Government spending: how does parliament approve it?

How does the government propose changes to spending?

The government lays out its principal financial plans for the year in the budget. Between 1998 and 2016 the budget was held once a year, in spring, but since then its timing has been more varied: in 2017 there were two budgets, in spring and autumn, and in 2019 the budget was cancelled for the first time in more than a century.

The budget lays out future spending and taxation plans. Tax measures require House of Commons approval of the relevant budget resolution (and subsequent finance bill), but on spending the government has more latitude and is subject to less scrutiny. 

Parliament generally approves spending in two phases:

1. Before the end of each financial year (i.e. 31 March) the government must pass a Supply and Appropriation (Anticipation and Adjustment) Bill. This authorises any additional spending required in the current financial year and/or any changes in the purpose for which the money is sought by departments. This bill also gives approval to the government to spend money during the first few months of the next financial year (known as ‘votes on account’ – usually authorising the government to spend 45% of the previous financial year’s total).
2. Shortly after the start of the new financial year, the government then publishes its ‘main estimates’, detailing planned spending by each department for the whole year. These form the basis of the Supply and Appropriation (Main Estimates) Bill, which typically becomes law by mid-July.

How do the main estimates pass through parliament?

The main estimates are laid before parliament in April or May and are scrutinised by departmental select committees. They are then subject to two days of parliamentary debate (usually in June or July, but no later than 5 August).

MPs submit proposals for which departmental estimates they want to see debated. The Backbench Business Committee, a committee of MPs not in government that manages debates on issues put forward by backbenchers, proposes four bids to debate. Half a day is usually devoted to each debate.

Amendments can be proposed by backbench MPs to reduce spending in any of the four estimates up for debate. However, they are not able to propose increases in expenditure. The majority of departmental estimates are not debated and are covered by ‘roll-up supply motions’, which cannot be amended. In those cases, MPs only have the (rather extreme) option of voting down the motions in their entirety.

After the debates, the estimates are usually approved by the House of Commons without a division (vote in the lobbies). The chief secretary to the Treasury then tables a Supply and Appropriation Bill to put them into law. The bill is not subject to debate or amendment at any stage. The bills have typically passed without challenge, although it is technically possible for MPs to force votes on them.

The Commons has prerogative over spending. This means that, while spending bills officially pass through the House of Lords, the proceedings are purely formal; the bill cannot be debated or amended by peers. Once the bill has passed through both Houses, it can receive royal assent and the government is allowed to spend the money.

How does the government propose changes to its spending plans?

The government generally uses the Supply and Appropriation (Anticipation and Adjustment) Bill, towards the end of the financial year, to request any additional funding required or to change the purpose of funding (as required, for example, if departments merge or are created part of the way through the year).

For spending outside of the main estimates that has already happened, due to an error or due to extraordinary circumstances, the government can issue a ‘statement of excess’. This is a retrospective statement of spending outside the remit granted by parliament.

Statements of excess automatically trigger an audit from the government’s internal auditor, the National Audit Office (NAO), and an investigation and report from the House of Commons Public Accounts Committee (PAC). They are subject to a vote in the Commons, normally alongside the supplementary estimates, but are not subject to a debate if PAC sees no objection to the expenditure being authorised.

For the extra spending required by the coronavirus crisis, the government followed a different process. It tabled a Contingencies Fund Bill in late March, alongside other emergency coronavirus legislation. This increased the size of the government contingencies fund, for spending on emergencies, from 2% to 50% of the previous year’s cash spend, or from £10 billion to £266 billion.^[1]

This was predominantly a cashflow decision, due to worries that the money from the votes on account, allocated in February, would be inadequate for increased demands on spending. The spending allocated in the contingencies fund was then scrutinised alongside the summer main estimates.

Does all spending need to be approved every year?

Following longstanding tradition, parliament only approves spending for the current year.

The chancellor generally sets out longer-term spending plans, for up to five years, in spending reviews. But there is no formal vote in parliament on these plans and they still need to be approved each year to give the government the legal right to spend money.

How can backbench MPs change spending plans?

MPs who are not in government have limited options to change spending plans.The crown (meaning the queen’s representative, which is usually the government) is the only authority allowed to propose spending in parliament. This is a longstanding constitutional principle, dating from at least 1713.^[2] As a result, legislation proposed by backbench MPs, in the form of private members’ bills, cannot directly increase spending.^[3] This is also the reason that backbench MPs can only vote to reduce spending in departmental estimates, not to increase it.

How effective is parliament’s scrutiny of government spending?

The House of Commons Procedure Committee,^[4] OECD^[5] and the Institute for Government have argued that parliament’s role in authorising government spending is too weak. In 2017, the then chair of the Procedure Committee, Charles Walker, stated: “In the financial year 2016/17 the House authorised Government expenditure of £638.6 billion over three Estimates days, with barely a mention of the sums which were formally under consideration.’

The parliamentary process for approving spending gives fewer opportunities for debate and scrutiny than the process for approving taxation. According to the Hansard Society, ‘the UK is considered to have among the weakest systems for parliamentary control and influence over government expenditure in the developed world.’^[6]

It does not help that the estimates and the explanatory note that accompanies them (setting out how spending is to be allocated) are often difficult to understand and do not set out many distinctions between different types of spending. Despite some updates to the process, including changes to the form of spending bills in 2010, this lack of clarity reduces MPs’ ability to significantly amend spending to target it towards any specific area and makes scrutiny more limited.^[7]

There have been proposals to improve matters, including through changes to how the spending review (which sets out multi-year spending plans) is scrutinised and the possible creation of a Budget Committee specifically to look over the government’s tax and spending plans.