Financial scrutiny in Parliament

One of Parliament’s most important constitutional roles is to control and scrutinise the government’s taxation and spending. It does this in several ways, which have changed over the years. Parliament does not perform well compared with international best practices when it comes to financial scrutiny, although there have been some recent attempts to improve the system.

Parliament’s role in the public finances

Parliament has been involved in controlling the supply of money since before it was even called “Parliament”. A mixture of legislation and long-standing constitutional convention allows it to grant or deny the government the right to levy taxes and spend public money.

However, these powers have also changed over time, and at present they are far weaker in practice than their history would suggest.

The current scrutiny system

Scrutiny of taxation and spending by legislatures is typically broken down into two main categories: scrutiny before the money is spent (“ex-ante”) and scrutiny after it is spent (“ex-post”).

Parliament’s scrutiny before spending is somewhat limited. It takes place at three main groups of events:

• Spending Reviews, at which the government lays out its spending plans for the next few years
• Budgets and other financial statements, at which taxation measures are announced and spending plans are updated
• The Estimates process, in which Parliament approves spending for the current financial year.

The system of scrutiny after spending in the UK Parliament is generally regarded as more effective. This takes place through:

• Scrutiny of annual reports and accounts published by government departments
• Reports by the National Audit Office
• Inquiries and evidence sessions carried out by Parliamentary committees, in particular the Public Accounts Committee and the Treasury Committee

International comparisons and best practice

The Organisation for Economic Co-operation and Development (OECD) published a report in 2023 which summarised best practices in financial scrutiny across the legislatures of its members (including the UK). The report outlines nine categories of practices, including fiscal responsiblity, legislative approval of the national budget, and organisation of committees.

The UK Parliament’s performance against the OECD’s recommendations is very mixed. In some areas (such as financial audit) it rates highly, but in others (such as having a dedicated budget committee, or meaningful influence on the implementation of the budget) it falls well short of international best practice.

Improving financial scrutiny

There have been some attempts in recent years to improve Parliament’s scrutiny. One significant change has been to the Estimates process, such that Parliament is encouraged to debate the contents of Estimates themselves rather than simply the policy ideas surrounding them. This has resulted in attempts to amend the government’s spending plans, something that had not happened in the previous two decades.

The House of Commons Procedure Committee looked into the possibility of setting up a dedicated Budget Committee in 2019. It recommended that such a committee be set up, but neither the government at the time nor any subsequent administration has taken the recommendation forward.