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Home -> E. Hilton Young -> The System Of National Finance -> IIIb

The System Of National Finance - IIIb

1. Preface

2. I

3. Ia

4. II

5. IIa

6. III

7. IIIa

8. IIIb

9. IV

10. IVa

11. V

12. Va

13. VI

14. VIa

15. VIb

16. VII

17. VIII

18. VIIIa

19. VIIIb

20. IX

21. IXa

22. X

23. Xa

24. Xb

25. XI

26. XIa

27. XII

But the effect of the
Parliament Act is to give to a financial resolution
of the House of Commons the force of law, in
substance if not in theory. Once the Commons
have passed it, it will become law, whatever the
Lords think about it. The procedure of embody-
ing the Commons' resolutions in money bills
adds now no new check or control in financial
legislation : it has become a fossil in the procedure
of Parliament. As far as the substance of Parlia-
mentary control of public money goes, the whole
business of criticising and approving estimates
and of authorising and appropriating issues might
be compressed and limited to the resolutions of
the Committee of Supply, and nothing would be
lost for which there would not be ample com-
pensation in the time gained for the adequate
discussion of a few more of the Votes which are
now passed in silence under the closure. A
reform of the sort would destroy many interesting
historic relics; but relics, however interesting,
sorely cumber the chambers of a House so
overfilled with work as that of the Commons.


The parliamentary session begins in January or
February: the financial year ends on March 3ist;
and owing to the long discussions of the estimates


in Supply the Appropriation Bill, which makes
operative the financial provision for the year,
usually does not get passed until towards the end
of the session in August. Now the only money at
the disposal of the executive in March is the
money granted for the service of the year then
current, which is limited to that service by the
Appropriation Act of that year and cannot be used
for the service of the next year. Were Parliament
therefore to take no steps after March 3ist, the
executive would be left without power to spend a
penny or to incur a pennyworth of liability on the
services of the new financial year until such time
as a fresh Appropriation Bill should receive the
Royal assent, an obvious impossibility. To fill up
the gap in time provision adequate to meet the
needs of the first part of the coming year has to be
made by a special process before April ist. In
outline the process is a reproduction of the full
process of financial legislation already described,
which puts at the disposal of the Executive money
enough to go on with until the Appropriation Act
is passed to legalize the whole provision for the
year. In order to give time for all the various
stages of procedure, a beginning has to be made
with this process early in March. The first step
is to get enough money voted in the Committee
of Supply to meet the immediate needs in the
coming year of each of the three chief heads of
service, Navy, Army, and Civil Service. When
they send their Estimates to the Treasury, the
departments furnish information to it as to the
amount which they will need to have granted to
them to go on with before the end of the financial


year. In the Parliamentary procedure for grant-
ing them what they need, there is a difference
between the procedure in the case of the Civil
Service Votes and that in the cases of the Votes
for the Army and Navy. It affects the whole
system on which the nation's accounts are kept,
and it needs therefore careful description. As
already observed, the Appropriation Act specifies
the services included in the estimates, Vote by
Vote, and the sum granted for each, and then
appropriates the sum to the service, so that it
becomes illegal to use a sum for the service of any
Vote other than that for which it was granted.
That is the rule, and in the case of the Civil
Service Votes it is an absolute rule ; but in the
case of the Navy and Army Votes the exigencies of
administration give rise to an important exception.
In contrast with the very heterogeneous character
and distributed control of the Civil Service grants,
there is a unity in the purpose for which the
grants for the Navy and those for the Army are
made, and they are each subject to a single control.
There is not therefore in their case the same
reason, in the interests of order and simplicity in
accounting, for keeping at all times an absolutely
impermeable division between the sums granted
for each Vote ; and for convenience' sake it is use-
ful that the Executive should be able to make
temporary use of the money granted for one Vote
in paying for the services of another. The
Admiralty and the War Office are accordingly
allowed to make temporary use of money granted
to them on any one of their Votes for any other
Vote. Ultimately of course they must bring their


expenditure into accordance with the provisions of
the Appropriation Act, and in no case can they
exceed the aggregate amount granted; but in
order to put them in a position to carry on their
work until the Appropriation Act is passed, thanks
to this special liberty it is enough for them that
one or two Votes should be passed before March
3ist big enough to give them as much money as
they will need for all their various purposes during
the interval. It is customary for this purpose to
take in the early part of March the Votes for
pay for the Navy and Army and one or two
others, which provide enough money for the

In the case of the Civil Service Votes there is
no such liberty to make temporary use of money
granted for one Vote for the service of another.
The consequence is that an estimate has to be pre-
sented earlyin the session by the Financial Secretary
to the Treasury of the amount required to be voted
on account of each of the Civil Service Votes before
March 3ist, in order to enable the business of civil
government to be carried on in the coming year
until the passage of the Appropriation Act. The
preparation of this estimate is governed by a rule
that a vote on account must be restricted to such
services as have already received the sanction of
Parliament. In this hasty business of making
temporary provision for the beginning of the
coming year, the House must not be called upon to
give its assent to anything new. Having received
the estimate, the Committee of Supply passes a
resolution granting the amounts asked for therein.
Its Vote on Account for the Civil Service is


in the same form as its ordinary resolutions : it
specifies the total grant, and the distribution of
the total amongst the departments is set out in a

The Supply Resolutions dealing with the Civil
Service Vote on Account and the Navy and Army
Pay Votes safely passed, the further procedure
of financial business already described is run
through in respect of those resolutions, often
in a desperate hurry to get it done before the
financial year runs out. The Supply Resolutions
are reported. The Committee of Ways and Means
meets and authorises the issue from the Consoli-
dated Fund of the amounts granted in Supply.
A bill is at once introduced, based upon the Ways
and Means resolution. This is called the Consoli-
dated Fund Bill. Its operative clause enacts that
the Treasury may issue out of the Consolidated
Fund the lump sum voted and apply it towards
making good the supply granted to his Majesty
for the service of the ensuing financial year.
Except for powers to the Treasury to borrow in
anticipation of revenue, that is all. The bill is
rushed through all its stages and usually receives
the Royal assent in the nick of time on the
last day of March. That done, the executive
is in a position to face the new financial year,
and the House to proceed at its leisure with
the regular business of Supply. It should be
observed that the Consolidated Fund Bill is not an
Appropriation Bill : it does not distribute the sum
granted amongst the particular Votes for which it
was granted. The Treasury may issue any part of
it for any supply granted, a circumstance which


has interesting results to be considered hereafter.
When the Appropriation Act is passed it covers
all the grants included in the Consolidated Fund
Act and appropriates them; but until then the
grants are at large.

In his estimate for the Vote on Account of the
Civil Service the Secretary of the Treasury
specifies the length of time for which he has made
provision. The House of Commons is supposed
to guard with some jealousy against temporary
provision of the sort being made for too long a
period, because to refuse Supply is its final means
of bringing to order an Executive with which it is
in disagreement, and once the Executive has got
its Consolidated Fund Act passed it is indepen-
dent of the House until the money voted therein
is exhausted. At ordinary times however the
House is wont nowadays to assent without demur
to a provision for the expenses of four or five
months, long enough to last until the Appropria-
tion Act can be passed in the normal course.
Formerly it used to insist on a shorter provision,
and then it was sometimes necessary to pass a
second Consolidated Fund Act, when the funds
liberated by the first had all been used up before
the Appropriation Bill could be carried. There is
however one occasion on which the length of time
for which provision is to be made is still a burning
question, and that is when a Vote on Account and
a Consolidated Fund Bill are needed to enable the
Government to be carried on while the sittings of
the House are interrupted by a dissolution and a
general election. The Opposition will then see to
it that the Government does not get money enough


to enable it to postpone the evil hour when it must
call the new House together and face, as they hope,
a majority of its opponents.


Did we live in a perfect world in which nothing
unforeseen ever happened and everybody always
did what they were told, the machinery as it has
now been described would be all that was needed
to get the financial work of the Legislature done,
year by year. But the unforeseen does happen ;
emergencies arise, and it is seldom that the original
estimates are found to meet all the needs of the
year for which they were intended to provide. It
would be strange if they did, because they are
prepared in October and November to meet the
needs of a year which begins in the following
April and so does not end until some fifteen
months later than the time at which the estimates
were settled. Some fresh need for expenditure,
unforeseen and unprovided for in the estimates,
may be expected to occur in the course of the
fifteen months. When it does, to provide for it
one or more Supplementary Estimates are intro-
duced towards the end of the financial year, in
February or March. An estimate of the sort is
needed either when the amount granted in accord-
ance with the original estimate for a service is
found to be insufficient for it, or when a need arises
for expenditure on some new service not con-
templated in the original estimates. In form a
Supplementary Estimate is similar to the original
estimates already described, and to authorise the


expenditure which it demands the same procedure
is necessary. To regularise matters the authorisa-
tion must be complete before the end of the
financial year in which the expenditure was in-
curred; and that is why the receipt of supple-
mentary estimates for the current financial year
and their consideration in Committee of Supply is
always one of the first concerns of the House of
Commons when it meets for the new session in
January or February. About the same time that
the first Navy and Army Votes, which are the
Votes for pay, and the Vote on Account for the
coming year are passing through Committee of
Supply, that committee is also meeting to vote the
Supplementary Estimates for the current year.
They pass through all the formal stages of Com-
mittee and report, both of Supply and of Ways
and Means. The sums voted for them are usually
included in the same Ways and Means resolutions
as those which cover the Vote on Account and
Navy and Army Pay Votes and serve as a basis
for the Consolidated Fund Act ; and it is that Act
which clothes the grants for the Supplementary
Estimates with statutory authority. It does not
appropriate them, any more than it appropriate
any other grants. That is done by the Appropria-
tion Act which is passed, as we have seen, towards
the end of the session. When the House holds an
Autumn Session it is sometimes able to get
through a good deal of the work of Supplementary
Estimates then. The Ministry is glad to do so,
because it is a decided hindrance to its work that
when the House meets, vigorous and refreshed
after Christmas, its enthusiasm should have time


to cool while it is getting through routine financial
work under pressure of the approaching end of
the financial year.

Because of the long forecast that has to be
made in preparing the estimates, Supplementary
Estimates may often be a necessity, but they are
always a necessary evil. The House and the tax-
payer have the right to expect that the estimates
and the scheme of the Budget shall be rigidly
adhered to by those who have to administer them.
Public control of public expenditure depends for
its efficiency in large measure on the financial
scheme for the year being presented to the House
and considered and approved once and for all and
as a whole. To allow the scheme, once approved,
to be treated as something still fluid and liable
to extensive modifications must infinitely weaken
effective control, and Supplementary Estimates are
the most harmful way of doing so. To make any-
thing but the most restricted use of them must
deprive the whole system of Supply of its meaning
and utility. Whilst admitting therefore that they
are occasionally necessary in the case of emergencies
unforeseen and unforeseeable, we should remember
that they are always harmful. They are a diseased
excrescence on the year's finance, and the skill and
success in finance of the ministry and the Executive
may be measured by their ability to do without


The procedure by Supplementary Estimates
covers all ordinary emergencies ; but extraordinary


and critical emergencies may arise for which that
procedure would be too slow. Suppose that the
nation is threatened with war ; the Executive will
then require a large sum in a hurry, and will not
be able to say in detail how the sum is to be
applied. The recognised procedure under such
exceptional circumstances is for the Executive to
ask the House for a big sum on a vote called a
Vote of Credit, specifying in an estimate expressed
in quite general terms the manner in which it is to
be spent. Like all other resolutions involving
expenditure the vote must be considered in a
committee of the whole House and confirmed by
the next regular Consolidated Fund Bill or by a
special one. The House in Committee grants a
sum in gross to the Executive, to which it leaves
the responsibility of distributing the money.
Needless to say, no part of the sum so voted must
be used except for the purposes for which it was
voted ; it must not be used to fill up deficiencies in
the ordinary votes. It is for expenditure in war
time that this form of procedure has been most
used in the past. The Boer war was indeed the
first occasion on which an attempt was made to
finance a war by means of detailed estimates.


Such is the regular machinery by which
Parliament discharges its financial functions year
by year, and all the processes described hitherto
are necessary to the financial legislation of the year.
In addition to its legislative business, the House of
Commons has lately undertaken a further financial


activity which is not essential to its work of
financial legislation, however useful it may be.
Dissatisfied with its control of the estimates, as it
well may be, it has appointed year by year a Select
Committee of some fifteen members to examine
and criticise the estimates in greater detail than is
possible in the Committee of Supply. The work
of the Committee is to consider what ends the
spenders are proposing to themselves, and then to
see that the means which they propose are the best
possible to secure those ends. According to the
terms of its Order of Reference, the Committee is
appointed "to examine and report on such of the
estimates presented to the House as may seem fit to
the Committee." l Unlike the Budget or Estimates
Committee of continental parliaments, and in
particular thatlof the French, this committee is a
purely advisory body : it has no responsibility for
the estimates which it examines. It cannot reject
or approve any estimate, nor can the minister in
charge of any estimate be condemned by its adverse
decision or relieved of his own responsibility by
its approval. Its functions are those of a critic and
scrutineer of details. In practice it takes a single
estimate or group of estimates, such as the Navy
estimates, and sitting with a High Treasury Official
ever present at its deliberations it examines them
item by item, seeking to detect extravagances,
reduplicated or obsolete charges, and all other

1 In 1912 (April i;th) the order of reference was " to examine
such of the Estimates presented to the House as may seem fit to
the Committee, and to report what, if .any, economies consistent
with the policy implied in these Estimates should be effected there-
in." The omission of the reservation of questions of policy in 1913
led to no change in the practice or procedure of the Committee.


offences against economy. When it has reported
to the House, the Treasury directs minutes based
on its report to the departments concerned. There
is a consensus that as an instrument of economy the
Committee has not justified all of the high hopes
that were held for it at its first appointment.
Confronted without preparation with a bulky
volume of technicalities, its members, lacking
expert knowledge of the details of the administrative
work which they are set to examine, must find
themselves inevitably very much at sea. Men
contending for economy in general are always at a
disadvantage when pitched against men contending
for expenditure on particulars. For enlightenment
the Committee must depend on the officials of the
department whose estimate is being subjected to
scrutiny and on the Treasury. Now it is those
officials who have themselves prepared the estimate,
and the Treasury has formally approved it ; and
although both, we may feel assured, loyally place
all means of information at the disposal of the
Committee, it is not in the nature of things that under
such conditions the department or the Treasury
officials should find many imperfections in their own
work to which to direct the attention of the
Committee. In the result the labours of the
Committee are prolonged, but its results are not of
commensurate importance. As the fruit of many
laborious days spent on the Navy estimates, the
chief recommendation was one relating to the supply
of tobacco to the sailors. It is not to be wondered
at, after the first glow of enthusiasm in 1912 was over
and when it became apparent to the Committee to
what unrewarding labours they were confined by


their inhibition from questions of policy, that there
has even been a difficulty in securing the needed
quorum of five at its meetings.

We shall have to deal later on with another
Select Committee of the House that does necessary
work with great efficiency and success, the Public
Accounts Committee that watches over the appro-
priation of public moneys and the audit of the
public accounts. Some waste of time is caused in
the work of the Estimates Committee by a natural
difficulty in distinguishing between the functions of
the two Committees'; but the Public Accounts Com-
mittee is mentioned here chiefly for the purpose
of pointing out that it has help in its work which is
the secret of its success, and that the lack of that
help is the secret of the Estimates Committee's
comparative failure. The Public Accounts Com-
mittee has a special servant of its own, the Auditor
General, a permanent official of high standing
and special knowledge, whose chief function it
is, aided by a large staff, to work over the field
of accounts before the Committee enters it, and to
make straight the way. He prepares a brief for
the Committee and, armed with that, the Committee
can put its finger straight on the points that matter.
Without such a brief the Estimates Committee
wastes its energies in trying to find out what it
ought to inquire into, and seldom succeeding. It is
to be feared that the Estimates Committee, unless it
can be supplied with a servant and helper in a
position similar to that of the Auditor General, is
never likely to do very much good ; and in the mean-
while it may even do some harm. Until its insti-
tution parliamentary criticism was the bogey which


intimidated ministers and others extravagantly
inclined and made them cautious. The hardiest
sinner hesitated at the thought that his extravagance
might be made the subject of special criticism and
debate in the House. Seldom indeed were any
criticisms of the sort made, but the possibility of
them had a restraining effect. Now the bogey is
materialised and put into a committee-room, and
turns out to be something of a hollow turnip after
all. Virtue is gone out of it. Another ill effect of
the new system is that it fixes the time at which
criticism will be made, and relieves the departments
from all apprehension of unexpected criticism
between whiles. At the rate of progress which it
has made in the past, the Estimates Committee will
get the whole of the estimates scrutinised about
once every ten years. Once then that it has under-
gone its ordeal before the Committee, and no very
severe one, each department will know that it has ten
years of safety before it. The disappointing result
of the Committee's labours, a disappointment due
in no wise to the Committee itself but wholly to
circumstances of its work for which it is not
responsible, is therefore not a matter of indifference.
It would be better that its powers should be ended
if not mended, and to mend them what is chiefly
needed, to judge by the experience of the Public
Accounts Committee, is a permanent and indepen-
dent official of its own as an adviser.

There are various other exceptional methods,
survivals and anomalies for the most part, in the
financial procedure of Parliament, some of which
have still some use ; but they are not essential to


Parliament's regular financial work, and we need
not allow them to delay us here. The methods
described are those by which, year in and year out,
Parliament decides what money is to be spent in
the course of the year, and how that money is to be
raised. The permanent acts imposing taxation to-
gether with the annual Finance Act and the Appro-
priation Act are the final authorities under which
the taxpayer's pounds are removed from his pocket
and paid over to the creditors of the state. Having
considered them, we have finished for the present
with the Legislature, and we can pass to the con-
sideration of the work of the Executive acting
under its statutory authorities derived from
Parliament in the manner which has been described.

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