Peace and Restoration of Parliamentary Control
Appointment of Accounting Officers
One of the immediate post-war priorities was to restore parliamentary control over expenditure, including determined moves to return to normal peacetime estimates and supply procedures. During the war these had largely been set aside, or reduced to token measures, to give the government greater freedom in the use of lump sum Votes of Credit to fund urgent needs and overriding military priorities. Measures to review and update the arrangements for parliamentary accountability and audit began again in 1919. These were driven by the Cabinet's determination to secure strong central oversight of departmental spending to bring under control the spiralling expenditure of the war years and to reduce the 'mushroom ministries' that had appeared. From 1919 onwards there was therefore a determined programme to re-establish traditional Treasury controls and to pursue stringent economies across the public sector. These included slashing cuts of more than 25 per cent in civil service numbers that were to come from the swing of the 'Geddes Axe'.
The comprehensive programme of reorganization, reform, and modernization was made the direct responsibility of the determined and forceful Sir Warren Fisher who had in 1919, at the age of only thirty-nine, been made Permanent Secretary of a rejuvenated Treasury, which was poised to return to a position of power following the recommendations of the Bradbury Report in 1919. Coincidentally in America, President Warren Harding was pushing through a broadly similar programme to cut government spending by 40 per cent. His Budget and Accounting Act 1921 set up a Bureau of the Budget specifically to subject budget authorizations to central scrutiny and control, and established the General Accounting Office to pursue greater economy and efficiency.
The concern for economy in the immediate post-war years made it a key aim that financial considerations should be taken fully into account from the outset when preparing departmental programmes and budgets. Here the status and responsibilities of the Principal Finance Officer should have been an important safeguard. However, the Baldwin Council had noted that 'in many Civil Departments the Principal Finance Officer ranks only as one of a number of Assistant Secretaries' and emphasized that 'the relation between the Chief Finance Officer and his permanent head requires very careful adjustment'. The Council's report, with some amendments suggested by Fisher, received general Cabinet approval in February 1920, and new arrangements to establish the basic structure of financial accountability were promulgated in
Treasury Circular 'Control of Expenditure' dated 12 March 1920. An extensive review of the historical background of the choice of Accounting Officers and the detailed discussions leading up to the revisions proposed by Sir Warren Fisher was included in the PAC's Fourth Report in 1920.
Although the Cabinet had accepted in principle that in the service departments the permanent head should be the Accounting Officer, neither the Cabinet decision nor the Treasury Circular said specifically who should be the Accounting Officer in the civil departments. Fisher became increasingly convinced that, for all departments, proper accountability and concern for finance would only come if responsibility for expenditure—and responsibility for policy and administration giving rise to that expenditure—were combined at the top level. Adopting a broad interpretation of his Cabinet authority, Fisher therefore resurrected the Treasury's original 1872 proposal that in all departments the Permanent Heads should be appointed as the Accounting Officers. In doing so, his primary focus was to ensure that clear emphasis was given to economy.
Fisher told the PAC, when discussing his proposals with them in 1920 and 1921, that he was 'very anxious indeed that it should not be open to any permanent head to say "Please, Sir, it wasn't me". Pin it on him in the last resort and you have got him as an ally for economy.' This view was strongly supported by C&AG Sir Henry Gibson, who thought the Accounting Officer proposals 'admirable' and, accordingly, had written to Fisher expressing his full support. Gibson also believed that 'The most important function of the Accounting Officer nowadays is the striving after economy. You want the biggest guns for the purpose and that is the permanent head of the department, whereas the present type of man that fills the post in the offices you are dealing with does not, with one or two exceptions, carry sufficient weight.' Once again, Fisher's proposal provoked predictable objections from a number of departments, but this time the Treasury was determined and finally won the argument.
Surprisingly, the proposal to upgrade the status of Accounting Officers did not have an entirely smooth passage through the PAC. The Committee wanted further consideration given to the position in the large civil departments where they foresaw difficulties because of the extra load on busy Permanent Heads, particularly in getting to grips with detailed questions of accounting and regularity. Fisher, however, meanwhile had embarked on detailed personal discussions with the Permanent Heads and by the time he appeared again before the PAC his determination and powers of persuasion had brought almost all the departments sufficiently close to his views for the proposal to proceed. Fisher's forcefulness was illustrated by the complaint of Sir Lewis Selby-Bigge, Permanent Secretary at the Board of Education 1911-25, an opponent of Fisher's proposals, who at the end of their discussions rather plaintively remarked: 'I doubt whether Fisher will mention my views to the PAC, or give me an opportunity of stating them.' He was right, for Fisher did neither.
Despite the C&AG's firmly expressed support for Fisher's proposals, they were strongly criticized in an extraordinary outburst at the PAC by the Assistant Comptroller and Auditor, Roland Wilkins. In front of the Committee he argued fiercely with Fisher that it was far better for the Accounting Officer to be one of the senior financial accountants in a department, since only they had the necessary technical training and, therefore, possessed the professional knowledge and experience. Wilkins then moved into even more dangerous territory by challenging whether Fisher had the Cabinet's authority for his proposals, implying that Fisher had misled the PAC when presenting the proposals to them. This potentially self-destructive attack pitched Wilkins into a highly confrontational battle at a level he could not possibly win.
Fisher was known to be scathing about the practice of taking 'gilded youths' as soon as they had emerged from the examination mill of the Civil Service Commission. 'If you do that', he said, 'then they get to work and take their little pens in their infant hands and they write away little criticisms of every sort and kind, very clever ones no doubt, but there is no training for constructive work, or work that would get them any practical experience.'27 Wilkins fitted Fisher's comments perfectly. He was widely regarded as being 'pedantic to the point of eccentricity', and was later said to be the model for 'Mr Pro Hac', an archetypal 'stuffy' civil servant in the novels of Arnold Bennett. Such characteristics were anathema to the modernizing Warren Fisher and Wilkins had been moved to the position of Assistant Comptroller and Auditor from the post of Senior Treasury Officer of Accounts shortly after Fisher became Permanent Secretary.
Wilkins later paid the price for his actions when the abolition of the post of Assistant Comptroller and Auditor was raised in the discussions leading up to the Exchequer and Audit Departments Act 1921. As to be expected, he argued strongly for the post to be retained, essentially on the grounds that it offered the C&AG access to an 'intellectual and social' pedigree that Wilkins believed was lacking in the rest of the staff. Gibson, however, flatly rejected this outdated and superior view and expressed every confidence in the advice and support he already received from the Secretary of the E&AD and the senior staff. Wilkins lost the argument and the post was abolished by the 1921 Act. To avoid having Wilkins back in the Treasury, Fisher tried first to have him sidelined as Librarian of the House of Lords. When this failed Fisher had him moved to an obscure backwater as Assistant Paymaster General, where he stayed for the remaining eleven years of his career. It was ironic that Gibson's views on the limited value of the post of Assistant Comptroller and Auditor should be a key factor in its abolition. It was in that post that Gibson himself, under the lacklustre Sir John Kempe, had largely run the Department and become C&AG.
In 1925 the PAC finally accepted that: 'As a general rule the larger Civil Departments should be brought into line by the appointment of the Permanent Head of those Departments as the Accounting Officer.' Resolution of this last lingering uncertainty was warmly welcomed by the new C&AG, Sir Malcolm Ramsay, who had moved from the Treasury to succeed Gibson in 1921, and had quickly been made the E&AD Accounting Officer. Ramsay wrote to Fisher: 'I am extremely glad that the Committee have now adopted the view which you and I have throughout held, and the road, I trust, is now perfectly clear.' The new Accounting Officer arrangements that were confirmed in a Treasury circular of 1 January 1926 were still not implemented by some departments until well into the 1930s. The most notable was the Foreign Office, even though the unsatisfactory position there had been strongly criticized by the PAC as far back as 1920. The long-awaited agreement that had now been achieved still left a number of related matters unresolved.
At the time of the 1872 discussions about Accounting Officers, and again in the 1920s exchanges, the Treasury gave an assurance that all Accounting Officers would receive a formal letter setting out their responsibilities. However, this was not done on any consistent basis. It was not until the PAC in 1937 reminded the Treasury about this promise that matters were put on the agreed footing. Another more substantial point arose on what should happen if an Accounting Officer was overruled on matters significantly affecting their responsibilities. As already noted, virtually from the outset it had been agreed that if the Accounting Officer was being overruled on a matter of regularity or propriety of expenditure, where his personal liability was potentially involved, then to protect his position he should have the instruction formally confirmed in writing and the matter should be reported to the Treasury and the C&AG. It had never been clearly set out what should happen if the matter were one of economical administration or other aspects of value for money.
When the Permanent Head became the Accounting Officer the position was complicated; the person doing the overruling would then be a minister, thus adding a political dimension. Fisher himself was untypically ambiguous on this point. Overwhelmingly, the broad position adopted was that value for money was not a 'protest' matter.
The issue was raised again when the content of the Accounting Officer appointment letter was re-examined in 1952 at the instigation of Sir Edward Bridges, the Permanent Secretary of the Treasury, in consultation with a dozen or more Permanent Secretaries of the major departments and C&AG Sir Frank Tribe. The procedures for formal 'protests' on matters of regularity and propriety were quickly confirmed and discussion then centred on the handling of questions of economy and efficiency. The Treasury's original draft letter was designed to re-emphasize an Accounting Officer's responsibilities in these areas, and some Accounting Officers were doubtful about what action they should take if their views and advice on such matters were being overruled by ministers. The Treasury then proposed that in important cases of this kind Accounting Officers should be able to ask for a formal direction from ministers, broadly in line with the 'protest' procedures. There was some support for this but the overwhelming view was that this was taking matters too far beyond the accepted relationships between senior officials and ministers on policy decisions. The idea of a formal ministerial direction on matters of economy and efficiency was therefore dropped and the position adopted that in the event of the minister adhering to his or her decision the situation should be defended by the Accounting Officer who, if pressed further, could then refer to the policy ruling of the minister. However, the uncertainties would not go away.
Things were brought to a head in 1973-4 when the Department of Trade and Industry made substantial grants under the Industry Act 1972 in attempts to rescue/resurrect three failing businesses: Kearney, Trecker Marwin Ltd; Meriden Motorcycle Company; and Scottish Daily News. All three were favoured projects of the Industry Minister, Anthony Wedgewood Benn, yet all quickly failed. Faced with what they regarded as a largely foreseeable waste of public funds, some PAC members asked the Accounting Officer, Sir Peter Carey, whether he had lodged a 'protest' against the expenditure but had been overruled. Sir Peter pointed out that the grants were within the provisions of the Industry Act and, with the support of the Treasury, made it clear that the expenditure involved value for money, not regularity, and did not therefore fall within the scope of the formal 'protest' procedures. On the wider question of the advisability of the grants, he was not prepared to disclose his department's advice to the Minister. He suggested that if members wished to pursue the matter further they should direct their questions to Mr Benn. However, the long-standing convention was that the Committee did not call for ministers to appear and the issue was not pressed.
Although the Treasury continued to provide periodic advice to Accounting Officers, changes in the conduct of business and in relationships meant that the distinction between ministerial involvement in matters of regularity and propriety and in matters of value for money came under increasing strain. From 1990 a system of 'ministerial directions' was therefore introduced to protect Accounting Officers whose views and advice on important issues of value for money were being overruled by ministers.