Contingencies Fund (No.2) Bill

The Bill is intended to increase the amount of money that can be advanced to Government departments for spending ahead of its approval by Parliament, from 2% of the previous year’s total approved spending to 12%.

In normal times, the Contingencies Fund is a standard part of Parliament’s control of public spending, and allows for Government departments to receive advances for unapproved spending (these advances are then paid back in the same year using money approved through the Estimates process). Between 2010 and 2019 the Fund paid out advances of a few billion pounds per year.

During the Covid-19 pandemic, the Contingencies Fund was used to provide the large amounts of emergency funding required to deliver the new public services that helped to cope with the pandemic’s impact. The Contingencies Fund Act 2020 raised the normal 2% limit to 50%, allowing for up to £266 billion to be advanced to Government departments. This change was time-limited to a single year, expiring on 31 March 2021.

The 2020-21 Supplementary Estimates showed that the actual usage of the Fund was £102 billion, 38% of the allowable maximum. This is over 11 times higher than the Fund’s usage in any year since at least 2010.

The UK Parliament generally has less control and influence over public spending than many other parliaments around the world. While the UK is not alone in finding ways to give government more flexibility to spend in response to the pandemic, continued sustained and substantial use of the Contingencies Fund may attract criticism if it further weakens financial scrutiny without adequate justification.

The current Bill proposes to raise the Contingencies Fund limit for a further year, but this time it would be raised to 12% of the previous year’s approved spending. This would come to a total of £105 billion. When combined with the Vote on Account, the other mechanism by which Government departments receive money ahead of approval (and which has also increased due to higher spending on Covid-19), the Government would theoretically have access to up to £469 billion in 2021-22 without this spending needing to be approved beforehand by Parliament. This is somewhat less than in 2020-21, but still much higher than in previous years.