Political commentary

The fall and rise of Treasury control

Ferdinand Mount

When plans for reform on rational lines are put forward, it is always useful to consider among other things what's in it for the reformer. Does the proposal materially improve the power, influence, or bank balance of its author? Does it make his life easier or more interesting? The author himself may be wholly unconscious of these questions; his motives may be wholly innocent and praiseworthy. All the same, the questions do raise themselves. But they are not the sort of questions that MPs could decently put to the senior civil servants who have been giving evidence to the Expenditure Committee about the control of public expenditure.

The immediate purpose of the hearings was to examine the Treasury's plans to assimilate the system of estimates presented annually to Parliament with the cash limits recently introduced to restore control of public spending.

MPs on the Public Accounts Committee — the other Select Committee which keeps an eye on government spending — had already had a crack at the same senior civil servants. And the PAC report, published this week, radiates general satisfaction with the new arrangements. Mr Edward du Cann, in a not untypical mood of self-congratulation, seems to think that the Treasury proposals follow the PAC's own recommendations quite closely. In fact, the PAC seems worried mostly about government underspending in the first two years of cash limits.

But is this bland unconcern justified? Is the Treasury genuinely prepared to break down the figures into detailed headings to bring what the PAC calls 'greater realism, incisiveness and precision to the management and control' of public spending? After all, for kears the Treasury told MPs that cash limits were impracticable. The only Commons debate on this far-reaching reform took place just before breakfast in one of those pre-Christmas marathons and lasted precisely one hour during which the Minister of State showed every sign of failing to understand the speech which he admitted the Treasury had written for him. It seems unlikely that the Treasury would have undergone a total conversion to the new system without a little more prodding.

Mr Michael English, Labour MP for Nottingham West and the chairman of the Expenditure sub-committee, is not what you immediately think of as the chief inquisitor type. He has a pasty, melancholy mien. He stares at the ceiling and clears his throat a good deal. His voice too has a somewhat distant quality as though filtered through wet dishcloths. For long periods he is silent, erupting into speech only when one of his fellow committee members threatens to develop a cogent point. The whole thing is more like Pinter than F. E. Smith.

And yet in his roundabout way Mr English does tend to end up somewhere near the heart of the matter. Why is it, he inquired of Sir Anthony Rawlinson, the second permanent secretary to the Treasury, that in 1867-8 expenditure was voted on by Par liament under 216 different headings, averaging about £184,000 each, while in 1977 the number of votes had fallen to 165, the average value of each being £265 million. Even after allowing for inflation, each heading was ninety-two times larger now and the degree of accountability in the way the money was spent accordingly. reduced by a factor of ninetytwo.

Well yes, Sir Anthony agreed, that did seem to represent a diminishing of par liamentary control. But then larger cash

blocks had the advantage of easier managerial control. There was a lot to be said for handing out big blocks and telling people,

'You get on with it and don't come back asking for more. You've got to consume your own smoke.'

But, Mr Nicholas Ridley, Tory MP for Cirencester, pointed out, the Treasury's own evidence on the operation of cash limits had shown that the smaller the block the greater the level of underspending. In other words, public money sloshing around • in these huge amounts was more likely to get spent, whether needed or not, than if assigned in smaller amounts to more detailed purposes.

Rawlinson: `Ah yes, but if you chop up the blocks, you increase the chances of having to come back during • the year to Parliament for more.'

Ridley: 'Exactly, but that would mean a supplementary estimate which would enable us immediately to identify where overspending has taken place.'

Rawlinson: 'Yes, one of the most important things about assimilating cash limits to

the Estimates would be to increase the importance of Supplementary Estimates — as long as there aren't too many of them for Parliament to cope with.'

Mr du Cann's committee seemed to swallow this one quite happily. One felt that there was a limit to the number of Sup" plementary Estimates they were eager to wade through. Mr English was less easily satisfied.

English: 'Well, what's wrong with going back to detailed headings?'

Rawlinson: 'It would be a step back from recent reforms tending to larger headings which correspond with the headings of the Public Expenditure Survey.'

And who thought up those reforms? How did anyone ever come to think that the way

to improve control of public spending was to hand out larger lumps of taxpayers' money with fewer opportunities for Parliamentary scrutiny?

First, we need to understand the extremely vague nature of the rules governing the preparation and scrutiny of the government's accounts.

English: 'What is the legal authority for defining the scope of estimates?'

Rawlinson: 'I don't know in a formal way. In fact, I don't know at all.'

English: 'Am I right in assuming that the Treasury decides?'

Rawlinson: 'I'm no expert. But I think it is taken that if Parliament votes it, Parliament iS satisfied.'

English: 'I think you can take it that if Parliament votes it, that is because it is in the draft.'

Mr English would appear to be right. As far as I can see from Lord Bridges' little book on the Treasury, the Exchequer and Audit Departments Act of 1866 not only still confers on the Treasury statutory control over all public expenditure but pretty much leaves it to the Treasury to lay down The form in which accounts should be kept.

It is this Act therefore which confers on the Treasury both its huge area of discretion and its power over other departments.

The Exchequer and Audit Act did not work too badly so long as the Treasury contained a bunch of skinflints who enjoyed bullying other departments and liked saving candle-ends. It was the Select Committee itself which made a fatal mistake at a fatal time. In a report published in 1958, it rashly called for a small independent committee to inquire into the theory and practice of Treasury control. The mandarins moved like lightning to squash any suggestion of an 'outside' committee but, with a brilliant deviousness which mere politicians can only gape at, set up an internal inquiry which had a kind of external façade in the shape of Lord Plowden and a few other old Whitehall hands. The work was essentially shaped and controlled by the Treasury but achieved a spurious authority in that it was fronted by persons not at that moment in government employ and commissioned and accepted by a Parliamentary Committee (poor souls, how could they know any better?).

The Plowden Report is a mandarin's charter. At every turn and in every field it is designed to save the time and trouble of the senior civil servant while adding to the job satisfaction which comes from being able to spend other people's money without fear of

criticism. The Estimates must be 'simplified.' Arrangements between the Departments and the Treasury must be 'liberalised' to 'allow for a somewhat greater flexibility' and greater opportunities for 'delegation' — that is to say for the relaxation of Treasury control. We must move away from tedious 'piecemeal' decisions towards 'wider concepts of long-term control of expenditure.' We must impose the 'primary incentive for economy on the spending authority.' The general grant system gives the local authorities 'a direct inducement to economy' or, putting it another way, it saves first-class Whitehall minds from having to concern themselves with the pettifogging concerns of provincial town halls. 'Long-term expenditure surveying' is the only occupation for really able men. And we don't want to hear any more of this suggestion that 'Parliament should in future authorise commitments' to specifjc items of expenditure. This-is not the kind of work 'for which the parliamentary machine is equipped' and we have told the Government to forget it. We do the authorising around here. And, what's more, we don't want these parliamentary committees 'imposing an unreasonable -load upon the Permanent Secretaries.' It's very kind of us to come along and answer or, as the case may be, not answer your questions as it is. Select committees ought to 'adapt themselves to the changing structure and requirements of the governmental machine.' We must, at all costs, avoid 'immersion in a sea of detail.'

If money is being wasted, it is entirely because the politicians insist on wasting money on subsidies or prestige projects. 'We have not seen evidence of any substantial inefficiency and waste in the sense of nugatory expenditure and conspicuously expensive methods of work.' Would somebody kindly pass Mr Leslie Chapman a couple of valium?

The Plowden Report is one of the most splendiferous pieces of bureaucratic arrogance and self-aggrandisement in the history of British administration. Seizing on the undoubted reality that in the early 1960s 'the attitudes of Parliament and public opinion no longer apply as systematic a restraint to public expenditure as they did in the past,' the mandarins took the opportunity to dispense with all effective machinery of restraint. They took advantage too of the fashion for 'indicative planning' to elaborate newer and altogether more grandiose concepts of administrative control. The Budget was no longer to be seen 'as a simple balancing of tax receipts against expenditure, but as a sophisticated process in which the instruments of ta, qtion and expenditure are used to influence the course of the economy.' The substitute for the old-fashioned counting of candle-ends was to be the Public Expenditure Survey, a 'sophisticated forward look' at 'prospective resources' over a five-year period.

By now, most of us are aware of the dangers of counting in funny money and of

how meaningless the notion of prospective resources is as a basis for deciding how much money to spend this year and on what. We understand too the tempting sleight of hand by which successive governments allot a big increase in public expenditure to the first year of each five-year plan, claiming . that public spending will taper off there. after, thus arriving at a plausible average over the whole period — whereas in practice the first year's figure is the only figure worth a damn because that is real money that is going to be spent. The result is that the next year's five-year plan starts from a sharply raised baseline, and so on. Moreover, as Mr Terry Ball points out in his memorandum to the Expenditure Committee, `by the time the PESC report reaches Ministers, the first year of the Survey — the current year — is almost entirely immutable and expenditure in the second year—beginning in only a feik months' time — can be altered only marginally without seriously disrupting programmes and services. The focus of attention therefore tends to be on the third and subsequent years of the Survey.' Yet by the time these years are reached, the economic situation may entirely have changed again. In other words, long-term control of expenditure is no control. Worst still, it tends to be a substitute for detailed 'sustained scrutiny of how the money is being spent now.

Yet if these things are now recognised, it is not yet generally recognised how much they are the results of reforms dreamed up and driven through by the Civil Service itself, nor how intimately they are connected to the interests of the bureaucracy, nor how tenaciously the bureaucracy still clings to them in the face of the disasters they have caused and the pressure to return to the detailed headings of the old days.

The introduction of cash limits, as Mr English points out, may improve Treasury control, but it is doubtful whether it improves parliamentary control. If anyone could be expected to suggest ways in which cash limits could be used to improve parliamentary scrutiny it ought surely to be Whitehall's resident watchdog, the Comptroller and Auditor General, Sir Douglas Henley. Alas, if Sir Anthony Rawlinson was somewhat less than helpful to the Expenditure Committee, he was Christian Aid Week in comparison to Sir Douglas, who claimed that more information about public expenditure estimates would merely 'produce complications for yourselves'; shades of Sir Anthony's suggestion that MPs would be well-advised not to bother their pretty little heads with too many supplementary esti • mates.

Could Sir Douglas not at least give them the records of what had been spent in the previous year and in the nine months of the current year to compare with the estimates of the year to come, as local authorities did? No, he couldn't; there were technical difficulties and anyway his department hadn't got the staff, they couldn't be expected to know every little price increase, the Committee would have to ask the Treasury.

But the Committee had asked the Treasury the week before and the Treasury had said that it would be a mistake to give more precise information about spending plans, mainly because 'experience has illustrated the risks of linking firm planning decisions too closely to highly uncertain projections of the economy over a number of years.' In other words, it is a mistake to get stuck with spending commitments, abandonment of which in the face of an economic crisis will be depicted as 'savage cuts'. But who was it who originally suggested that these longterm projections of the economy should form the central feature of expenditure control? None other than the Treasury mandarins, who now admit that these projections are even fleetingly plausible only so long as they are not examined in detail.

Sir Douglas is a mild man and quietspoken — the epithet as inescapably associated with senior civil servants as rosyfingered with Homer's dawn. In fact he is so quiet-spoken that the blushing shorthandwriter has to ask him to repeat himself. And yet his obstructiveness is so unwaveKing that he drives some MPs on the Committee to the brink of apoplexy.

Could the Civil Service not at least adopt the American method of relating blocks of work to parliamentary votes so that MPs could see what the money was being spent on? No, that would conflict with the requirements of the Public Expenditure Survey and with the requirements of Parliament. But, Mr John Garrett, Labour MP for Norwich South, almost screeches, this is Parliament asking.

Ah well, Sir Douglas says, deftly switch ing his ground, you can't just make Mr X or Mr Y responsible for spending this or that dollop of £100,000. There are in Whitehall 'these complex, interlocking relationships' (what you or I would call committees). In business, of course, they may do these things differently. But Sir Douglas has `no personal experience of business'; he speaks with the modest pride of one who has spent a lifetime keeping out of brothels. Efforts to institute businesslike methods of keeping the books in Whitehall have as often as not turned out to be more like 'playing shops.' The important thing was to induce in the Civil Service 'the feeling of accountability'. Not accountability, just the feeling. Parliament's job was to 'concentrate upon the broad level of distribution and volume of public expenditure,' that is, to keep its nose out of Sir Douglas's ledgers.

These exchanges are worth recording at some length to show how strongly entrenched in Whitehall is resistance to the imposition of any effective parliamentary control of public expenditure. The uninhibited extravagance of the glorious 1960s and 1970s may no longer be permitted, but the Treasury remains determined to make sure that if the politicians insist on these newfangled (in reality oldfangled) cash limits it will be the Treasury which controls their application.