Chapter 1

Responsibilities

The relationship between the government,acting on behalf of the Crown,and parliament,

representing the public,is central to how public resources are managed. Ministers
implement
government policies, and deliver public services, through public servants; but are able to
do so only
where parliament grants the right to raise, commit and spend resources. It falls to the
Treasury to
respect and secure the rights of both government and parliament in this process.

1.1 Managing public money: principles

1.1.1 The principles for managing public resources run through many diverse
organizations delivering public services in the UK. The requirements for the different
kinds of body reflect their duties,responsibilities and public expectations. The
demanding standards expected of public services are set out in box 1.1.

1.1.2 The principles in this handbook complement the guidance on good governance in
the Corporate Governance Code applying to central government departments. Some of
the detail applies to England only, or just to departments of state.There is separate
guidance for the devolved administrations.Where restrictions apply,they are identified.
1.1.3 Much of this document is about meeting the expectations of parliament. These
disciplines also deliver accountability to the general public, on whose behalf parliament
operates. The methods of delivery used should evolve as technology permits. Public
services should carry on their businesses and account for their
1 The Corporate Governance Code-see
https://www.gov.uk/government/publications/corporate-governance-code-for-central:
government-departments
stewardship of public resources in ways appropriate to their duties and context and
conducive to efficiency.
1.2 Ministers
1.2.1 In the absence of a written constitution, the powers used to deploy public resources
are a blend of common law, primary and secondary legislation, parliamentary procedure,
the duties of ministers, and other long-standing practices. This mix may of course change
from time to time.
1.2.2 As the Corporate Governance Code makes clear, the minister in charge of a
department is responsible for its policy and business as part of the broad sweep of
government policy determined in Cabinet.They:
determines the policies of the departmental group;
chairs the departmental board;
allocates responsibilities among the ministers in the department;
2
 chooses which areas of business to delegate to officials,and on what conditions;
looks to the department's accounting officer (see chapter 3) to delegate within
the department to deliver the minister's decisions and to support the minister in
making policy decisions and handling public funds;and
also has general oversight of other bodies on whose behalf they may answer in
parliament, including the department's arms length bodies (ALBs).
1.2.3 The Ministerial Code requires ministers to heed the advice of their accounting
officers about the proper conduct of public business. See section 3.4 for how the minister
may direct the accounting officer to proceed with a policy if a point of this kind cannot be
resolved.
1.2.4 The minister in charge of a department may delegate defined areas of its business,
or of its parliamentary work, to their junior ministers.Ministers have wide powers to
make policies and to instruct officials.
1.2.5 Only ministers can propose legislation to parliament to raise public revenue
through taxation,or to use public funds to pursue their policy objectives. Specific primary
legislation is normally required to spend public funds (see section 2.1). Similarly, taxes
may be collected, and public funds may be drawn, only with parliamentary authority; and
only as parliament has authorized.
1.2.6 It is not normally acceptable for a private sector organization to be granted powers
to raise taxes, nor to distribute their proceeds. Parliament expects these responsibilities to
fall to ministers, using public sector organizations.
1.2.7 The House of Commons (and not the House of Lords)enjoys the financial privilege
to make decisions on these matters.

2 https://www.gov.uk/governmenV/publications/ministerial-code
1.3 Parliament
1.3.1 Parliament approves the legislation which empowers ministers to carry out their
policies. It also allows finance for services when it approves each year's Estimates.See
the Estimates Manual3 for more.
1.3.2 From time to time parliament may examine government activity.Select committees
examine policies, expenditure, administration and service delivery in defined areas. The
Committee of Public Accounts (PAC-see section 3.5) examines financial accounts,
scrutinizes value for money and generally holds the government and its public servants to
account for the quality of their past administration.
1.4 The Treasury
1.4.1 Parliament looks to the Treasury to make sure that:
· departments use their powers only as it has intended; and
revenue is raised,and the resources so raised are spent,only within the agreed
limits.
1.4.2 Hence it falls to the Treasury to:
set the ground rules for the administration of public money; and
account to parliament for doing so.
1.4.3 This document sets out how the Treasury seeks to meet these parliamentary
expectations. The key requirements are regularity, propriety, value for money and
feasibility(see box 3.2).The Treasury:
designs and runs the financial planning system 4 and oversees the operation of
the agreed multi year budgets to meet ministers' fiscal policy objectives;
oversees the operation of the Estimates through which departments obtain
authority to spend year by year;

2
 sets the standards to which central government organizations publish annual
reports and accounts in the Financial Reporting Manual (FReM). This adapts
International Financial Reporting Standards (IFRS) to take account of the public
sector context;
sets Accounts Directions for the different kinds of central government
organizations whose accounts are laid in parliament; and
may also work through the Cabinet Office to set certain standards applicable
across central government, for example functional standards5.

3 https://www.gov.uk/government/publications/supoly-estimates-guidance-manual
4 See the Consolidated Budgeting Guidance for
more-https://www.gov.uk/governmenV/publications/conslidated-budgeting: guidance
5 See Functional Standards-GOV.UK(www.gov.uk).
1.5 Departments
1.5.1 Within the standards expected by parliament,and subject to the overall control and
direction of their ministers, departments have considerable freedom about how they
organize, direct and manage the resources at their disposal. It is for the accounting officer
in each department, acting within ministers' instructions, and supported by their boards,
to control and account for the department's business.
1.5.2 A departmental board,chaired by the senior minister,leads each department.
Boards can bring to bear skills and experiences from elsewhere in, and outside of, the
public sector (see section 4.1).
1.5.3 Within each department,there should be adequate delegations, controls and
reporting arrangements to provide assurance to the board,the accounting officer6 and
ultimately ministers about what is being achieved,to what standards and with what effect.
These arrangements should provide timely and prompt management information to
enable plans to be adjusted as necessary. Similarly ministers should have enough
evidence about the impact of their policies to decide whether to continue,modify or end
them. This is discussed further in chapter 4.
1.5.4 In supporting ministers, civil servants should provide politically impartial advice.
Should they be asked to carry out duties which appear incompatible with this obligation,
the accounting officer should take the matter up with the minister concerned (see also the
Civil Service Code7).
1.5.5 Departments often operate with and through a variety of partners to deliver their
ministers' policies. It is important that these relationships operate in the public interest:see
chapter 7.
1.6 The Comptroller and Auditor General
1.6.1 Supported by the National Audit Office (NAO), the Comptroller and Auditor
General (C&AG) operates independently to help parliament scrutinize how public funds
have been used in practice. Further information about the role of the NAO is available on
their website and in annex 1.1.
1.6.2 The C&AG provides parliament with two sorts of audit:
financial audit of the accounts of departments and ALBs,covering:
assurance that accounts have been properly prepared and are free of material
misstatements9; and
confirmation that the underlying transactions have appropriate parliamentary
authority;
value for money reports assessing the economy, efficiency and effectiveness
with which public money has been deployed in selected areas of public business.
A programme of these reviews covers a variety
2
 6 If there is a change of Accounting Officer in the course of the year,the Accounting
Officer in place at the year end takes responsibility for the whole year's accounts,using
assurances as necessary.
http://www.civilservice.gov.uk/abouvalues
8 The NAO website address is http://www.nao.org.uk
9 See Audit Practice Note 10 of the Audit Practices Board on the FRC website at
Http://www.frc.org.uk
Types of liability
A5.4.20 Public sector organizations may take on liabilities by:
issuing specific guarantees, usually of loans;
·writing a letter or statement of comfort;or
providing indemnities.
A5.4.21 It is important to remember that any of these instruments issued by a minister
may be legally enforceable.
A5.4.22 Guarantees should normally arise using statutory powers.They typically involve
guarantees against non-payment of debts to third parties.
A5.4.23 Letters of comfort, however vague, give rise to moral and sometimes legal
obligations.They should therefore be treated in the same way as any other proposal for a
liability. Great care should be taken with proposals to offer general statements of
awareness of a third party's position, or oral statements with equivalent effect. Creditors
could easily take these to mean more than intended and threats of legal action could
result. Treasury approval is essential.
A5.4.24 It is common to give certain kinds of indemnity to members of boards of central
government departments or of NDPBs; or to civil servants involved in legal proceedings
or formal enquiries as a consequence of their employment,perhaps by acting as a board
member of a company. The standard form is set out in box A.5.4B,in line with the Civil
Service Management Code2.This cover is comparable to what is obtainable on the
commercial insurance market. So it excludes personal criminal liability, reckless acts or
business done in bad faith.
A5.4.25 Liabilities of this kind to individuals do not normally need to be reported to
parliament unless they go beyond the standard form or are particularly large or risky.

Box A5.4B: standard indemnity for board members

The government has indicated that an individual board member who has acted
honestly and in good faith will not have to meet out of his or her personal resources
any personal civil liability,including costs,which is incurred in the execution or the
purported execution of his or her board functions, save where the board member has
acted recklessly.

2 https://www.gov.uk/government/publications/civil-servants-terms-and-conditions
Notifying liabilities to parliament
A5.4.26 The rules for notifying parliament of liabilities are very similar to those for
public expenditure. Generally speaking there is no requirement to inform parliament
about any liability which:
arises in the normal course of business;
arises under statutory powers (subject to third bullet point of paragraph
A5.4.23);or,
would normally require notification (i.e. neither arising in the normal course of
business nor under statutory powers) but is under f300,000 in value.
2
 A5.4.27 There are some exceptions to this general rule.Parliament should be notified of
any liability, even if it meets one or more of the criteria given in paragraph
A5.4.22,which:
arises as a result of a specific guarantee, indemnity or letter of comfort where
the guarantee is not of a type routinely used in commercial business dealings;
is of such a size,relative to the department's total budget,that parliament should
be given notice;
arises under specific statutory powers which require parliament to be
notified;or,
is novel, contentious or potentially repercussive
A5.4.28 It is important to note that undertakings in the normal course of business should
be judged against the department's normal business pattern authorized by parliament. So
what may be normal for some departments may not be normal for others. In cases of
doubt it is best to report.
A5.4.29 Non-statutory liabilities which need to be reported to parliament should be
notified by Written Ministerial Statement and accompanying departmental Minute (see
box A5.4C).Treasury approval is required before going ahead. It is sometimes
necessary,with Treasury agreement, to adapt the form of wording, e.g. if the liability
arises immediately.
A5.4.30 Written Ministerial Statements and departmental Minutes should be laid in the
House of Commons, on the same day, and should briefly outline the nature of the
contingent liability and confirm that a departmental Minute providing full details has
been laid in the House of Commons.
A5.4.31 Departmental Minutes should:
use the standard wording for the opening and closing passages,which has been
agreed with the PAC (box A.5.4C);
describe the amount and expected duration of the proposed liability, giving an
estimate if precision is impossible;
explain which bodies are expected to benefit,and why;
if applicable,explain why the matter is urgent and cannot observe the normal
deadlines(paragraph A5.4.26_);
explain that authority for any expenditure required under the liability will be
sought through the normal Supply procedure;
be copied to the chairs of both the PAC and departmental committee.
A5.4.32 The contingent liability should not go live until 14 parliamentary sitting
days after the Minute has been laid. Every effort should be made to ensure that the
A full waiting period falls while parliament is in session. Where a contingent liability is
reported less than 14 days before the end of the session, the contingent liability
should only go live after laying before parliament during 14 sitting days, ie some days
after the start of the next session.
A5.4.33 If an MP objects by letter, Parliamentary Question or Early Day Motion,the
indemnity should not normally go live until the objection has been answered.In the case
of an Early Day Motion, the Member(s) should be given an opportunity to make direct
personal representations to the minister, eg proactively arranging a meeting with
them.The Treasury should be kept in touch with representations made by MPs and of the
outcome.
A5.4.34 If,exceptionally, the guarantee or indemnity would give rise to an actual
liability,the department should consult the Treasury about the wording of the Minute. The
department should discuss the implications for the actual liability on its budget,Estimate
and accounts.

2
 A5.4.35 There is not usually a requirement to notify parliament in instances where a
contingent liability arises due to events outside a department or ALB's control rather than
through an active policy decision. An example of something that would be outside a
department or ALB's control would be legal proceedings being brought against them.
Events of this nature should still be disclosed in the entity's Annual Report and Accounts
in line with the requirements of the Government Financial Réporting Manual (FReM).
Box A5.4C:standard text for departmental Minutes on liabilities
Opening passage
It is normal practice, when a government department proposes to undertake a
contingent liability in excess of £300,000 for which there is no specific statutory
authority,for the Minister concerned to present a departmental Minute to parliament a
giving particulars of the liability created and explaining the circumstances; and to
refrain from incurring the liability until fourteen parliamentary sitting days after the
issue of the Minute,except in cases of special urgency.
The body of the Minute should include:
If the liability is called,provision for any payment will be sought through the normal
Supply procedure.
Closing passage
The Treasury has approved the proposal in principle. If, during the period of fourteen
parliamentary
sitting days beginning on the date on which this Minute was laid before parliament, a
member
signifies an objection by giving notice of a Parliamentary Question or by otherwise
raising the matter
in parliament, final approval to proceed with incurring the liability will be withheld
pending an
examination of the objection.
Non-standard notification
A5.4.36 Sometimes it is not possible to give details of a contingent liability with full
transparency. In such cases the department should write to the chairs of both the PAC and
departmental committee to provide the same details as those outlined in paragraph
A5.4.24, with the same notice period.The letters should explain the need for
confidentiality. Any objection by either chair should be approached in the same way as
MPs' objections (paragraph A.5.4.27). If departments continue to have concerns about
writing to parliament,in particularly sensitive or confidential cases, they should seek
advice from the Treasury.
A5.4.37 Sometimes departments want to report an urgent contingent liability providing
less than the required 14 days notice. In such cases,the department should follow the
procedure in paragraph A.5.4.27 and explain the need for urgency, agreeing revised
wording to the final standard paragraph with the Treasury.
A5.4.38 If the proposal is more urgent than this rule would allow,the department should
write to the chairs of the PAC and the departmental committee,giving the information in
paragraph A.5.4.28 and explaining the need for urgency.Where possible, the Chairs
should be given 14 working days from receipt of the letter to raise an objection in
writing, in which case the department would withhold final approval to proceed with
incurring the liability pending an examination of the objection. As a matter of record,
when parliament reconvenes, a Written Ministerial Statement and departmental Minute
should be laid explaining what has happened, including any liabilities undertaken.
A5.4.39 The same procedure as in paragraph A.5.4.29 should be used to report liabilities
during a parliamentary recess. In such cases the notice period should be 14 working days
notice, i.e. excluding weekends and bank holidays.
A5.4.40 Similarly, it is possible that a department might want to undertake a non-
statutory contingent liability when parliament is dissolved. Every effort should be made
to avoid this, since members cease to be MPs on dissolution, and committees will be
2

149
reconstituted in the new parliament. If the department nonetheless considers the proposed
liability to be essential, it should consult the Treasury.When parliament reconvenes a
Written Ministerial Statement should be laid explaining what has happened, including
any liabilities undertaken.
Reporting liabilities publicly
A5.4.41 Any changes to existing liabilities should be reported in the same way as they
were originally notified to parliament, explaining the reasons for the changes. If an
originally confidential liability (see paragraph A5.4.29) can be reported transparently, the
standard Minute (paragraph A.5.4.24) should be laid.
A5.4.42 Departments should report all outstanding single liabilities, or schemes of
liabilities, in their accounts unless they are confidential. Any which would fall as a direct
charge on the Consolidated Fund should be reported in the Consolidated Fund accounts.
The conventions in the FreM should be used.
A5.4.43 Estimates should similarly be noted with amounts of any contingent or actual
liabilities. The figures quoted should be the best assessments possible at the
time of publication. Actual liabilities should appear as provisions. The rubric should
refer back to notification of parliament.
A5.4.44 When the conditional features of contingent liabilities are met, it is good practice
to wait until parliament has approved the relevant Estimate before providing the
necessary resources. But if providing support is more urgent, departments should apply
for an advance from the Contingencies Fund (see Annex 2.4 and the Estimates Manual3
under the usual conditions). If an advance is approved,a statement to parliament should
explain what is happening, and in particular how the crystallized liability is to be met.
International agreements
A5.4.45 International treaties, agreements or commercial commitments which mean the
UK incurring specific contingent liabilities should follow the parliamentary reporting
procedures as far as possible whether or not the agreement is covered by legislation. Even
if an international agreement does not require legislation for ratification, it should
nevertheless be laid before parliament, accompanied by an explanatory memorandum, for
21 sitting days before it is ratified(the Ponsonby rule).

150

2
3 https://www.gov.uk/governmenV/publications/supply-estimates-guidance-manual

151