Sample Material of Public Administration Study Kit: Financial Management: Parliamentary control of public expenditure

Sample Material of Public Administration Study Kit (Paper - II)

Financial Management: Parliamentary control of public expenditure

PARLIAMENTARY CONTROL OF PUBLIC EXPENDITURE

The Parliament is the custodian of public money, and what better way to keep an eye on the authorities spending the money than through the representatives of the public sitting there? The methods adopted by the Parliament for controlling expenditure may be broadly classified into two categories:

(a) Built-in techniques in parliamentary procedure, and

(b) Committees appointed by the Parliament To begin with the first category, there are certain techniques which are part of the parliamentary procedure. Some of these are general, in the sense that they are employed for
both financial and other matters, while specific techniques help the Parliament to exercise financial control. Among the in-built techniques in the parliamentary procedure, questions are the most significant.

Questions

Questions represent a very powerful technique of parliamentary control over expenditure. The right to ask questions was given for the first time to the legislators by the Act of 1892 and for asking supplementary questions in 1909. A question is a request made by a member for an oral explanation from the concerned minister. However, a notice of 10 days has to be given to the concerned minister before a question can be asked. But if a matter is urgent, then, a shorter notice is enough. The questions are classified into two categories-starred and unstarred. The questions marked with a star are answered orally and the unstarred ones get a written answer.
In the Indian Parliament, the questions raised by members on the various issues of the conduct of government, including its finance, have had great impact. It is well known how Feroz Gandhi’s one set of questions led to the unravelling of the Mundra Scandal, that eventually shook the whole Central government. It added a new chapter to India’s parliamentary history. The report of the Chagla Commission of inquiry on the LIC financial
deals is a document that can still provide useful guidelines of right conduct for the ministers and the civil servants.

Resolutions

The term ‘Resolution’ is used in respect of certain kinds of motions only. These are of two kinds: those which recommend a particular course of action to the government and those which seek to censure an individual minister or the whole ministry. A member can also move a resolution on a matter of public interest. Fifteen days notice is required for moving a resolution. The resolution must raise some definite issue and should not deal
with the conduct of anyone except in his official capacity.

All general rules applicable to motions are applicable to resolutions also. However, by its nature, a resolution is only recommendatory and not binding. But, resolutions passed in pursuance of any provision in the Constitution or in any Act of Parliament have a binding effect.

Motions

When a member of the Parliament feels that a particular matter or report ought to be discussed in the House, a motion for that has to be brought before the House. A notice for such a motion has to be given according to set rules. When a member moves a motion, he may speak on it and so can the other members. Then, the debate over it takes place.

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Adjournment Motion

An adjournment motion is a device which enables the House to discuss matters of urgent  importance and, if it is passed, the ordinary business of the House is adjourned and the matter for which the adjournment motion has been moved, is taken up. The proposing member has to give a notice to the Speaker, generally before 12 o’clock, but it can be later also. If forty or more members support it, it is considered passed and the matter
is taken up for discussion. A debate on an adjournment motion may last only three hours. However, the right to move such a motion is subject to certain restrictions:

1. It must relate to a specific and important matter, which deserves urgent consideration by the House.

2. It must be based on facts which are not open to dispute.

3. The matter must be raised at the earliest opportunity and must be a matter of recent occurrence.

4. It must be of public importance.

5. The matter must not be subjudice, that is,under adjudication by a court of law.

6. It must relate to the administrative responsibility of the government concerned.

7. It must not relate to anything which has already been discussed in the House.

8. It must not raise matters entailing legislation.

When the debate on the motion comes to an end at the specified time, the Speaker closes the debate and puts the motion to vote. In case such a motion is passed by a majority, it amounts to a censure against the government. In practice, it is found that the Speaker has been rather reticent in giving permission to move such motions.

Debates and Discussions

Debates and discussions form the core of parliamentary proceedings. These take many forms and take place on numerous occasions. Discussion takes place over the various clauses of a bill and over every demand in the budget; the purpose of every motion is to hold debates and discussions. Debates can be arranged on the government’s own initiative or at the request of the opposition. The value of the debates lies in the fact that they compel the government to explain and defend particular issues of their policy at length and enable it to gauge the strength of various shades of opinion thereon.

Calling Attention Motion

Another popular device innovated in the Indian Parliament is that of the “calling attention motion”. By this method a member can ask for an explanation or a clarification from a minister on matters of urgent public importance at short notice. However, the Speaker is free to grant such a request or disallow it. If he allows it, the matter comes up before the House at once and the minister is expected to make a statement immediately or later.

These are methods by which the Parliament exercises general control over the administration in financial as well as non-financial matters. In the  succeeding pages, the discussion centres on methods used by the Parliament exclusively for exercising financial control.

Specific Methods of Financial Control

While discussing the specific methods of financial control, a reference at the outset to the annual financial statement will be in order.

Annual Financial Statement

According to Article 112 of the Indian Constitution, the President of India causes to be laid before both the Houses of Parliament an ‘annual financial statement’ containing the statement of the estimated receipts and expenditure of the Government of India for that year. In the estimates of expenditure, the figures for the charge on the Consolidated Fund of India and the sums required for meeting expenditure outside the Consolidated Fund of India are given separately. Besides, the expenditure on revenue account is also distinguished from other expenditures.

Consolidated Fund

Article 112(3) of the Constitution of India specifies the expenditure that is charged to the Consolidated Fund of India. This includes the following items:

(a) The emoluments and allowances of the President and other expenditure relating to his office.

(b) The salaries and allowances of the Chairman and the Deputy Chairman of the Rajya Sabha and the Speaker and the Deputy Speaker of the Lok Sabha.

(c) Debt charges, for which the Government of India is liable, including interest, sinking fund charges and redemption charges, and other expenditure relating to the raising of loans and the service and redemption of debt.

(d) The salaries, allowances and pensions payable to or in respect of judges of the Supreme Court.

(e) The salary, allowances and pension payable to or in respect of the Comptroller and Auditor General of India.

(f) Any sums required to satisfy any judgement decree or award of any court or arbitral tribunal.

(g) Any other expenditure declared by the Constitution or by Parliament, by law, to be charged to the Consolidated Fund of India.

As mentioned in Article 113, the estimates of expenditure charged upon the Consolidated Fund of India are not submitted to the vote of Parliament, although there can be discussion on the same in either House of Parliament.

Money Bill

Generally, a financial bill may be considered as any bill which relates to revenue or expenditure. However, the Constitution of India uses the term in the technical sense and prefers the term, Money Bill which, in turn, has been defined under Article 110.

According to Article 110 of the Indian Constitution, a bill is deemed to be a money bill if it contains only provisions dealing with all or any of the following matters, namely;

(a) The imposition, abolition, remission, alteration or regulation of any tax;

(b) The regulation of borrowing of money or giving of any guarantee by the Government of India, or the amendment of the law with respect to any government financial obligations;

(c) The custody and operation of the Consolidated Fund or the Contingency Fund of India;

(d) The appropriation of moneys out of the Consolidated Fund of India.

(e) The declaring of any expenditure charged on the Consolidated Fund of India or the increasing of the amount of any such expenditure;

(f) The receipt of money on account of the Consolidated Fund of India or the public accounts of India or the custody or issue of such money.

A money bill cannot be introduced in the Rajya Sabha, nor can it be introduced except on the recommendation of the President. As already stated, the Rajya Sabha has no powers to amend or reject such a bill. It can, however recommend amendments to the Lok Sabha, which may or may not be accepted. Likewise, a financial bill, which contains any of the matters mentioned in Article 110 but does not deal exclusively with such matters, also cannot be introduced in the Rajya Sabha. Besides, it cannot be introduced except on the recommendation of the President. But, the Rajya Sabha enjoys the power to reject or amend such a financial bill, subject to the limitation that an amendment other than for reduction or abolition or a tax cannot be moved in either House without the President’ recommendation. In the case of the second kind of financial bills, which involve expenditure from the Consolidated Fund, either House has powers to reject or amend it; but, it requires the President’s recommendation before it can be considered (as against before it can be introduced).

Demands for Grants

On the recommendation of the President of India, the estimates of expenditure, other than those specified for the Consolidated Fund of India, are presented to the Lok Sabha in the form of demands for grants. Under Article 113, the Lok Sabha has the power to assent to or to reject, any demand, or to assent to any demand, subject to a reduction of the amount specified.

After the conclusion of the general debate on the budget, the demands for grants of various ministries are presented to the Lok Sabha. There was a time when all demands were introduced by the Finance Minister; but, now, they are formally introduced by the ministers of the concerned departments. These demands are not presented to the Rajya Sabha, though a general debate on the budget takes place there too. The demands of ministries may be voted without any discussion at all; but, in case the members are not satisfied, several methods of introducing ‘cuts’ can be adopted, a reference to which will be made later.

Supplementary, Additional or Excess Grants

Article 115 of the Constitution lays down that statements showing the estimates of expenditure for the supplementary, additional or excess grants have to be presented to the Lok Sabha. Supplementary or additional grants would be required, if the amount authorised for the current financial year is found insufficient for the purpose during that year or when a need arises during that year for additional expenditure for some new services not contemplated in the annual financial statement for that year.

The procedure followed in their approval is the same as applicable to regular grants. Proposals for sanctioning excess grants are introduced in the House to regularise excess amounts spent, over and above the original grants approved by the Parliament. This is essentially a process of regularization of what has already been spent; but, it presents yet another opportunity for discussion on the particular transactions which have led to the excess. However, it maybe mentioned that excess grants are treated by the House with utmost caution, at times, even with resentment, because these excess grants represent a relaxation of parliamentary control.

Cut Motions

Cut motions are introduced to discuss the policy pursued in regard to a specific matter by the minister concerned or to ventilate grievances or to suggest economies. Each such motion has to focus on one demand and one-matter only, which needs to be precisely stated. It must not relate to the expenditure charged on the Consolidated Fund of India or make suggestions for the amendment or repeal of existing laws.

They are of three varieties:

1. Policy Cuts: Under this category, the amount of the demand is sought to be reduced by Re. 1, though it implies a total  disapproval of the policy pursued by the ministry.

2. Token Cuts: Under this group, the amount  of the grant is sought to be reduced to Rs. 100 and the purpose is to ventilate a grievance relating to the demand.

3. Economy Cuts: They are directed to reduce the demand by such amounts as would be considered desirable by the  members to bring about economy in expenditure,

These cut motions invariably put the government on the defensive. But, if the replies are convincing and the ruling party has a solid majority, it would be difficult to get them passed. These cut motions, after discussions, are put to vote and, depending on the result of the voting, the demands are accordingly passed or reduced. It may be noted, however, that because of the support enjoyed by the ruling party in the Indian Parliament, no such cut motions have ever been carried through.

Appropriation Bill

According to Article 114 of the Constitution, when the demand for grants has been voted for, the Appropriation Bill authorises the withdrawal of the funds from the Consolidated Fund of India, as regards both the votable and the charged items. The bill includes all those items which have already been included in the demands for grants of individual ministries and is a replica of the statement of those amounts, which had earlier been approved by the Parliament. No amendments can be proposed to this bill because that would amount to altering the once decided amount of a grant. Notably, the Appropriation Bill provides an occasion for a full-fledged discussion on topics chosen by the various parties in the House.

Vote on Account

As per Article 116 of the Constitution, a vote on account is a grant approved by the Parliament in advance of the detailed examination of various demands presented to it. Since legislative programmes proceed on schedule and cannot be hurried, merely to enable the executive to get its grants exactly at the beginning of the new financial year, the executive is given an advance grant to meet its temporary and other running expenditure until the demands are voted by the legislature. The idea is that no governmental activity should be held up for want of funds.

Such grants are passed, after a detailed discussion in the House, since no money can be taken without the sanction of the legislature. It again gives a chance to discuss matters of policy, to ventilate grievances and to propose cut motions. In practice, however, the approval of such grants in the Indian Parliament has been a smooth affair on almost all occasions.

Vote of Credit

Article 116 of the Indian Constitution also provides that the Parliament may make a grant for meeting an unexpected demand upon the nation’s resources, when, on account of the magnitude or the indefinite character of the service, the demand cannot be stated with the details ordinarily given in the annual financial statement. An Appropriation Act is again essential for passing such a grant. It is intended to meet specific purposes, such as for
meeting war needs. These however, are very rare.

Reappropriation

The process of re-appropriation consists in appropriating from one head, where there is saving, to another where there may be need for more expenditure. It is a process wherein the total amount of the grant remains the same but, there are internal transfers and shifts which change the composition of the demand. Another related technique of control is through token grants. They are variations of supplementary grants and are submitted when the proposed expenditure is not within the ambit of the demand already approved, but, can be met from the savings within that demand. Thus, this demand also does not involve any additional expenditure.

Control Through Committees

Since the field of control is extremely vast, the Parliament appoints certain committees to  exercise control on its behalf. These committees are composed of members appointed by the Parliament from amongst the MPs, both of the ruling and opposition parties together, to bring about control. These committees exercise control through research and investigation of the varied activities of the spending departments and submit their reports to the Parliament. Some of the most important committees being taken up for discussion are:

  • Public Accounts Committee

  • Estimates Committee

  • Committee on Public Undertakings

  • Standing Committees.

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