Holding Government to Account 150 years of the Committee of Public Accounts

1857 – 2007 The Committee of Public Accounts would like to acknowledge the use of a number of sources in the preparation of this document. In particular, it has drawn heavily on “ The Control of Public Expenditure: Financial Committees of the House of Commons” by Basil Chubb (Oxford 1952) and made use of “The Accountability and Audit of Governments” by E L Normanton ( University Press 1966), “’’ by Ben Pimlott (Harper Collins 1993) and ‘‘ : Does Parliament Work?’’ by John Garrett (Victor Gollancz Ltd 1992) and the Oxford Dictionary of National Biography (Oxford University Press, 2007). We are grateful for the assistance of the National Audit Office in preparing this history and the House of Commons Library for supplying invaluable reference material. Holding Government to Account 150 years of the Committee of Public Accounts

1857 – 2007 ‘‘That there shall be a standing Committee to be designated

’’The Committee of Public Accounts’’; for the examination of

the Accounts showing the appropriation of sums granted by

Parliament to meet the Public Expenditure, to consist of‘‘ nine

members, who shall be nominated at the commencement of every Session, and of whom five shall be a quorum. 31 March 1862

Houses of Parliament 1860 As current Chairman of the Committee of Public Accounts, I am delighted to present this short history, which has been prepared to celebrate 150 years of the Committee.

History should continue to inform the present. This booklet reminds us of the contemporary relevance of the centuries old desire to strengthen Parliamentary scrutiny over the public finances. It shows how our approach to public accountability has evolved as the nature of government has changed.

Edward Leigh Introduction

Expectations about the proper stewardship and accountability for public money go back many centuries. Generations of politicians and public officials have recognised the significance of the proper handling of public funds, the need to combat fraud and corruption and the importance of getting the most from revenue. Such themes have been at the heart of relations between the Crown and Parliament, and then subsequently have featured in numerous Parliamentary debates.

The Committee of Public Accounts is a key part of our accountability arrangements to safeguard public money. One hundred and fifty years ago this year – in 1857 – a select committee of the House of Commons recommended the creation of a committee to oversee government accounts. This was a crucial step in the already long running efforts to secure proper stewardship. In 181, the Committee came into being and continues to this day to examine the use Government makes of public money. Over time, the role of the Committee has changed in line with the needs of the day – for example, widening the type of subjects considered from purely financial matters to broader concerns about the effectiveness of public programmes; increasing the number of hearings held and reports produced; and taking evidence from a wider range of witnesses, including from outside the public sector.

 At times, there has been resistance to the expansion of the focus of the Committee’s enquiries: in the late nineteenth century, for example, to the consideration of more than just the regularity of expenditure; in the 1940s to the desire for access to public corporations; and in the 1990s to its desire to examine public sector companies. Nevertheless, the mutual interest in the effective use of public money between Government and Parliament is clear and only recently, the Government stated in its response to the Committee’s 17th Report 2005-0 ‘‘Achieving Value for Money in the delivery of public services’’: ‘‘….that it takes the Committee’s recommendations seriously as the fruit of the accountability process. The best proof of this is that, as the report acknowledges, the vast majority of the Committee’s recommendations

have been acted upon. The Committee has thus helped the Government

‘‘

to secure financial savings, raise the standards of public services and improve the quality of delivery.

This history of the Committee of Public Accounts – once described by Professor Peter Hennessy as “the queen of the select committees… [which]…by its very existence exerted a cleansing effect in all government departments’’ – starts with the creation of the Committee and then charts the expansion of its interests, the challenges of two world wars and the subsequent growth of public expenditure with the development of the welfare state in the 1940s and 1950s. It highlights the Committee’s championing of higher standards of auditing in the late 1970s and 1980s, its concerns for maintaining standards of conduct in public business in the 1990s, and its efforts to modernise audit and accountability arrangements in the 2000s. A lot has changed, but much of the work of today’s Committee of Public Accounts would be very familiar to those who have served on it throughout the last 150 years.

7 8 Creating a lasting structure of accountability – the 1850s and 1860s

There is a long history in the of attempts to improve Sir Francis Baring stewardship over money raised through . Often this was stimulated by the consequences of war. In the 1780s, for example, William Pitt The driving force behind the moves that led ultimately to the the Younger took steps to gain control of national finances after creation of the Committee of the American War of Independence, but it was in the middle of the Public Accounts. A grandson of nineteenth century that major changes in public finances began to take Francis Baring, the founder of shape. At the time, the role of Parliament in the process of control was Baring Brothers banking house, limited. Whilst it had, for several centuries, been responsible for raising he was one time Chancellor of revenue and authorising expenditure, its scrutiny of public spending the Exchequer and First Lord of was weak. Intermittent attempts had been made to gain greater the Admiralty. He was involved control, but these were often thwarted by a lack of information. The first in finance committees in the House of Commons for several systematic presentation of accounts to Parliament began at the turn decades, pressed for a committee of the nineteenth century, and in the 1830s accounts showing actual of accounts in the 1850s and expenditure by the Admiralty were introduced, followed subsequently chaired the Select Committee on by the Army and other departments. Public Monies, which made the recommendations which shaped In the eighteenth and early nineteenth centuries, a number of financial the reform of public finances in committees were established in Parliament, but real and permanent the 1860s. He became the first change was slow. Within the House of Commons there existed a Chairman of the Committee of small group of interested Members of Parliament who pressed for Public Accounts. improvements and in 1857 one of them, Sir Francis Baring, successfully called for a Select Committee on Public Monies. The Committee, which Baring was to chair, secured the support of Gladstone (page 12) and Palmerston, and was set up to inquire into “the Receipt, Issue and Audit of Public Monies in the Exchequer, the Pay Office, and the

9 Audit Department”. The Committee’s efforts formed the basis for the financial reforms of the next decade, and it was described by a Head of the Treasury a generation or more later as “having practically decided the form in which Parliamentary control over expenditure should be established”. It recommended that the system of appropriation accounts in use for the services was extended to other civil departments, with accounts to be compiled annually and considered by a committee of the House of Commons nominated by The Speaker.

Despite this development, progress in implementing the recommendations was slow, with Disraeli, as Chancellor of the Exchequer, not minded to act. Only in 1859, with William Gladstone in this post, did the idea of a Committee of Public Accounts receive the necessary support, and in April 181, Gladstone moved for a committee and the motion was carried to create the Committee of Public Accounts.The following year, the House of Commons passed a Standing Order, which read:

“That there shall be a Standing Committee of Public Accounts; for the examination of the Accounts showing the appropriation of sums , the granted by Parliament to meet the Public Expenditure, to consist of Committee’s chair between 1870 nine members, who shall be nominated at the commencement of and 1871, later became Chancellor every Session, and of whom five shall be a quorum.” of the Exchequer. By repute, when he presented his one and only Budget speech to Parliament he discovered that he had left the ministerial Red Dispatch Box containing it at home in Northamptonshire. This is said to be the start of the tradition that, when a Chancellor leaves for the House of Commons on Budget Day, he shows the assembled crowd his box by holding it aloft.

10 , who chaired the Committee of Public Accounts from 1877 to 1880, was murdered in Ireland in1882 – along with the Permanent Under Secretary, Thomas Henry Burke – on the day of his appointment as Chief Secretary for Ireland by several men from an Irish nationalist group known as the Irish National Invincibles. The event became known as the Phoenix Park Murders. Burke, not Cavendish, was the target of the assassins.

11 Sir – chair of the Committee of Public Accounts in 188 – was entrusted by Disraeli with the reorganisation of the Conservative Party, following its defeat at the general election of 188. The Conservative success at the general election of 1874 is widely attributed to his efforts.

Whilst it took several years to establish the Committee of Public Accounts, it took even longer to introduce more of the proposed reforms and it was not until 18 that the Exchequer and Audit Departments Act was passed. The Act marked a significant step in the development of Parliamentary control. It required all departments, for the first time, to produce annual accounts, known as appropriation accounts. It also established the position of Comptroller and Auditor General (C&AG) and set up an Exchequer and Audit Department (E&AD) to provide supporting staff from within the civil service. The C&AG was given two main functions – to authorise the issue of public money to government from the Bank of England, having satisfied himself that this was within the limits Parliament had voted, and to audit the accounts of all Government departments and report to Parliament accordingly. This created a uniform system of accounting and in 189 the first complete appropriation accounts were laid before Parliament. William Gladstone The Committee of Public Accounts quickly developed the practices The structure and function of that continue to this day. It obtained information by questioning the Committee date back to the officials from the departments, although it was not until the 1870s that reforms initiated by William Gladstone when he was Chancellor the Treasury agreed on a uniform basis for representation under the of the Exchequer in the mid- title of Accounting Officer. It was agreed that “wherever it is practicable, nineteenth century. Gladstone the Permanent Heads of Departments [will] render the Appropriation was born in 1809, the son of a Accounts of grants for the services under their control”. The Committee prosperous merchant. He was produced reports on a range of topics, based on evidence, and elected to Parliament in 1832 as began to comment on action that had been taken to respond to a Tory, and then led four Liberal previous recommendations. It avoided policy issues but took a wide governments for a quarter of a interpretation of its role in reviewing the accounts. century (1868-74; 1880-85; 1886; and 1892-1894). He held the post of Chancellor of the Exchequer between 1852 and 1855 and then resumed the post under the Liberal premiership of Lord Palmerston in 1859.

12 In 185, Sir John Lubbock (Committee of Public Accounts Chairman, 1887–8) published what was probably the most influential archaeological text book of the nineteenth century, entitled ‘‘Pre-historic Times, as Illustrated by Ancient Remains, and the Manners and Customs of Modern Savages’’, in which he coined the distinction between palaeolithic and neolithic man, summed up existing evidence in favour of human antiqiuity and drew attention to the similarity between prehistoric tools and those in use by ‘modern savages.’

13 Extending the focus beyond regularity – 1890s and 1900s

Much of the focus of the Committee of Public Accounts during its early years was on the regularity of expenditure (that is spent in accordance with the authorities governing its use) and on urging government departments to improve the standards of accuracy of their accounts. It also pressed departments for explanations for why they had spent money in certain ways. The Committee built up its expertise and improvements in the standards of accounting by the 1880s were a testament to its influence and persistence.

Towards the end of the nineteenth century, the Committee gave support to the C&AG as he developed his work to examine the economy and efficiency of government expenditure, as well as regularity. Although such themes had often arisen, there was nothing

14 in the legislation that suggested that the C&AG had a broader role. Despite this, the Committee of Public Accounts stated in 1887 that ‘if, in the course of his audit, the Comptroller and Auditor General becomes aware of facts which appear to him to indicate an improper expenditure or the waste of public money, it is his duty to call the attention of Parliament to them’. This issue arose during work on the War Office accounts. When the C&AG had queried a contract for ribbon costing 20 shillings when a previous contract had cost only 14 shillings, the War Office had refused to respond.

The Committee’s position was not supported by government departments or by the Treasury, with the latter arguing that, whilst departments were bound to provide information to establish the regularity of expenditure, they might refuse to explain why they had spent money in one way rather than another, although the Government accepted that departments might have to account to Parliament for their refusal.

However, further work established precedents for such examinations. In the 1890s, the Committee supported the C&AG in investigations into the costs of shipbuilding. On this occasion, the Treasury gave its support. Some years later, audit reports on massive waste and mismanagement in the South African War, led in 1904, to a Royal Commission of Inquiry and a new emphasis on the importance of value-for-money in public spending. In 1911, the Committee again supported the C&AG in investigations into price discrepancies in the purchasing of horses and the absence of competitive tendering. Having extracted a promise from the War Office to ‘furnish explanations’ in future on such matters, departmental attempts to limit the C&AG’s discretionary powers came to an end. As a result, auditors were able to undertake more ambitious work, looking, as one Committee member put it, “beyond the formality of the expenditure, to its wisdom, faithfulness and economy.”

15 Maintaining careful oversight – World War One and the inter-war period

The First World War saw the relaxation of established financial controls. The swift setting up of new departments, often with insufficient financial staff, and the need to purchase supplies urgently, all led to a lowering of standards of financial management. These developments preoccupied the Committee, which undertook considerable work on the spending of the Army and Navy, their relations with contractors and their supply systems. They were particularly concerned to make recommendations on forms of contracts and pressed government departments to ensure they curbed excessive profits amongst their suppliers.

1 Personal liability of Accounting Officers

In 1920, it came to the Committee’s attention that the Accounting Officer of the Ministry of Information who served between April and December 1918 had failed to The realities of the expansion of government over many years before gain Treasury approval for a and during the war meant that automatic audit checking of all number of payments described transactions became wasteful and impractical and this requirement as “personal remuneration ended with the Exchequer and Audit Departments Act 1921. The and allowances” totalling a same year also saw the last recorded instance of an Accounting Officer sum of £101 6s. 3d. In 1921 personally repaying funds not considered chargeable to an account. the Committee ordered that the monies be repaid, which After the war, the Committee sought to enforce the traditional they were – in full – by the principles of control again, with many of its reports in the 1920s Accounting Officer from his and 1930s – not unlike those of the nineteenth century – criticising own pocket. the failure of departments to comply with standards of reporting and accounting. The Committee was also a strong critic of what it saw as excessive expenditure, commenting on one occasion on the “imperative necessity for securing economy in every department of public (as, indeed, of private) life, if national bankruptcy is to be avoided”. Much of its work focused on the C&AG’s reports of waste and extravagance, looking beyond the accounts to consider whether money had been used wisely. Increasingly, this developed into considering issues relating to the ways in which departments were organised and their staff deployed.

17 Walter Guinness, 1st Baron Moyne, chairman of the Committee of Public Accounts in 1924, was assassinated in Cairo in 1944 by the Zionist group Lehi, known in the United Kingdom as the Stern Gang.

The 1920s and 1930s also saw the Committee focus on a number of matters of accounting policy as Government changed the manner in which it sought to meet high and long-term expenditure in ways seen as inconsistent with traditional principles of operating according to an annual budget. The Committee criticised the use of statutory loans to meet capital expenditure, previously met by the annual budget. It was very wary of the development of new methods of financing government projects such as the Road Fund and the National Health Fund, fearing that expenditure would be incurred without prior Parliamentary authority. Such concerns led it to ask for, and secure, an extension in its terms of reference in 1934 to allow it to consider, “such other accounts laid before parliament as the committee may think fit”.

Around the same time, the Committee considered how far annual Parliamentary authority could be regarded as sufficient for a government department to exercise its functions in cases where no other specific statutory authority existed. The Committee was concerned that government was gaining Parliamentary authority for some areas of expenditure simply by use of the Contingencies Fund, but without troubling to obtain specific statutory powers. These concerns, dating back to the 180s, led to the 1932 Committee of Public Accounts Concordat: a long-standing agreement between the Treasury and the Committee of Public Accounts which established the general rule that continuing functions of government should be defined in specific statute. The Concordat underscored the Committee’s desire to curtail Government spending without statutory approval by permitting only “certain recognised exceptions” to this general principle.

18 Scrutinising an expanding public sector – the post-war period

The Second World War created considerable challenges for the Committee. It increased the volume of spending and the pace of demands again made it hard to enforce its traditional standards. As in 1914-18, the Committee increased its concentration on contracts and contract procedure, on price reviews and profit fixing, as well as the state’s role as a buyer within the country and overseas. It had to accept a relaxation of standards of accounting and non-compliance with many of the practices that in peacetime it would have been able to insist upon.

The subsequent post-war growth in public expenditure and the creation of the ‘welfare state’ underlined the importance of ensuring public funds were well spent and the Committee examined many aspects of government financial management.

19 Harold Wilson long-held principle that power was best consolidated by taking a range Between 1959 and 1963 Harold of key offices, it complemented Wilson, later Prime Minister, was his already unique collection of Chairman of the Committee of strategic positions. In particular, Public Accounts. His biographer, it enabled him to tighten his grip Ben Pimlott wrote: on the parliamentary party’s “In addition, Wilson increased economic and financial policy, his influence within the House by at a time when this had become becoming Chairman of the Public a matter for debate. It also had a Accounts Committee, the powerful practical benefit: at a time when select committee responsible for accommodation in the Palace of ascertaining how money voted by Westminster was not available for Parliament has been apportioned senior Opposition front-benchers, and spent. Though this post was the Chairman of the PAC was always held by a senior member of provided with a room of his own the Opposition, there was no recent – a citadel of great importance precedent for a Shadow Chancellor in Westminster’s psychological taking it. Wilson, however, saw a battleground.” number of advantages to the new position. In accordance with his

20 Major subjects pursued included: Defence procurement; contract control and pricing; project management in such areas as weapons systems, civil works, roads and hospitals; a wide range of grants and subsidies; programmes; agricultural schemes; and assistance to industry. Indeed, value for money work became an important feature of the Exchequer and Audit Department’s audit for the Committee, with well developed methods and techniques. Chevaline

The period saw some challenges to the ability of the Committee to The Public Accounts Committee’s scrutinise some new areas of expenditure. The creation of publicly report into the Chevaline owned corporations after 1945 provided for accounts to be audited Project in 1982 prompted by commercial accountants and laid by sponsoring ministers in reform to the way the Ministry Parliament. Although the Committee’s standing order allowed it of Defence reports its spending to consider the accounts, the C&AG had no rights of access and to Parliament. The Chevaline thus could not assist the Committee. The Government was keen to Project was to update Polaris avoid what it saw as interference in the day to day operations of the missiles at an estimated cost corporations, and without audit reports, the Committee’s reviews were of £175m in 1974. This figure severely circumscribed. rose to £530 million in 1982. The project had been devised The Committee, led for a time by future Prime Minister, Harold in 1967 but Parliament was not Wilson, investigated a number of high profile cases in the 1950s and informed until 1980. The affair 190s. In 1958-59, the Committee reported on poor estimating and prompted an examination by the financial controls in contracts for the development of aircraft and Committee of Public Accounts engines, and in 192-3 its report on the Ferranti case was debated which led to two concessions in Parliament. The report showed that the contractor – which had far from the Government. After better information available to it than was in the hands of the Ministry’s 1982, the Ministry of Defence officials – had made an estimated profit of 3 per cent, which the was to make a Major Project Committee described as excessive. This examination was one of many Statement to the PAC and looking into major defence projects – Chevaline in the 1980’s being Defence Committee – effectively another important investigation. disclosing the existence of projects costing more £250m. In addition, after 1987, Defence Equipment Project Reports have been provided for items over £25m.

21 Championing higher standards of audit for public money – 1970s and 1980s

During the 190s and 1970s, a number of commentators inside and outside of Parliament expressed concerns about the effectiveness of the process for scrutinising public money. There were complaints that many of the events considered by the Committee of Public Accounts had taken place long before they were reported. There were a number of other restrictions on the C&AG’s value for money work for Parliament. In particular, he did not have specific statutory authority to carry out such examinations, and he was advised that legislation precluded him from reporting to Parliament on matters arising from his examinations other than when accounts were laid before the House.

The Committee’s reports regularly featured recommendations arguing for a widening of the C&AG’s access rights, some of which, such as for universities, were accepted by the Government. Subsequently, Parliament – initially through the General Sub-Committee of the Expenditure Committee in 197-77 – began to examine and comment on the need for reform of state audit and in particular, the importance of the independence of the C&AG. The PAC reported in 1979 and issued a Special Report on ‘The Role of the Comptroller and Auditor General’ in 1981, which argued for a statutory basis for VFM work as The Committee first ‘a logical part of the C&AG’s work’. It also endorsed the wide-ranging admitted the public and cross-departmental studies that had started, and supported the press to hearings in the view that there was no reason why the C&AG’s VFM reports should 1977–78 session. necessarily be published with the accounts. The first televised hearing of the Committee took place on 4 December 1989 when it considered a report on the Sale of Rover Group.

22 The attention of the PAC – chaired during this period by (later Lord Barnett) – increased the pressure for reform, but it took a Private Member’s , introduced by Norman St John Stevas (later Lord St John of Fawsley) in 1982, to generate the reforms that set up the National Audit Office. The National Audit Act 1983 confirmed the C&AG as an Officer of the House of Commons, and head of the National Audit Office, whose staff were no longer civil servants. The Act gave the C&AG statutory power to produce value for money reports and enabled him to report to Parliament in a more timely manner on discrete subjects. It also established the Public Accounts Commission Joel Barnett to oversee the budget of the National Audit Office. Joel Barnett was born in 1923 The Act gave a new lease of life to the work of the Committee, with and is a Labour member of the VFM studies forming the basis for almost all of its hearings thereafter. House of Lords. He served as Chief Secretary to the Treasury, The widening of the focus of the work of the C&AG provided the from 1974 to 1979 gaining a seat Committee with a broader range of topics to consider. Increasingly, its in the cabinet from 1977 onwards. hearings tackled more extensive issues of the quality of public services, During this time he oversaw the the effectiveness of policies and programmes, and the consequences devising of what is known as for citizens of shortcomings in administration. Nevertheless the De the ‘’ by which Lorean case (page 24) showed traditional concerns remained a key public spending is apportioned part of the Committee’s work. between England, , , and . He was Chairman of the Committee from 1979 to 1983.

23 De Lorean

Between July 1978 and February 1982, the Government provided assistance totalling some £77 million to establish the De Lorean manufacturing project in Northern Ireland. The company aimed to produce up to 30,000 cars a year, with a workforce rising to 2,000 over five years.

In February 1982, some 12 months after starting full-scale production, the Northern Ireland company went into receivership. Production ceased in May 1982 and the plant closed six months later.

In July 1984, the Committee of Public Accounts reported that, “the De Lorean project represents one of the gravest cases of the misuse of public resources to come before us in many years”. The Committee noted that there were still a number of matters which had not been fully resolved. A key issue was an alleged fraud of some £8.8 million. The Comptroller and Auditor General for Northern Ireland undertook to monitor progress and published his report on the outcome in February 2004.

24 Safeguarding public money in times of change – 1990s

The 1980s and 1990s saw many changes in the way Government in the United Kingdom was organised. The creation of executive agencies, the privatisation of many public assets and the establishment of many arm’s length organisations spending public money presented new challenges for the Committee, chaired from 1983 to 1997 by Robert Sheldon (later Lord Sheldon). In 1993 the Committee issued a report entitled “The Proper Conduct of Public Business” in which expressed its concern that:

“In recent years we have seen and reported on a number of serious failures in administrative and financial systems and controls within departments and other public bodies, which have led to money being wasted or otherwise improperly spent. These failings represent a departure from the standards of public conduct which have mainly been established during the past 140 years. This was the period Robert Sheldon following the publication of the Northcote – Trevelyan Report which Robert Edward Sheldon (later condemned the nepotism, the incompetence and other defects of the Lord Sheldon) was elected Civil Service and brought about fundamental change. It is from that Member of Parliament for period that we acquired the principles and the standards which have Ashton under Lyne at the 1964 come to be copied by some countries and admired by many more. It is general election, serving until the our task to retain those standards.” 2001 general election, when he was created a life peer. He was The Committee argued that although the changes had been intended Financial Secretary to the Treasury to improve the provision of public services through greater delegation from 1975 to 1979. He was of responsibilities, streamlining and a more entrepreneurial approach to Chairman of the Committee of Public Accounts from 1983 the work of Government, “at a time of change it is important to ensure to 1997 – the longest serving that proper standards are maintained in the conduct of public business”. Chairman to date. The report identified a number of failings on which the Committee had reported in key areas of financial control, compliance with rules, the stewardship of public money and assets, and generally getting value for

25 the taxpayer’s money. Alongside each of these failings was a checklist of points for public bodies to keep in mind in order to guard against the risk of such lapses in the proper conduct of public business.

The Committee’s determination to maintain a robust oversight of public expenditure was further highlighted in the case of the Pergau Dam. In July 1991, the Secretary of State for Foreign and Commonwealth Affairs overruled the advice of the Accounting Officer of the Overseas Development Administration and ordered the expenditure of up to £234 million on the project. The go ahead was given despite warnings given by the Accounting Officer that the project was “unequivocally bad … in economic terms”. This case led the Committee to conclude that its responsibility to examine value for money made it particularly important that it conducted inquiries in cases where an Accounting Officer has been overruled. It recommended that the Treasury memorandum setting out the Accounting Officer’s responsibilities be amended to provide that such officials communicate, without undue delay, papers relating to all cases where Ministers issued a direction on matters involving prudent and economical administration, efficiency and effectiveness. This was accepted by the Government.

2 Modernising accountability arrangements – 2000s

In the late 1990’s, continuing changes in the government landscape stimulated Committee concerns about the ability of traditional arrangements to support proper accountability. This was neatly summarised by the Committee of Public Accounts in 1999, which suggested: ‘‘…The framework established by Gladstone provided for the Comptroller and Auditor General to give assurance, through his audit of departments’ accounts, that funds approved by parliament had been spent in accordance with the principles

of appropriation.….But government has changed out of all ‘‘

recognition since the 19th century; funds are now spent by a range of bodies which help to deliver departmental programmes.

It added that “Parliament has the right to expect the same standards of probity and regularity in the use of public funds however they are spent’’.

Disquiet at the impact changes in government were having on audit and accountability took a number of forms. One concern related to the consequences of the changes in service delivery bodies. The Committee noted that government departments had established a variety of “arms-length” public bodies: executive agencies, Non- Departmental Public Bodies (NDPBs) and other local spending bodies, and had established private contracts for the delivery of services. The scale of spending outside of traditional channels was significant; between 1979 and 1999, the annual spending by non-departmental public bodies more than doubled, in real terms, to £18 billion.

27 Of more specialised interest – but going to the heart of parliamentary concerns about accountability – were the apparently arbitrary decisions about who audited many of these bodies. Although there had never been any doubt that the C&AG would audit executive agencies (which remained legally part of their parent department), this was not the case for NDPBs. By the late 1990s, although the C&AG audited around two-thirds of these bodies, the remainder were audited by private sector firms appointed by, and reporting to, Ministers under legislative powers. As a consequence of decisions taken during the 1970s, 1980s and 1990s around 0 organisations were in this position, spending more than £3 billion a year.

28 In 180, public expenditure was £87 million – approximately £8 billion in today’s money. By 2007, the Committee of Public Accounts was responsible for scrutinizing £587 billion of expenditure

Another fear of the Committee was that the NAO and, by extension, the Committee, was in many cases being excluded from specific areas of spending. The Committee quoted examples where it felt the C&AG had had problems scrutinising spending; Training and Enterprise Councils, Housing Associations, Royal Palaces, Private Finance Initiative contractors, and Camelot (the Lottery company). Similarly, the Committee drew attention to what it saw as the restrictions on the C&AG’s access, compared with the apparently stronger powers of access within the United Kingdom of the European Court of Auditors and the European Commission.

The Committee, led by David Davis MP, saw parliamentary consideration of the Government Resources and Accounts Bill – the first major reform of government accounting since the 18 Act – as the opportunity to strengthen the C&AG’s powers. In response to the David Davis Committee’s concerns, expressed in two reports, the Government asked Lord Sharman of Redlynch to review audit and accountability David Davis was elected Member arrangements for central government. His recommendations were of Parliament for Boothferry at substantially accepted by the Government and led to reforms of the the 1987 general election. He was Parliamentary Secretary at audit arrangements for NDPBs, greater access for the C&AG to a range the Office of Public Service and of lower tier bodies spending public money and ultimately, following Science from May 1993 until the passage of the Companies Act 200, the right to audit companies. July 1994 when he was appointed Minister of State at the Foreign and

Commonwealth Office. In 1997, he assumed the chairmanship of the Committee of Public Accounts, holding it until September 2001 when he was appointed Chairman of the Conservative Party. Since November 2003, he has been the Shadow Home Secretary.

29 Members of the Committee, November 2007: (L to R) Keith Hill, Nigel Griffiths, Austin Mitchell, Angela Eagle, Ian Davidson,

30 Making accountability real today

Today’s Committee of Public Accounts consists of sixteen members. The members are nominated at the beginning of each Parliament on the basis of a motion made by a Government minister, after consultation with the Opposition. Changes in membership are made from time to time during the Parliament, often because Members have become Ministers or front-bench opposition spokesmen.

The party proportions of the Committee, like other committees, are the same as in the House, and at present this gives nine Labour members, five Conservative members, and two minority party members (at present from the Liberal Democrats). Divisions in the Committee are very rare. One of the members is the Financial Secretary to the Treasury, who, by convention, does not normally attend. The Committee chooses its own chairman, traditionally an Opposition member. The Committee is assisted by the C&AG, a permanent witness at its hearings, along with his staff, who provide briefings on each report and assist in the preparation of the Committee’s own reports.

The Committee of Public Accounts today holds more than 0 hearings a year, and in 200-07 published 2 reports. These ranged right across the work of government from major projects such as the Thames Gateway and the preparations for the 2012 Olympics, administrative processes such as helping companies fulfil their tax obligations and the implementation of child support reforms, social issues such as legal aid and anti-social behaviour, as well as timeless value for money concerns such as procurement and employment programmes. The effectiveness of the Committee’s work can be gauged by the high proportion of recommendations accepted by Government and acted

31 upon in ways which lead to better public services. Its impact can be seen, for example, in the clawback arrangements following the sale of public assets, the sharing of Private Finance Initiative refinancing gains, improvements in the service provided by those managing the financial affairs of people with mental incapacity and a wide range of other ways in every part of government.

The most recent period of the Committee’s history has seen a number of developments under the chairmanships of David Davis and Edward Leigh. The Committee has produced a number of cross-government reports, pulling out lessons from its work on particular topics. These have included privatisation and the Private Finance Initiative, as well as a compendium on lessons from more than 20 reports on problems with IT projects during the 1990s. More recently, it has published reports drawing on more than a decade’s worth of material to Edward Leigh comment on the obstacles to government achieving greater value for Edward Leigh was first elected money, and to highlight the factors behind high quality public services. as Member of Parliament for In addition, as well as senior government officials, the Committee has Gainsborough & in 1983 and later to the new seat of increasingly taken evidence from representatives of private sector Gainsborough in 1997. From 1990 organisations responsible for supplying government or delivering to 1993 he was a Parliamentary services on its behalf. They are present alongside the main witness, the Under Secretary of State at relevant Accounting Officer. The Committee has also made a series of the Department of Trade and visits overseas – to the United States, the institutions of the European Industry. Prior to that he was a Union, Denmark, , Portugal, Spain and Sweden – in order to Parliamentary Private Secretary inform itself of parallel developments in other accountability regimes. in the Home Office. A former member of the Social Security Select Committee, he became Chairman of the Committee of Public Accounts in 2001.

32 The Committee has seen its role change in certain areas. The creation of the devolved assemblies in Scotland, Wales and Northern Ireland, ended the Committee’s role in scrutinising much of the expenditure in these countries, but the privatisation of many utilities and the creation of new regulatory regimes, for example, for water, gas and telecommunications, has provided new opportunities to examine key public services. This is in contrast to the situation when such industries were in state hands (see page 21).

Despite the continuous changes in government, an examination of the history of the Committee of Public Accounts shows considerable continuity in terms of the areas of interest and concern about the ways in which public money is spent. The language may have changed and the size of the sums of money involved may have grown, but the themes of identifying waste, tackling poor performance and making the best use of public funds remain as they were 150 years ago.

33 The impact of the Committee of Public Accounts

In October 2007 the Chairman of the Committee of Public Accounts highlighted the positive response of the Government to recommendations made in recent reports from the Committee. These examples give a good sense of the breadth of the Committee’s interests.

l The Child Support Agency is taking l The Ministry of Defence has introduced steps to make better use of the a range of actions to increase methods it uses to calculate and collect recruitment and retention, including maintenance payments. The number the new One Army Recruiting change of cases in receipt of maintenance is programme which will provide a more reported to have increased from 385,000 efficient and effective recruiting process in March 2005 to 48,000 cases by across the Regular and Territorial Army. June 2007, benefiting around 0,000 It is also examining better ways of children. And the Department for recruiting, training and supporting Children, Schools and Families has put in Reserve Forces, and offering enhanced place measures to improve the financial medical support to Reservists on their management of children’s centres and return from operations. their ability to direct resources where l The Department for Culture, Media and they are most effective. Sport is addressing key risks to delivering l Work is planned by the Home Office a successful Olympic and Paralympic to support victims and witnesses of Games in 2012 and legacy benefits in anti-social behaviour, including advice the longer term, by developing plans to on providing help-lines in support secure wider benefits for and of a 24-hour service, and a national the rest of the UK, and strengthening support network. oversight and risk management for the programme as whole.

34 The PAC published 1300 reports between 1945 and 2007

l HM Revenue & Customs is taking l Primary Care Trusts are implementing steps to reduce IT running costs and electronic rostering to improve the real- has set more rigorous targets for the time monitoring of temporary nursing delivery of IT projects by its suppliers. staff and associated costs. Following the The Government has agreed that, if a joint venture between the Information department decides to pay an incoming Centre (established by the Department supplier its transition costs, the supplier of Health to centralise the collection and will not be paid a profit on those costs. dissemination of information accross the The Department is also tackling VAT NHS) and Dr Foster LLP (a private sector Missing Trader Fraud by improving the company), the Department of Health timeliness and quality of information has accepted that open competitive exchanged with other EU Member States. processes for awarding contracts should be the norm. l The Office of Government Commerce has launched a new programme, with Permanent Secretary oversight, to improve the value for money of the government’s spending on external consultants. OGC is also exercising tougher scrutiny and oversight over all high-risk and mission-critical IT-enabled programmes and projects. And the Government’s central procurement arm, called OGCbuying.solutions, has now been set a tougher target to save £1 billion a year by 2010-11, compared with l Train users should notice £500 million in 200-07. improvements to their service as l The Department for Business, Enterprise the Government encourages the rail and Regulatory Reform plans to produce industry to simplify the fare structure frequent estimates of the cost of British and refund customers with the Energy’s liabilities. difference when they are charged more than the lowest fare on offer.

35 Chairmen of the Committee of Public Accounts 181–2007

Year Chairman Party of Administration Chairman 181–3 Sir Francis Thornhill Baring Liberal Liberal 184–18 Rt Hon Edward Pleydell Bouverie Liberal Liberal 18 Mr George Sclater-Booth Conservative Liberal 187–8 Mr Hugh C E Childers Liberal Conservative 189 Mr William Pollard Urquhart Liberal Liberal 1870–71 Rt Hon George Ward Hunt Conservative Liberal 1872–73 Mr George Sclater-Booth Conservative Liberal 1874–7 Rt Hon John George Dodson Liberal Conservative 1877–80 Lord Frederick Cavendish Liberal Conservative 1880–83 Sir Henry Holland Conservative Liberal 1884–85 Mr Thomas Salt Conservative Liberal 188 Sir John Eldon Gorst Conservative Liberal 1887–8 Sir John Lubbock Liberal Unionist Unionist 1889–92 Sir Ughtred Kay-Shuttleworth Liberal Unionist 1893 Mr Edmond Wodehouse Liberal Unionist Liberal 1894–5 Sir Richard Temple Conservative Liberal 189–1900 Mr Arthur O’Connor Irish National Unionist 1901–5 Rt Hon Sir Arthur Hayter Liberal Unionist 190–8 Rt Hon Victor Christian William Cavendish Liberal Unionist Liberal 1908–18 Col Robert Williams Unionist Liberal Coalition 1919–20 Rt Hon Sir Liberal Coalition 1921–22 Mr Liberal Coalition Conservative

3 1923 Mr Frederick William Jowett JP Labour Conservative 1924 Lt Col Rt Hon Walter Edward Guinness Conservative Labour 1924–29 Rt Hon William Graham JP Labour Conservative 1929–31 Mr Arthur Michael Samuel Conservative Labour 1931–38 Mr Morgan Jones Labour National 1938–41 Rt Hon Frederick William Pethick-Lawrence Labour National Coalition 1941–43 Lt Col Rt Hon Walter Elliot Unionist Coalition 1943–45 Lt Col Sir Assheton Pownall OBE TD Unionist Coalition 194–48 Rt Hon Osbert Peake Conservative Labour 1948–50 Ralph Assheton Conservative Labour 1950–51 (1) Sir Ronald Cross Conservative Labour (2) Rt Hon Charles Waterhouse 1951–52 Mr Lewis John Edwards Labour Conservative 1952–59 Sir George Benson Labour Conservative 1959–3 Rt Hon Harold Wilson Labour Conservative 193–4 Rt Hon ALN Douglas Houghton Labour Conservative 194–70 Rt Hon John Boyd-Carpenter Conservative Labour 1970–73 Rt Hon Harold Lever Labour Conservative 1972–73 Rt Hon Labour Conservative Acting – due to Lever’s illness 1974–79 Rt Hon Edward DuCann Conservative Labour 1979–83 Rt Hon Joel Barnett Labour Conservative 1983–97 Rt Hon Robert Sheldon Labour Conservative 1997–2001 Rt Hon David Davis Conservative Labour 2001– Mr Edward Leigh Conservative Labour

37 Photography acknowledgements Alamy Getty Images Mary Evans Picture Library London 2012