MPs call for radical shake up of public spending accounting

Written by Richard Johnstone on 27 April 2017 in News

Current government reporting of public spending does not allow public to properly assess value for money of policies, according to report

Departments should set out greater details of public spending, including estimates of unit costs such as school places or police officer visits to improve scrutiny of Whitehall decision making, MPs have said.

In a report examining the effectiveness of government accounts, the Public Administration and Constitutional Affairs Committee said reforms were needed because the current system of government accounting does not allow for citizens to properly assess the value for money of policies.

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Both departmental annual reports and accounts (designed for parliament and the public) and the management accounts (designed for the use of ministers and officials in managing their departments) have not been designed to assist democratic scrutiny, the committee said.

In particular, the annual reports and accounts appear to be currently failing in their purpose of explaining to the public and parliament the effectiveness of government spending.

These should provide more information about value for money and commitments made to parliament, including allocating spending for each policy or service separately to make it easier to see how much is spent in specific areas, such as child and adolescent mental health. This should include unit cost estimates for these services, to reveal the cost of individual parts of the public sector, such as the cost of a school place or a police officer visit.

Committee chair Bernard Jenkin said financial accountability was vital to both parliamentary sovereignty and of democratic government.

“Parliament can only be what Gladstone described it as – the real authoritative steward of the public finances – if the government improves the accounts,” he said.

The committee highlighted that the Treasury has made reforms to published annual reports and accounts, and the UK is a world leader in accruals accounting for government through the annual Whole of Government Accounts, which provides a long-term view of the government balance sheet by setting out long term assets and liabilities, rather than just single year spending.

But this information is still not being used by MPs or citizens as much as they should be, meaning there was a need for further reforms.

Each department should also set out ministerial promises of funding and saving, and what was achieved for that spending, and these should be independently audited.

Rob Whiteman, the chief executive of the Chartered Institute of Public Finance and Accountancy welcomed the report. “At a time of skyrocketing service demand and unprecedented funding cuts, public and parliamentary scrutiny is a must," he said.

“The report rightly acknowledges the UK's position as a world leader in accrual accounting and that to support effective scrutiny a stronger focus on output and outcome measures is required. Having submitted evidence to the inquiry, CIPFA would be pleased to work with the Treasury in developing the framework for departmental annual reports in order to improve their effectiveness without sacrificing transparency.”

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Richard Johnstone is CSW's deputy editor and tweets as @RichRJohnstone

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