expenditure and its more effective control. The PAC's authority and remit[6] differ from those of other select committees in two ways. First is the non party political approach it adopts to its task and the fact already noted that it is chaired by a senior opposition MP. Secondly, its inquiries are almost all audit based and it receives expert assistance from the C & AG through the work of the National Audit Office. In the case of VFM examinations its reports to Parliament carry considerable weight.
The PAC and the control of expenditure
At the outset it is important to recognise some of the constitutional aspects of Parliament’s role that set the context for the PAC. It is remarkable how little the United Kingdom Parliament is able to overview financial and budgetary matters. The formal constitutional position is that only the Government has priority over public finance. The primacy of government control is evidenced in standing Orders of the House of Commons numbers 46 and 47 that provide the Crown with the initiative and sole responsibility for expenditure. Private members, including the Opposition, are unable to propose increased charges on public funds or initiate legislation involving expenditure out of public funds without a financial resolution. An Appropriation Act satisfies the requirement of statutory authority through the supply procedure of the House of Commons on an annual basis by means of the Consolidated Fund Acts and by an Appropriation Act. The revenue side is largely undertaken though the Inland Revenue, Customs and Excise, and as part of the Budget and Public Finance Directorate of the Treasury[7].
The supply procedures required to enable the House of Commons to vote supply and provide the government with funds from the Consolidated Fund, appear technical and formal. Little substantial scrutiny is involved in such procedures. Lord Sharman’s Report, Holding to Account: The Review of Audit and Accountability for Central Government (2001) argued that public money should receive greater scrutiny than private money and advocated a broader definition of public money. He also noted that the PAC was often criticized for failing to encourage innovation and risk taking. However, there were no specific examples that illustrated this criticism. This leaves the suspicion that the PAC may have become over complacent in its role.
The PAC is illustrative of the organic and institutional features of the unwritten and un-codified United Kingdom Constitution. Its constitutional function of monitoring the financial resources and expenditure of government provides a link between financial accountability and political control. A key feature is that the PAC supported by the NAO, acts alongside the Treasury as a means of securing effective and economical public spending. The Treasury, as a government department has a pivotal function in creating financial policy, ensuring that it is implemented and alongside the PAC and the NAO in seeking to ensure that departmental spending is in keeping with the evaluation of good value. The PAC provides the link to Parliamentary scrutiny that enables the House of Commons to oversee government spending as well as to check that Parliamentary authorization is appropriate. Reliance on the PAC and the Treasury allows the government of the day the means to monitor the effectiveness of its spending plans and the achievement of its financial objectives. The PAC acts as a constitutional watchdog while seemingly dependant on Treasury scrutiny at a time when Treasury scrutiny has itself become dependant on adopting all the financial controls of audit and appraisal, input targets and output measurement within its own rules of annual financial planning. As Treasury controls have become more robust and intended to create more effective evaluations of public expenditure, the question posed is whether the PAC is able to maintain an effective role?