IV. UNITED KINGDOM

1.2. Reforms of budget system law

Since the 1980s, the budget system has changed markedly. Although new statutes have been adopted to support some of these changes, many of the budget reforms have been introduced by the government, either by virtue of its delegated legal powers or its inherited powers (Box 2). Command papers have been used to communicate some of the changes to Parliament and the public.

In the 1980s, the way government departments were managed was changed dramatically, with the creation of executive agencies. These “arm’s length” agencies are headed by chief executives who are provided with

Box 2. United Kingdom: Reforms of the budget system in the past 20 years

Changes introduced by statute law

●Principles for Fiscal Stability introduced by the 1998 Finance Act. The act requires H.M. Treasury to lay before Parliament a code embodying these principles and requiring H.M. Treasury to prepare pre-budget, budget and debt reports.

●Principle of accrual-based budgets and accounts introduced in GRA Act 2000.

Changes introduced by the Code for Fiscal Stability

●The government’s principles of fiscal management, objectives and operation of fiscal and debt management policy.

●The contents of the various pre-budget, annual budget, and debt reports.

Changes not introduced by law, but by Cabinet/Treasury decision

●Fiscal rules: 1) over the cycle, the government will borrow only to invest and not to fund current spending (a “golden rule”), and 2) public sector net debt as a proportion of GDP will be held at a stable and prudent level over the cycle.

●Definition of expenditure aggregates for fiscal monitoring and procedures for tight control of expenditures.

●Creation of some 130 executive agencies (under government departments) with considerable management autonomy, including for their budgets.

●A major simplification of the appropriation structure, with Parliament controlling only very broad aggregates on a “programme” basis.*

●Modernisation of public services, improved accountability and outcomefocused budget management, including public service agreements (PSAs) and performance indicators (Blair, 1998; H.M. Treasury, 2000).

*For simplicity, the word “programme” is used in this chapter. Under resource accounting, the term used is “Request for Resources” (RfR), not programme.