Volume 15: Government and Public Administration
6. Planning and resources
Accountability
The Treasury
Parliament - the Public Accounts Committee (PAC) and the National Audit Office (NAO)

The Treasury

6.5 Headed by the Chancellor of the Exchequer (one of the three most senior Cabinet Ministers), the Treasury was responsible for all aspects of the national finances. Apart from fiscal and monetary policy and regulation of financial institutions, it had two other key responsibilities:

1. the control of public expenditure and value-for-money in the public services - overseen by the Chief Secretary to the Treasury, who reported to the Chancellor but was also a Cabinet Minister; and
2. the formal procedures whereby Parliament voted funds for specified purposes - overseen by the Financial Secretary, who was not a member of the Cabinet.

6.6 As guardian of the public finances, the Treasury's role was to appraise and agree the expenditure plans of 'spending Departments' (ie, all other Government Departments and Agencies). No such plans could be implemented without prior authorisation by the Treasury ¹ and by Parliament, and Departments were not allowed to overspend their approved budgets without such authorisation. This was not obtained easily. Powers to transfer allocated monies between expenditure programmes, and between different expenditure heads within programmes, were usually closely circumscribed. However, in a national emergency - for example, an outbreak of war or a major natural disaster - the Treasury could make resources available from the Contingency Reserve of unallocated funds for which provision was made annually in the Budget.

6.7 Negotiating for resources always involved tough bargaining, heavily occupying senior officials and culminating in bilateral meetings between departmental Ministers and the Chief Secretary to the Treasury. If agreement could not be reached, the issue was considered by a Cabinet committee, usually comprising Ministers who did not themselves have significant responsibilities for public expenditure programmes.

Parliament - the Public Accounts Committee (PAC) and the National Audit Office (NAO)

6.8 The need to account to Parliament for the way funds were used was a key preoccupation of departmental financial managers. Historically, the role of the PAC was to examine Departments' accounts. In practice, this task was delegated to the Comptroller and Auditor General (C & AG), who was an officer of the House of Commons and headed the NAO. The PAC investigated issues drawn to its attention in reports by the C & AG, taking evidence from Accounting Officers and from other officials and from Ministers as appropriate. It would then issue its own report, and the Government had to respond to its recommendations. Such investigations were taken very seriously by all concerned, and provided an extra incentive for proper stewardship and seeking value-for-money.

6.9 The NAO was statutorily responsible for the annual audit of the accounts of all Government Departments (around 30) and Executive Agencies (of which there were 129 by 31 December 1996). The NAO also audited some 150 'non-departmental public bodies' (NDPBs) and some international organisations. Once public money had been spent by a central government body, the C & AG was free to report on the regularity, propriety and value-for-money with which this had been done. As indicated above, the PAC could investigate further on the basis of these reports. Even if no report was considered necessary, the C & AG could send to the body a 'management letter', proposing improvements to its accounting systems.