Whitehall permanent secretaries have been told they should seek ministerial directions for spending related to Brexit if they are not sure if they have legislative approval for the funding.
In documents released by the Treasury yesterday, it was revealed that Treasury permanent secretary Tom Scholar and Department for Exiting the European Union chief Philip Rycroft wrote to other department chiefs in October telling them to seek ministerial directions to authorise spending to implement new systems needed for after the UK leaves the EU.
Ministerial directions are most frequently used when departmental accounting officers, usually perm secs, think that to go ahead with a planned policy would be inappropriate or not value for money, as they force ministers to publicly defend their proposals and issue formal instructions to proceed.
However, they can also be used for ministers to provide backing for spending that does not have legislative backing in an Act of Parliament, Scholar and Rycroft said.
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“Ministerial directions are the proper way to allow critical spending to be incurred whilst being transparent with Parliament about why spending is being incurred ahead of Royal Assent,” the letter said.
According to Scholar and Rycroft, this will arise in a small number of cases where departments need to spend money to prepare for Brexit but the specific legislation that would cover such spending, such as the bills to create a new UK trade and customs regime, is not yet in place.
Government spending rules, set out in the Treasury’s Managing Public Money guidance, requires new spending to be linked to specific legislation, but the letter to perm secs acknowledges that “delaying spend until legislation has reached Royal Assent could jeopardise readiness for Brexit”.
To address this, in a small number of cases, ministers should issue what Scholar and Rycroft call a “technical direction” to allow spending to take place before legislation has reached the statute book in key areas.
“In these cases, the use of a direction will be a matter of timing,” they wrote. “Departments will still need to ensure spending is in all other respects regular, proper, feasible and good value for money, in the usual way.
“To be clear, the majority of spending to prepare for EU exit has, or will have, the necessary legislative cover when spending is required to happen. This issue only affects a small fraction of EU exit spending – spending on implementation of a new service ahead of Royal Assent,” they added. “Spending on preparatory work which is not concerned with implementing a new service does not require specific legislative cover.”
The letter also set out the option of departments securing an advance from the Treasury’s contingency fund if the legislation that would authorise the spending has reached the second reading stage in the House of Commons and is “virtually certain” to receive Royal Assent within a year with minimal changes.
However, if this was not possible, “a formal written direction to spend from your secretary of state” should be sought.
The letter adds: “A single direction per department can cover multiple areas of spending, so long as the arguments for spending are clear for each case and the amounts involved are set out separately.”
Follow-up Treasury guidance to perms secs and other Whitehall accounting officers, sent on 28 November, stated that although departments can wait until the next departmental annual report and accounts to publish the direction letter, to ensure transparency this should be done “as soon as possible after it has been issued”.
The guidance also stated the Treasury had expanded the role of ministers in approving spending directions from arm’s-length bodies where they related to Brexit. Usually, there is no formal role for a minister where the board of any arm’s-length body issues a direction to its accounting officer, usually the chief executive.
However, given the potential interest in Brexit spending, the role of ministers in sponsor departments should be “greater than normally envisaged” for Brexit-related spending directions, according to the ‘Dear Accounting Officer’ circular. They will now be asked by the chair of any public body to provide written advice on how to proceed “in the event their accounting officer has felt unable to proceed with essential spending in advance of full specific statutory cover for that spending”.
Such advice must be “taken into account” when boards decide whether to issue a direction to proceed, and the Treasury has provided a standard form of words for ministers to use. This includes a statement that the request “falls within the category of spending for which I would issue a direction, in areas where I have the authority to do so”.