Jesse Norman, Financial Secretary to the Treasury, moves the Second Reading and responds to the committee stages of a technical Bill to allow the Government to access cash advances to deal with unexpected events over the coming year.
I beg to move,
That the Bill be now read a Second time.
This is a technical measure that concerns cash management. Its purpose is to allow the Government to use cash advances to act swiftly and decisively to safeguard the people of this country, both from the impact of the covid-19 pandemic and from other unexpected events. But I would emphasise that money from the Contingencies Fund constitutes a cash advance, which will have to be repaid once a Supply estimate is voted through the House; it is not additional spending. It is important to be clear that the House will still be able to scrutinise and debate where resources have been allocated in the usual way when the Government publish the Supply estimates.
As hon. Members will be very much aware, Parliament provides the Government with the authority to expend resources in the form of capital and cash. However, the Government must also sometimes provide a swift financial response to national emergencies and other pressing events. That is why the Contingencies Fund exists. In the Contingencies Fund Act 1974, Parliament put a limit on the amount that could be issued from the fund at 2% of the previous year’s cash spend. That cap has normally proved to be sufficient to meet unexpected and sudden financial requirements, but we are not living in normal times at present, and uncertainty as to the impact of covid-19 has required a degree of flexibility in setting the cap.
As colleagues across the House will recall, a year ago, as the full implications of the pandemic started to emerge, the House agreed to change the limit on the Contingencies Fund from 2% to 50% of the previous year’s cash spend for the financial year 2020-21. That had the effect of raising the amount in the fund from a possible £11 billion to £266 billion. This cash advance has been invaluable to Departments in dealing with the unprecedented events that have been set in motion by the pandemic. In fact, over the past 12 months, requests from the Contingencies Fund have totalled over £210 billion. It has provided the cash for Government interventions to support businesses, to support frontline workers and to pay for the furlough and other schemes. In addition, it has provided the financial firepower to help the NHS through the crisis, and it has funded numerous other measures that have helped to safeguard lives and livelihoods throughout this extraordinarily difficult period. As is the case in every previous year, the fund has also paid out on business-as-usual requests.
This Bill again seeks to adjust the limit on the amount that can sit in the Contingencies Fund for the financial year ending 30 March 2022 to 12% of last year’s cash spend. I will set out the reasoning behind that decision. With the new cap, the amount in the fund will total £105 billion. By contrast, with the 2% cap—the normal percentage limit—the fund would have contained £17.5 billion. That is clearly a substantial sum, and it would be more than ample to deal with spending requirements in the normal run of things.
While the Government will provide Departments with suitable resources for the 2021-22 year, it is prudent to be prepared in cash terms. While the resounding success of the vaccination programme offers us light at the end of the tunnel, it is equally true that we must remain vigilant. The crisis is not over, and therefore the Government believe it is only right to retain flexibility on the amount in the Contingencies Fund. However, given the experience accrued by each Department over the last year in dealing with the virus, we can scale back the limit from 50% of the previous year’s cash spend to 12%. Once again, let me assure Members that the House will still be able to scrutinise and debate where resources have been allocated in the usual way when we publish the supply estimates.
This is a small and technical but important Bill that will allow the Government to deal with unexpected events over the coming year. It provides Departments with a mechanism to respond swiftly and decisively to emergencies and sudden, unpredictable needs so that they can safeguard our public services and support the wellbeing of people across the country. It does not impinge on Parliament’s right to scrutinise and question, but it does underline this Government’s commitment to do whatever it takes to protect lives and livelihoods in order to overcome this virus, and I commend it to the House.
At the conclusion of the debate
I will not detain the House for long. By leave of the House, let me just say a couple of words. I thank all Members who have spoken so far. I thank the hon. Member for Ealing North (James Murray) for the Opposition’s support for this, but I think he was mistaken in relation to my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), who was making a point about the absence of any person on the Labour Front Bench during the debate. That has largely been a characteristic of this debate so far, and that is a pity. I thank the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) for his recognition of the way in which I and colleagues at the Treasury have leant into the difficult issues he raised in relation to the excluded. That does not bear directly on this debate, but the wider point he makes is welcome.
I am mindful that this debate has featured several contributions from Labour Members that have resolutely failed to engage with the substance of the Bill under discussion, and that is a particular shame. This is a party that talks about proper accountability but simply finds it impossible to exercise that accountability in the Chamber by asking the Minister questions. I hope that hon. Members will do that in the next stage of the debate, so that we can have a proper discussion about this. They have, after all, just had a long period of debate on the Budget in which any of the points they wished to raise—irrelevant to the Contingencies Fund Bill but relevant to that topic—could have been discussed. Instead, they have indulged in cheap and irrelevant political posturing, and that is a particular shame—all the more so as their contributions have had the effect of delaying an important and much needed debate in this House called by the Backbench Business Committee on International Women’s Day.
Question put and agreed to.
As you will be aware, Mr Evans, clause 1 provides for an increase in capital for the Contingencies Fund. It raises the limit from the standard 2% to 12%, providing a sum of approximately £105 billion for the financial year 2021-22 only.
We are all agreed across the House on the central importance of accountability to Parliament, but it is the Government’s very firm view that new clause 1 is not needed in order to achieve accountability. It is important to say again that supply processes continue to be used in the usual way with expenditure still subject to parliamentary scrutiny and a vote. This Bill simply permits an advance on expenditure that will be included in the main or supply estimates.
Let me set out four points that make this quite clear. First, the Contingencies Fund is about ensuring cash flow, restricting it to urgent services in anticipation of parliamentary provision becoming available and temporary funds required for necessary working balances. It is not additional spending; it is simply a cash advance to be repaid. It does not in any way preclude the scrutiny by Parliament of additional provision sought by a Department through the supply estimates, nor does it preclude the Comptroller and Auditor General from expressing his view on the regularity of departmental expenditure.
Secondly, each and every departmental accounting officer remains fully accountable for expenditure; and, of course, that expenditure will be audited by the NAO in the usual way as part of the annual reports and accounts of each Department. Transparency arrangements for ministerial directions—where they are sought under the requirements of the doctrine of “Managing Public Money”—will also continue in the usual way. Accounting officers are already required to publish any direction that they receive as soon as possible, unless there is a broader public interest in keeping it confidential.
Thirdly, the House has seen throughout 2021 that Departments must notify Parliament by way of a ministerial statement agreed with the Treasury where a commitment will be or has been entered into in advance of supply. I would like to make it clear that the mandatory WMS wording agreed with Parliament and the NAO already distinguishes whether this advance is a new service, new expenditure or simply a cash requirement ahead of a supply estimate.
I remind hon. Members that the Contingencies Fund is not a tool—some hon. Members have made this point—that Ministers can choose to use; it is not discretionary. It is managed entirely by the Treasury, and the accounting officer must ensure that advances are given in line with strict rules agreed between Parliament, the NAO and the Treasury. These rules are set out clearly in the published estimates manual. Every Department makes an application outlining the urgency of their case and how they plan to meet the listed requirement. It is worth mentioning that the NAO also audits the Contingencies Fund accounts, and that includes a full list of advances.
Let me turn to a couple of the points raised by Members in the debate. I did ask for questions on the Bill, but the hon. Member for Luton North (Sarah Owen) somehow found that difficult. She raised another irrelevant issue about public spending. She asked me about my own link. I assure her that I had nothing to do with the awarding of any contracts. As my hon. Friend the Member for South Cambridgeshire (Anthony Browne) pointed out, this is true for Ministers across the Government, according to the NAO.
The hon. Member for Hackney South and Shoreditch (Meg Hillier), who chairs the Public Accounts Committee, made a speech, wonderfully—and I thank her for it—on the Bill. I am very grateful. She asked whether the Bill is rushed through. The answer to that question is no, it is not. It is important to do it, we think, before the beginning of the new financial year. The same Bill was put through in March last year, and so it is here. She asked about Treasury controls. We fully, strongly believe in them. She recommends Ghanaian principles of public finance, but I am not sure I can follow her in that direction.