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●Delegation of authority to H.M. Treasury to approve departmental expenditure, subject to ultimate parliamentary authority.

In recent years, constitutional values, including “openness, fairness and impartiality” (McAuslan, 1988) and “open and accountable government” (Harden and Lewis, 1986), have been embodied in law. Five principles, notably transparency, stability, responsibility, fairness, efficiency, are included in the CFS. The legislative basis of the CFS is somewhat hidden in the “miscellaneous” section of the 1998 Finance Act, an act principally devoted to tax measures.

Some, but not all of the “traditional” principles used in other European countries are embodied in the law. The principle of annuality for supply is explicit in the law (s. 1, GRA Act 2000): specific provision for expenditure is only for a specified financial year only. The principle of universality – all revenues and expenditures are included in budget-related documents – is not embedded in legislation, although it is practised. The principle of unity is absent: separate laws and legal processes are used to approve the annual revenue and expenditure estimates. The principle of specificity needs to be qualified. Parliament approves very broad aggregates. Essentially, there is specificity by “programme” for current expenditures but no direct control of capital expenditure.7

3. Legal basis for the establishment and the powers of the actors in the budget system

3.1. The executive and the legislature

3.1.1. Overview

The Queen is the head of State, the head of the executive (a term not widely used in the United Kingdom – “the Crown” is preferred) and an integral part of Parliament. However, the monarchy has very limited powers. By convention, the Queen follows the advice of her ministers. Parliament is composed of three elements: the Queen, an elected House of Commons, and a largely appointed House of Lords. The agreement of all three is necessary for legislation by statute.

The Prime Minister, who is the head of the main political party, automatically becomes the head of government following legislative elections. Formally he/she is appointed by the Queen, who also appoints Cabinet ministers on the recommendation of the Prime Minister. The Cabinet is not a legal entity but has pervasive decision-making powers. H.M. Treasury (equivalent to a Ministry of Finance) exists by royal prerogative – not by law. It is the department that leads and co-ordinates the budget process.

The United Kingdom is a unitary state, traditionally divided into two main tiers: central and local governments. Elected local councils have

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considerable expenditure responsibilities but limited revenues of their own. Transfers from the central government’s annual budget to local councils are sizeable. The regional devolution that took place in 1999 resulted in the establishment of a Parliament or an Assembly in Northern Ireland, Scotland, and Wales.

3.1.2. Roles and responsibilities of Cabinet and individual ministers

The government as a whole has few legal powers – mainly those of Orders of “Her Majesty in Council”. Although the Prime Minister has wide powers, in general, these are not formally stated. The legal basis of the Prime Minister’s conventional power over his/her government is the Sovereign’s right to appoint and dismiss ministers, to summon and dissolve Parliament, and other such “royal” prerogatives exercised by the Prime Minister. The Prime Minister is also the Minister for the Civil Service, a power transferred to him/her from H.M. Treasury in 1968, although day-to-day responsibility for the civil service is handled by a minister in the Cabinet Office.

The government is composed of about 100 ministers, who are either sitting Members of Parliament (MPs) or peers of the House of Lords. About 20 ministers are members of Cabinet, the key policy-making body. Although most Cabinet members are senior members of the ruling party in the House of Commons, the Prime Minister typically includes a few peers in his/her Cabinet.8 Cabinet is an extra-legal entity – there is no statute or statutory instrument that states its roles and responsibilities. Although there is no formal limit on the size of Cabinet, the Ministerial and Other Salaries Act 1972, limits to 19 the maximum number of salaries that can be paid to secretaries of State. In addition, two distinct ministerial titles have been retained. In the absence of other funding for salaries, this law constrains the number of Cabinet ministers to a maximum of 21.

Nearly all Cabinet ministers are heads of government departments that are administered by non-partisan civil servants. Ministers are individually responsible for the policies pursued by his/her department and collectively for the policies pursued by the government as a whole. Ministers are individually accountable is to Parliament.

3.1.3. Establishment of ministries and executive branch agencies

Ministries. The government usually does not need Parliamentary approval for the merger or abolition of existing ministries (“departments”) or the creation of new ones. The legal authority for the existence of some longstanding departments, such as H.M. Treasury or the Home Office, is derived from the prerogative. In contrast, several departments were created by statute law up until 1946. However, under the Ministers of the Crown Act 1975,

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the transfer functions between secretaries of State can be made by an executive order. In law, the office of secretary of State is one and indivisible (Simcock, 1992). Crucially, the government alone can decide on the number of Secretaries of State and create new departments. Also, the Ministers of the Crown Act 1975 authorises the dissolution (but not the creation) of departments or offices by order. Thus, over the past 30 years or so, the abolition, creation or merger of departments has been implemented largely on the initiative of the Prime Minister, without parliamentary approval.

Executive agencies. Since the late 1980s, when the government desired to improve management and efficiency in government departments, some 130 semi-autonomous agencies have been created (Box 3), most without parliamentary approval. Each agency produces an annual report. However, ministers are accountable to Parliament for agency performance, including the achievement of objectives and targets, as specified in framework documents. Although most executive agencies are not established by law, this is not the case for trading funds. Legislation first adopted in 1973 identified five specific trading activities considered suitable for financing outside the

Box 3. United Kingdom: Executive agencies and other bodies

Executive agencies

●Agencies are administrative units of government departments, primarily concerned with delivery of public services.

●Agency chief executives, appointed by ministers, are accountable within their department to establish and achieve agency-specific targets.

●Many have an internal management board (not an external governing board).

●Most staff are civil servants, subject to the Civil Service Code.

●They must produce agency annual reports and accounts.

Non-departmental public bodies (NDPBs)

●Entities that operate at arm’s length from ministers.

●All are accountable to Parliament.

●Two main types:

Executive NDPBs: carry out executive, administrative, regulatory or commercial functions; generally not part of the Crown; employ their own staff; have their own budgets; have separate legal identity.

Advisory NDPBs: set up by ministers to provide advice; rarely incur spending on their own account; seldom have separate legal identity.

Source: Wall and West, 2003.

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estimates and appropriations process. The Government Trading Act, 1990, permits the creation of a trading fund for any activity of a department where operations could be largely self-financed. Trading funds enjoy considerable financial autonomy, including power to borrow and invest money, and to carry forward cash reserves. Discretionary power used by the minister responsible for the trading fund is exercised with Treasury concurrence (Daintith and Page, 1999, p. 139).

Non-departmental public bodies (NDPBs). These are entities that are part of general government. “Executive” NDPBs are generally legally incorporated either by a specific act of Parliament, by Royal Charter, or under the Companies Act. Governance structures are generally not specified in the underlying legislation. All NDPBs are headed by governing boards, typically comprising a chair and a number of non-executive members. NDPBs carry out a wide range of executive, administrative, commercial, regulatory and advisory functions. In 2003, there were 811 NDPBs.

National Health Service. The National Health Service (NHS) was first set up in 1948 to provide universal healthcare for all citizens. The NHS Act 1977 provides for the establishment of various health authorities and primary care trusts. Significant changes were introduced by the NHS and Community Care Act 1990 which, by 1995, allowed all health care to be provided by independent NHS trusts with their own managements. The NHS is funded by the taxpayer and managed by the Department of Health. The overwhelming majority of the NHS resources and cash are voted in the annual estimates that form part of the annual appropriation act, that is, Parliament approves NHS expenditure when it approves the estimates.

3.1.4. Responsibilities of senior civil servants

Civil Service Code – not a law. All civil servants in the United Kingdom are permanent and non-partisan. Unlike continental European countries, the civil service has never been governed by a general law that establishes public servants’ rights and responsibilities. The management of the civil service is one aspect of the royal prerogative exercised by ministers on behalf of the Crown, who alone issue instructions concerning civil service management (Cabinet Office, 1995, paragraph 2.15). Parliamentary committees have called for statutory backing to be given to essential civil service values and standards.9 In 1996, a Civil Service Code was adopted by statutory instrument. The code lays out general principles, such as “civil servants should endeavour to ensure the proper, effective and efficient use of public money”. It also encourages civil servants to report possible unlawful activities, although detailed sanctions are not prescribed. The code was amended in the late 1990s to maintain a unified civil service after devolution: Scottish and Welsh civil servants are subject to the provisions of the code.10

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A Senior Civil Service was created in April 1996 by government decision. The associated framework gives limited scope to the employing department or agency to vary terms and conditions. Senior civil servants have a common pay, contracts, job appraisal and training systems. Although the political impartiality of the civil service is embodied in the Civil Service Code, there are concerns about the increasing politicisation of the civil service (for example, see www.the-hutton-inquiry.org.uk/content/report/chapter12.htm#a90). Just as civil servants are subject to a code, so are all United Kingdom ministers (including Scottish ministers), whose Ministerial Code requires them to uphold the political neutrality of the civil service.

Accounting Officers (AOs).11 Statute law places special responsibilities for financial management on some senior civil servants. Both the E&AD Act 1866 and the GRA Act 2000 state that H.M. Treasury (not the Chancellor of the Exchequer) appoints an official in each department as its “accounting officer” (AO). The AO, who is normally the most senior officer of a department or agency, is responsible for overall organisation, management and staffing of his/her entity. In particular, the AO is “responsible for the preparation of the department’s resource accounts and their transmission to the C&AG” (s. 7, GRA Act 2000). Other responsibilities of AOs are set out in detail in a Treasury memorandum, which emphasises personal propriety, regularity and value-for-money in all financial decisions of the department (H.M. Treasury, 1997). Treasury guidance to AOs is applicable to all government departments and agencies, including NDPBs, NHS trusts and trading funds.

3.1.5. Establishment and roles of parliamentary committees

Parliamentary committees are established on the authority of parliamentary Standing Orders (SOs). “Select Committees” of the House of Commons are the most important for budget processes. Select committees are “permanent” committees for a given Parliament; standing committees are not permanent: they are set up to consider one specific bill.12 Since 1979, there has been one select committee for each government department, whose mandate is “to examine expenditure, administration and policy of principle government departments” (House of Commons SO No. 152). In addition, there are about 20 other non-departmental select committees, including the Public Accounts Committee (PAC). There is no Budget Committee whose sole task is to examine budget strategy and propose amendments to the budget proposals of the government.13 However, the Treasury Committee always conducts an inquiry into the annual budget and pre-budget report.14 The Liaison Committee, comprised of the 34 chairmen of select committees, chooses which select committee reports should be debated in the plenary session of the House of Commons.