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Money and the Constitution: Financial control, reporting and audit*

Published online by Cambridge University Press:  02 January 2018

Ian Harden
Ian Harden*
Affiliation:
University of Sheffield
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Extract

Money is central to the constitution, whether the focus be effective power, legitimate authority, or both. To map the distribution of power within government it is best to begin by examining the control of money, because little of the business of government can be done without incurring expenditure of some sort. Control of money gives control of policy, either directly - because, in many fields, ‘expenditure is policy; policy is expenditure’ -or indirectly, on the principle that he who pays the piper calls the tune.

Type
Research Article
Information
Legal Studies , Volume 13 , Issue 1 , March 1993 , pp. 16 - 37
Copyright
Copyright © Society of Legal Scholars 1993

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Footnotes

*

This paper is a revised version of a contribution to an Italian book on the modernisation of public sector financial controls, edited by Sabino Cassese and sponsored by Reconta, Ernst and Young. I would like to thank Peter Keemer and David Metcalfe of the National Audit Office and Professor Patrick Birkinshaw for helpful comments and criticism. None of the above bears any responsibility for errors, nor for the opinions expressed in the article.

References

1. Hugh Heclo and Aaron Wildavsky, The Private Government of Public Money (2nd edn, Macmillan, 1981), p 345.

2. A. V. Dicey, Introduction to the Study of the Law of the Constitution (19th edn, Macmillan, 1960), pp 447.

3. See eg Erskine May's Treatise on the Law, Privileges, Proceedings and Usages of Parliament (21st edn by C. J. Boulton, Butterworths, 1989), ch 26.

4. This formulation is intended to avoid both the charge of having a ‘monocular view’ of Treasury control (see Terence C. Daintith, ‘Political programmes and the content of the constitution’ in Wilson Finnie, C. M. G. Himsworth and Neil Walker (eds) Edinburgh Essays in Public Law, Edinburgh University Press, 1991) and the distortions which flow from placing Parliament at the centre of a constitutional analysis of public spending.

5. See Erskine May, pp 691–2.

6. ‘Budgetary Reform’ (1992) Cm 1867. The reform may help to demonstrate that British budgetary procedures are designed to ensure the avoidance of excessive deficits, as required by the Protocol on the excessive deficit procedure of the Treaty of Maastricht. Note however that the Estimates are not identical with ‘public expenditure’, although considerable progress has been made in aligning the two in recent years.

7. Procedural opportunities for amending Estimates are very limited and in practice any amendment would be treated as an issue of confidence: see J. A. G. Griffith and M. Ryle, Parliament: functions, practice and procedures (Sweet and Maxwell, 1989), pp 250–1; Ann Robinson, ‘The House of Commons and Public Expenditure’ in S. A. Walkland and M. Ryle (eds) The Commons Today (Fontana, 1981).

8. ‘The Crown … makes known to the Commons the financial requirements of the government; the Commons, in return, grant such aids or supplies as are required to satisfy these demands …’; Erskine May, p 684.

9. M. Elliott makes this point in ‘The control of public expenditure’ in J. Jowell and D. Oliver (eds) The Changing Constitution (2nd edn, Oxford: Clarendon Press, 1989).

10. Grenville v Lord Murray (1869) 9 LR Eq 11, discussed in Elliott op cit pp 189–90.

11. B. L. R. Smith and D. C. Hague, The Dilemma of Accountability in Modern Government: independence versus control (Macmillan, 1971).

12. Exchequer and Audit Departments Act 1866, ss 22, 23.

13. HM Treasury, Government Accounting: a guide on accounting and financial procedures for the use of government departments (HMSO: 1989(and amendments 1–5), referred to hereafter as GA.

14. Exchequer and Audit Departments Act 1866, ss 13–15.

15. GA, 6.1.5.

16. GA, 6.1.5. para 13; 6.1.6.

17. GA, 6.1.5. para 11.

18. GA, 2.3.4.

19. Exchequer and Audit Departments Act 1921, s l(2).

20. GA, 13.3.1.

21. Exchequer and Audit Departments Act 1921, s l(3).

22. National Audit Act 1983, s l(3).

23. Dicey drew attention to the importance of the independence of the C&AG; op cit pp 319–24.

44. National Audit Office, Annual Report 1991 (NAO, 1991), 6–7.

25. Select Committee on the European Communities (1987) The Court of auditors, HL 102, session 1986-7: minutes of evidence, 13 (evidence of Mr Peter Keemer).

26. Peter Keemer, ‘State Audit in Western Europe: a comparative study’, unpublished thesis, University of Bath, 1985.

27. NAO Annual Report 1991, p 7.

48. National Audit Office, NAOA Framework for Value for Money Audits (NAO (undated)).

49. HM Treasury, Government Internal Audit Manual (2nd edn, HMSO, 1988).

30. D. Henley et al, Public Sector Accounting and Finam'al Control (3rd edn, Van Nostrand Reinhold (International), 1989) p 257.

31. National Audit Act 1983, s 6 (2). The limitation imposed on VFM examinations would not legally prevent the C&AG, as part of his financial audit, from questioning the merits of policy objectives that were in conflict with the legislation governing the expenditure.

32. Heclo and Wildavsky, op cit.

33. Aaron Wildavsky, Budgeting: a comparative theory of budgetary processes (Revised edn) Transaction Books, 1986).

34. Gray, A. G. and Jenkins, W. I., Policy analysis in British central government: the case of Par, Public Administration, 60, 329–50 (1982)CrossRefGoogle Scholar.

35. Heclo and Wildavsky, op cit.

36. Efficiency Unit, Making Things Happen: a report on the implementation of government efficiency scrutinies (HMSO, 1985); Managing Scrutinies: a guide for ministers and managers (HMSO, 1985).

37. ‘Efficiency and Effectiveness in the Civil Service’ (1982) Cmnd 8616.

38. GA, 6.1.5 para 7; Annex 6.2.

39. Public Accounts Committee (1981) Ninth Report 1980/81, ‘Internal Audit in Central Government’, HC 270; Keemer, op cit., 70.

40. GA, 6.4; Treasury, ‘Government Internal Audit Manual’, B 4.4.

41. HM Treasury, Using Private Enterprise in Government: report of a multi-departmental review of competition tendering and contracting for services in government departments (HMSO, 1986).

42. For local government see; J. Bennett and S. Cirell, Compulsory Competitive Tendering: law and practice (Longman, 1990); Kieron Walsh, Competitive Tendering for Local Authority Services: initial experiences (HMSO, 1991).

43. ‘Competing for Quality: buying better public services’ (1991) Cm 1730.

44. M. S. Levitt and M. A. S.Joyce, The Growth and Efficiency of Public Spending (Cambridge: Cambridge University Press, 1987).

45. Neil, Carter, ‘Learning to measure performance: the use of indicators in organizations’, Public Administration, 69, 85–101 (1991)Google Scholar.

46. Efficiency Unit, Improving Management in Government: the Next Steps (HMSO, 1988).

47. Efficiency Unit, Making the Most of Next Steps: the Management of Ministers' Departments and their Executive Agencies (HMSO, 1991).

48. The official account is Diana Goldsworthy, Setting Up Next Steps: a short account of the origins, launch and implementation of the Next Steps Project in the British civil service (HMSO, 1991). See also eg Anne Davies and John Williams, What Next? Agencies, Departments and the Civil Service (IPPR, 1991); Ian Harden, The Contracting State (Buckingham: Open University Press, 1992).

49. Ministers may establish companies with no special formality. For example, the task of administering loans to students under the Education (Student Loans) Act 1990 was given to a company incorporated for the purpose under the Companies Acts.

50. GA, 15.2.6.

51. Government Trading Act 1990, s 3; amending Exchequer and Audit Act 1921, s 5. The power was previously limited to a narrow class of activities.

52. Government Trading Funds Act 1973, (as amended by the Government Trading Act 1990).

53. The Chartered Institute of Public Finance and Accountancy (CIPFA) is the main professional accountancy body specialising in public sector work. However, CIPFA has no monopoly on the public sector. For example, NAO trainees now study for the qualification offered by the largest accountancy body, the Institute of Chartered Accountants in England and Wales (ICAEW), most of whose members are involved in private sector work. Some NAO financial audit work is also sub-contracted to private sector firms.

54. Henley et al, op cit, p 10.

55. GA 15.3.20.

56. NHS Management Executive, NHS Trusts: a working guide (HMSO, 1990); Jonathan Wise and David Fernandez, ‘The new style NHS accounts’, Public Finance and Accountancy, 8 March 1991, 1C18.

57. GA, 6.1.5. paras 18–21.

58. ‘The Financing and Accountability of Next Steps Agencies’ (1989) Cm 914, 3.18.

59. GA 11.7.8. See also ‘Cash Limits 1990–1, Provisional Outturn.’ Cm 1587.

60. L. Metcalfe and S. Richards, Improving Public Management (Sage, 1987), p 200.

61. Walter Bagehot The English Constitution (Fontana, 1963).

62. A. Normanton The Accountability and Audit of Government (Manchester: Manchester University Press, 1966).

63. How far the public expenditure planning system is able to perform this task is another question. See eg David Heald, ‘The political implications of redefining public expenditure in the United Kingdom’, Political Studies, XXXIX, 75–99 (1991).

64. National Health Service Act 1977, s 98 and Local Government Finance Act 1982, as amended by the National Health Service and Community Care Act 1990.

65. Price Waterhouse, Executive Agencies: fits and trends (3rd edn) (Price Waterhouse, 1991).

66. ‘Civil Service Management Reform: the Next Steps. Government Reply to the 8th Report from the Treasury and Civil Service Select Committee, session 1987–88, HC 494-1’ (1988), Cm 524; ‘The Financing and Accountability of Next Steps Agencies’ (1989), Cm 914.

67. Metcalfe and Richards, op cit.

68. ‘The Citizen's Charter: raising the standard’ (1991), Cm 1599.

69. National Audit Act 1983, ss 6, 7.