The Public Accounts Committee (PAC) identifies “worrying scrutiny gaps” in some sensitive areas of government expenditure, leading to a lack of transparency and inadequate scrutiny on matters “which could be of vital national interest”.
A new report from PAC has called for the creation of a new select committee to scrutinise sensitive areas of government expenditure which do not currently fall within the mandate of other committees, with “a specific remit to consider sound financial practice and value for money”. This committee should be “provided with the assistance of the National Audit Office (NAO)” and the committee should be “established as soon as possible and before the dissolution of the current parliament.”
The call follows the identification of two main areas of government expenditure where “scrutiny gaps” exist, being “nuclear enterprise” expenditure, which falls under the remit of the Defence Nuclear Organisation (DNO), and expenditure incurred in support of the “UK Special Forces”.
According to the 2022-23 Ministry of Defence (MOD) Annual Report and Accounts, DNO incurred total resource and capital expenditure in 2022-23 of £5.9bn, which is 11.4% of total resource and capital spending across MOD. The National Audit Office’s Equipment Plan 2023-33 report highlights that DNO are forecast to spend £99.5bn over the next 10 years, while currently having a budgeted deficit of £36.7bn. Such a high deficit has arisen due to MOD prioritising “delivering the replacement nuclear deterrent to schedule over immediate cost constraints”, according to the NAO.
A previous NAO report on MOD’s Equipment Plan for 2021-31 highlighted an investment of £1.1bn in relation to “UK Special Forces” over a 10-year period.
Currently, the process for scrutinising such sensitive expenditure falls on a series of “bespoke arrangements”, falling outside the mandate of PAC or “practical working arrangements of other committees such as the Defence Select Committee, the Joint Committee on the National Security Strategy, or the statutory Intelligence and Security Committee of Parliament.” PAC argue that these bespoke arrangements do not provide “detailed, routine financial scrutiny”, leads to “gaps in Parliament’s overall understanding” of these areas and “fails to provide appropriate assurance” to the public, Parliament, and Government alike.
Creation of a new select committee with a specific remit to consider sound financial practice and value of sensitive areas, would follow the approach of legislatures of other countries, with the Norwegian Parliament having a “committee which can receive reports on classified defence expenditure”, while in the USA, “committees of both Houses of Congress holding open and closed sessions on defence, intelligence and other sensitive expenditure”.
Jack Bower, ICAEW Public Sector Audit and Assurance Manager, comments: “While sensitive areas of government expenditure require a scrutiny approach which is in line with their sensitivity, it is not appropriate for such high levels of expenditure to be subject to such low levels of transparency and scrutiny, especially at a time of such pressures on public finances.
We concur with the suggestion to create a new select committee to appropriately appraise such sensitive expenditure. This would follow a similar process to the statutory Intelligence and Security Committee of Parliament, who scrutinise the expenditure of MI5, MI6, and GCHQ, amongst others, which also have high levels of sensitivity.”
The call follows the identification of two main areas of government expenditure where “scrutiny gaps” exist, being “nuclear enterprise” expenditure, which falls under the remit of the Defence Nuclear Organisation (DNO), and expenditure incurred in support of the “UK Special Forces”.
According to the 2022-23 Ministry of Defence (MOD) Annual Report and Accounts, DNO incurred total resource and capital expenditure in 2022-23 of £5.9bn, which is 11.4% of total resource and capital spending across MOD. The National Audit Office’s Equipment Plan 2023-33 report highlights that DNO are forecast to spend £99.5bn over the next 10 years, while currently having a budgeted deficit of £36.7bn. Such a high deficit has arisen due to MOD prioritising “delivering the replacement nuclear deterrent to schedule over immediate cost constraints”, according to the NAO.
A previous NAO report on MOD’s Equipment Plan for 2021-31 highlighted an investment of £1.1bn in relation to “UK Special Forces” over a 10-year period.
Currently, the process for scrutinising such sensitive expenditure falls on a series of “bespoke arrangements”, falling outside the mandate of PAC or “practical working arrangements of other committees such as the Defence Select Committee, the Joint Committee on the National Security Strategy, or the statutory Intelligence and Security Committee of Parliament.” PAC argue that these bespoke arrangements do not provide “detailed, routine financial scrutiny”, leads to “gaps in Parliament’s overall understanding” of these areas and “fails to provide appropriate assurance” to the public, Parliament, and Government alike.
Creation of a new select committee with a specific remit to consider sound financial practice and value of sensitive areas, would follow the approach of legislatures of other countries, with the Norwegian Parliament having a “committee which can receive reports on classified defence expenditure”, while in the USA, “committees of both Houses of Congress holding open and closed sessions on defence, intelligence and other sensitive expenditure”.
Jack Bower, ICAEW Public Sector Audit and Assurance Manager, comments: “While sensitive areas of government expenditure require a scrutiny approach which is in line with their sensitivity, it is not appropriate for such high levels of expenditure to be subject to such low levels of transparency and scrutiny, especially at a time of such pressures on public finances.
We concur with the suggestion to create a new select committee to appropriately appraise such sensitive expenditure. This would follow a similar process to the statutory Intelligence and Security Committee of Parliament, who scrutinise the expenditure of MI5, MI6, and GCHQ, amongst others, which also have high levels of sensitivity.”
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