First World War

Treasury Control of Departments

Some of the Treasury's powers increased during the First World War while others were reduced or relaxed. The main extension to Treasury powers followed from the introduction of Votes of Credit. With major funds for wartime expenditure now being under the control of the Treasury, it played a key part in decisions on allocating funds between different wartime needs, based on the demands of the fighting services and other priorities and emergency requirements. In normal times these appropriations would have been the responsibility of Parliament. As part of these arrangements, emergency inter-departmental committees were set up with the Admiralty, and later the Ministry of Munitions, to enable the Treasury to keep in close touch with funding needs and to exercise necessary control but without creating undue delay to the work. Similar arrangements were considered impracticable for the War Office. Thus, prior Treasury sanction was not required for expenditure 'certified to be vitally necessary to the public interest and to have been incurred under such conditions of urgency that it could not be submitted to the Treasury beforehand'.[1] Certificates of Urgency were signed by the War Office's Financial Secretary on the authority of the Secretary of State. Though occasionally the War Office was committed to expenditure before the Certificate of Urgency was obtained, 'the Financial Secretary speedily made it clear that he would refuse to give the necessary certificate unless he was asked before the expenditure was incurred'.[2]

For some smaller bodies, Treasury officials were appointed to serve on their finance committees in order to be kept informed about spending plans as they were being formulated and to be in a position to stop or moderate them. The PAC was concerned that these Treasury officials could in time become 'quasi-departmental' and less independent, but the Committee was reassured by the Treasury that this would not happen. More generally, Treasury controls were reduced or relaxed to give departments wider powers on such matters as writing off of losses and overpayments, special and unusual payments, waiver of outstanding debts, freedom from competitive tendering for smaller nonurgent contracts, and straightforward cases of vote allocation and virement.

The most significant reduction in Parliament's wartime control over funding was the use of Votes of Credit. These granted the Treasury large annual lump sums to be spent as the government decided, without prior parliamentary approval, on urgent and unforeseen measures directly needed for the war effort. The exigencies of war precluded the preparation and submission of detailed estimates. Votes of Credit were mainly used to fund expenditure on the fighting services but also for such matters as protection of food supplies and other essential services, and for emergency needs. The initial Vote of Credit at the outbreak of war was ?100 million, after which subsequent increases brought the total for 1914-15 to ?362 million. Further annual amounts were provided throughout the War. For 1915-16 and subsequent years these covered the total expenditure of the Navy, the Army, and the Ministry of Munitions, with only token estimates presented to Parliament. Votes of Credit were not intended to be used to meet excess expenditure on services already provided for in estimates and supplementary estimates, but this distinction was not always maintained. Amounts used from Votes of Credit were subsequently shown either in the relevant appropriation accounts or as a direct charge to the Vote of Credit. Details of the arrangements for allocating and accounting for sums drawn down from the Vote of Credit were set out in extensive Treasury Minutes.[3]

The House of Commons had always reluctantly accepted Votes of Credit as a necessary evil in exceptional circumstances. However, whilst recognizing the continuing demands of wartime operations, the House of Commons had by 1917 become increasingly uneasy about the curtailments and constraints on its traditional powers. These concerns were fuelled by burgeoning levels of expenditure, taxation, and debt, and the number of new services and organizations that Votes of Credit were being used to fund. Resentment about these issues emerged clearly in the debate in Parliament in July 1917 on a motion to appoint a new Select Committee on National Expenditure.[4] In 1917 the PAC produced a special report on 'Estimates and Treasury Control in Wartime Conditions' and, although there were some specific areas of concern, the broad picture presented was that: 'During the year under review the accounting by Departments and the work of the Comptroller and Auditor General have been carried out in face of abnormal difficulties caused by the war, and they have, on the whole, been satisfactorily overcome.' Looking forward, however, the Committee believed that:

Whatever may have been the necessity for Vote of Credit procedure in the early stages of the war, the time has now arrived when Estimates more approaching those in force in normal times should be presented to Parliament, not merely for the fighting services, but also, where practicable, for the new services now charged direct to the Vote of Credit.

The Treasury responded by explaining at some length in a Treasury Minute the continuing need for Votes of Credit, at the same time agreeing to provide, where possible, further information on the main services for which it was expected to be used and to extend the presentation of token estimates for the new departments being created. Predictably, and with barely suppressed irritation, the Minute did not accept the PAC's criticisms of Treasury control.[5]

  • [1] Treasury Minute of 8 December 1914, para. 11. Certificates under this provision were to besubmitted to the C&AG with the relevant accounts.
  • [2] PAC Second Report, 1916, HC 115, paras 23-4.
  • [3] Treasury Minutes, 20 August 1914 and 22 November 1915. PAC Second Report, 1916, HC 115paras 68-72.
  • [4] Hansard, 6 July 1917, vol. 95, cc 1493-569.
  • [5] PAC Report, 1917, HC 123. Treasury Minute, 1 November 1917.
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