The biggest reform and modernisation programme in the management of
the country's public finances since the Gladstone era was announced
today by chief secretary to the Treasury, Andrew Smith.
part of the government's fiscal framework aimed at its modernising
agenda and is to apply the financial reporting practices of the
private sector and much of the public sector to central government.
Welcoming the Bill, Andrew Smith said: 'Resource accounting and budgeting is a vital part of our modernising agenda and this Bill marks a major milestone on our way to full implementation. It demonstrates this Government's commitment to introducing best-practice accounting methods in line with the code for fiscal atability.
'Through Partnerships UK, the Bill will also give the public sector
access to private sector skills. I want to see the progression of
well-structured private finance initiative (PFI) and public private
partnership (PPP) projects delivered in all sectors of the economy.
This will bring about improved front line services to the public,
increased deal flow togther with a reduction in the cost, delay and
uncertainty by bidders for PFI projects.'
The main purposes of the Bill are:
- to introduce resource accounting and budgeting into
government accounts and to modernise the operation of other
aspects of the Exchequer and Audit Departments Acts;
- to provide enabling legislation for the preparation and
audit of consolidated accounts for the whole public sector;
- to spend the money required to set up Partnerships UK
to facilitate a new body designed to make the public sector
a better client in PFI/PPPs.
The Resource Accounting and Budgeting Bill will improve the way
Parliament votes and scrutinises public spending. Objectives and
outputs will be costed through RAB, underpinning the public service
agreements. There will also be better information on buying and using
assets with improved comparisons between PFI/PPP projects and
government capital spending.
1. The Government Resources and Accounts Bill was announced in
the Queen's speech on 17 November.
2. The move to RAB is an integral part of the government's fiscal
framework and its modernising government agenda. RAB applies
the financing reporting practices of the private sector and
much of the rest of the public sector to central government.
It will involve producing the equivalent of the main financial
statements from commercial accounts, in particular a balance
sheet and the equivalent of a profit and loss statement and
using these as one of the means by which public spending is
planned and controlled.
3. Whole of government accounts (WGA) represents an expansion of
RAB principles to the preparation of consolidated accounts
covering the entire public sector. This fulfils the
commitment given in The code for fiscal stability (in effect
given legal status by the 1998 Finance Act) to produce
accounts for the whole of the public sector, on a consolidated
basis if possible, in order to provide better transparency and
accountability to Parliament as well as greater certainty to
4. Practical considerations require a staged approach to
producing the whole of government accounts. The immediate
commitment is to producing a set of consolidated accounts for
central government. Further research is required before a
final decision can be made to extend the coverage to the rest
of the public sector.
5. The existing legislation on government accounts are,
principally, the 1866 and 1921 Exchequer and Audit Departments
Acts but also the National Health Service (NHS) Act 1977 in
respect of introducing RAB into the NHS.
6. The creation of Partnerships UK was announced by the then
chief secretary to the Treasury, Alan Milburn, on 22 July 1999
and, when created, will take over from the treasury taskforce
in the Spring of 2000.
7. Partnerships UK will become a private sector-led body to help
increase and improve investment in the UK's public services
from private sources. Partnerships UK will employ high
calibre staff to help the public sector get the best deal from
the private finance initiative and other forms of public-
8. A steering group is currently in operation to oversee the
development of Partnerships UK business case to consider
governance issues, and to prepare for the raising of private
sector capital, which is not expected to take place before
March 2000. The government appointed N M Rothschild & Sons
Limited as financial advisers and Herbert Smith as legal
advisers to the Treasury on 28 October 1999 in connection with
the creation of Partnerships UK.
9. If you have access to the internet you can find this news
release and other Treasury information at
GOVERNMENT RESOURCES AND ACCOUNTS BILL
DESCRIPTION OF CLAUSES
CLAUSES 1 and 2 deal with the operation of the supply system.
The budgeting and supply systems are almost entirely non-statutory
and nothing in the Bill changes this. However, the Bill does
modernise those few aspects of the supply system which are already
covered by statute to take account of RAB. The main change is in
clause 2 which will enable departments to account for appropriations-in-aid on an accruals rather than a cash basis.
CLAUSE 3 would enable the procedures for making issues from the
consolidated fund to be modernised. The current legislation
effectively requires a manual system and has prevented the
computerisationof the process.
CLAUSE 4 provides a power for the Treasury to repay sums surrendered
in error to the consolidated fund.
CLAUSE 5 requires the preparation of resource accounts (which will
replace appropriation accounts under RAB), makes provision for the
Treasury to determine the form of the accounts and would enable the
Treasury to appoint accounting officers to be responsible for the
preparation of the accounts.
CLAUSE 6 sets out the requirements for the audit, by the comptroller
and auditor general (C&AG), of resource accounts and the procedures
for laying the accounts, together with the C&AG's reports thereon,
CLAUSE 7 would give the Treasury power to direct the form of other
departmental accounts and would require the C&AG to audit these.
CLAUSE 8 would allow the Treasury to set the accounting rules for
departments to deal with VAT.
CLAUSE 9 would provide the C&AG with access for the purpose of
auditing departmental accounts.
CLAUSES 10 and 11 are the enabling legislation to enable whole of
government accounts to be prepared and audited.
CLAUSE 12 and 13 would enable the secretary of state for health to
control health authorities and primary care trusts on a RAB basis.
This is necessary as these bodies will be within the RAB accounting
CLAUSE 14 amends the Government of Wales Act to enable information to
be presented on a resource basis by the secretary of state for Wales.
CLAUSES 15 to 17 would enable the Treasury to incur expenditure in
respect of the formation of a new body (Partnerships UK) to be set up
to provide advice on and invest in public-private partnership
arrangements and to provide financial assistance to it.
CLAUSES 18 to 26 cover various general and miscellaneous matters
mostly of a technical nature.
SCHEDULE 1 lists the minor and consequential amendments flowing from
the Bill. The most significant are the changes to the House of
Commons (Administration) Act 1978 and the National Audit Act 1983
which will require the House of Commons and the National Audit Office
to prepare their accounts on a RAB basis (these provisions have been
agreed with these bodies).
SCHEDULE 2 lists the repeals of earlier legislation required by the