Management Accounting, Devolution and Democratic ... · 6 Management Accounting,Devolution and...

Management Accounting, Devolution andDemocratic Accountability

Research Report

Mahmoud EzzamelCardiff Business School

Noel HyndmanQueen’s University, Belfast

Åge JohnsenOslo University College

Irvine LapsleyUniversity of Edinburgh Management School

June PallotCanterbury University, New Zealand

Simona ScarparoWarwick University Business School

Copyright © CIMA 2005First published in 2005 by:The Chartered Instituteof Management Accountants26 Chapter Street London SW1P 4NP

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Management Accounting, Devolution and Democratic Accountability 1

Contents

Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2About the authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Executive Summary and recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Glossary of abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61.2 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61.3 Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81.4 Research Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91.5 Outline of the Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

2. The Process of Devolution in the UK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102.2 Devolution in Northern Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102.3 Devolution in Scotland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .112.4 Devolution in Wales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .122.5 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

3. International Comparisons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .143.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .143.2 Political Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .143.3 National Audit Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .173.4 New Public Management (NPM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .183.5 Public Management Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .183.6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

4. Research Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .204.1 Research Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .204.2 Data Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .204.3 Way of Working . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

5. Accountability in the UK Devolved Parliaments and Assemblies . . . . . . . . .225.1 Introduction: ‘The Accountability Gap’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .225.2 Accountability Arrangements in the UK Devolved Institutions . . . . . . . . . .235.3 What Accountability Means for the Participants to the Study . . . . . . . . . .245.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

6. Management Accounting Information in the UK Devolved Institutions . . .266.1 Northern Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .266.2 Scotland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .286.3 Wales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .296.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30

7. Issues of Performance Measurement and Auditingin the UK Devolved Parliament and Assemblies . . . . . . . . . . . . . . . . . . . . . . . .317.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .317.2 Availability and Use of Performance Information . . . . . . . . . . . . . . . . . . . . .327.3 Sources and Accessibility of Performance and Audit Information . . . . . . . .337.4 The Impact of Reforms on Performance and Audit Information . . . . . . . . .347.5 The Impact of Devolution on Performance and Audit Information . . . . . .347.6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

8. International Comparison: Issues on Accounting and Accountabilityin New Zealand and Norway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .368.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .368.2 Empirical Issues on Accounting and Accountability in New Zealand . . . . .368.3 Empirical Issues on Accounting and Accountability in Norway . . . . . . . . . .388.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39

9. Discussion and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43

Management Accounting, Devolution and Democratic Accountability2

The work on this project started in Edinburgh in 2000 as anidea for a CIMA-sponsored project on managementaccounting in central government. The project was funded bya grant from the Research Foundation of The CharteredInstitute of Management Accountants (CIMA) in 2001. In2002, the project also received a grant from the Devolution,Parliamentarism and Democratic Accountability: aComparative Study project (grant award numberL219252132) in the Economic and Social Research Council(ESRC) research programme on devolution and constitutionalchange.

The aim in writing this report is to contribute to the debateon the role of finance, accounting and management as facetsof the modernising agenda in evaluating the democraticaccountability that is taking place in accounting, publicmanagement, political science, sociology and economics,within the ‘governance and the constitution’ theme. Thisreport aims to be useful to practitioners (public sectoraccountants, managers and policy-makers). Research oncurrent political and administrative practices can be useful forpoliticians, policy-makers, journalists and citizens, at large. Inparticular, the project is relevant for informing the debates ondevolution, decentralisation, regionalisation and federalism,for instance with regard to establishing regional assemblies inEngland, and in assessing the diverse roles of accounting ondemocratic accountability in public sector reforms.

Acknowledgements

It is of great sadness to the research team that weacknowledge the death of June Pallot, a member of thisresearch team who passed away on 5th November 2004following a long battle with illness. This publication isdedicated to her memory.

A number of steps have been taken to facilitate interactionwith – and dissemination of findings to – different usergroups of this research (such as academics, politicians andpolicy-makers). Firstly, the main findings have been presentedboth to academic and to professional conferences, includingseminars in Northern Ireland, Scotland and Wales, whereplans and preliminary results have been presented anddiscussed with politicians and policy-makers. Secondly, theauthors have also participated in CIMA and ESRC workshopsand conferences. Thirdly, results have been circulated andpublished, with more publications in prospect to enhancedissemination.

There are many institutions and individuals to acknowledge.Thanks to ESRC and CIMA for financial support. Thanks toRebecca Edser, Sarah Hunt, Gary Martin and Elisa Wright forassistance in data collection for the project. Thanks also tothe many colleagues and reviewers that, at different stages inthe project and at different seminars and conferences, haveprovided numerous constructive comments. Lastly, thanks toall of the interviewees – members of parliaments andnational assemblies, executive officers, audit officers andparliamentary clerks and advisers – who generously gave oftheir time and insights to help with the data collection phaseof the project.


About the Authors

The team involved in this international comparative projectconsists of six researchers who have backgrounds in publicmanagement, management accounting and public policy:

Mahmoud EzzamelUniversity of Cardiff, Wales.

Mahmoud Ezzamel is professor of accounting at CardiffBusiness School. He is a joint editor of Accounting andBusiness Research. He has previously held professorial postsat Aberystwyth, UMIST and Manchester.

Noel HyndmanQueen’s University, Belfast, Northern Ireland.

Noel Hyndman is professor of management accounting inthe School of Management and Economics at Queen’sUniversity, having previously worked at the University ofUlster and the University of Ottawa in Canada. He is editorof the Irish Accounting Review, the journal of the IrishAccounting and Finance Association, and has providedtraining and advice to a number of public bodies in the UKand Canada.

Åge JohnsenThe University of Edinburgh, ScotlandOslo University College, Norway.

Åge Johnsen is associate professor at the Faculty of Business,Public Administration and Social Work, Oslo UniversityCollege; and senior research fellow at the the University ofEdinburgh Management School.

Irvine LapsleyThe University of Edinburgh, Scotland.

Irvine Lapsley is professor of accounting and director of theInstitute of Public Sector Accounting Research (IPSAR) at theUniversity of Edinburgh Management School. He is editor ofFinancial Accountability & Management and has advised anumber of public sector organisations, including the FinanceCommittee of the Scottish Parliament.

June PallotUniversity of Canterbury, New Zealand

June Pallot was professor of accounting at the Department ofAccountancy and Information Systems at CanterburyUniversity, Christchurch. She was associate editor of FinancialAccountability & Management, and a visiting professor ofaccounting at the University of Edinburgh.

Simona ScarparoWarwick University, England

Simona Scarparo is a lecturer in accounting at WarwickBusiness School. Previously, she was a PhD student and post-doctoral researcher at IPSAR, the University of Edinburgh.


Executive Summary and Recommendations

Devolution is commonly understood to be the transfer to asubordinate elected body, on a geographical basis, offunctions previously exercised by ministers and the nationalparliament. Devolution is also called external decentralisationto differentiate it from delegating responsibility within anexisting structure of authority. In 1997, the populations ofWales and Scotland voted in favour of devolution, and, inNorthern Ireland, the 1998 Good Friday Agreement – basedon the re-establishment of devolved government – alsoreceived electoral support. In 1999, the Northern IrelandAssembly in Belfast, the Welsh National Assembly in Cardiffand the Scottish Parliament, Holyrood, in Edinburgh begantheir operations. One of the main purposes of the devolutionprogramme was to facilitate political responsiveness to thepeople in their respective countries within the UnitedKingdom. The aim was to increase transparency and enhancedemocratic accountability using a different approach tomatters of government to that previously taken by Whitehalland Westminster.

This report documents how management accounting in thedevolution project has affected democratic accountabilityfour years into the devolution programme’s operation. Basedon documentary studies, media reports, observation ofparliamentary committee meetings and interviews with keyactors (for example, members of national assemblies andparliaments, parliamentary committee clerks and advisers,executive ministers and deputy ministers, audit officers, partypoliticians and other external experts) in the five countries, itconcludes that devolution has significantly and unequivocallycontributed to a more consultative, transparent anddemocratic accountable government in Northern Ireland,Scotland and Wales.

Key Findings:

● politicians in the devolved assemblies/parliaments,have a very compartmentalised view of accountabilityand – often – limited awareness of the potential ofmanagement accounting;

● most politicians interviewed experienced informationoverload. This is a key challenge for providers ofbudgeting and financial information in these settings;

● there was limited knowledge of what resourceaccounting and budgeting (RAB) is, and what it isintended to do, amongst the politicians in this study;

● most expertise in RAB sits with professional experts(government accountants and auditors) and there is adanger of democratic processes becoming increasinglymystifying, rather than more transparent;

● there is a need for the complexity of new forms ofgovernment accounting to be taught to electedrepresentatives. There is little evidence of interest orinclination from the elected representatives to attendseminars on accounting, which makes this a biggerchallenge;

● there is a shift towards the increased use ofperformance information in Northern Ireland, Scotlandand Wales. This trend is even more marked in NewZealand and Norway;

● the processes of budgetary scrutiny in the devolvedassemblies/parliaments need to be streamlined. Theyappear over-elaborate; and

● devolution and RAB are in their infancy. There is a needfor a more consistent appraisal/review of both of theseprocesses on a continuing basis.

AMS Additional Member SystemCSG Consultative Steering GroupDG Devolved GovernmentFEC Finance and Expenditure Committee (NZ)FIAG Financial Issues Advisory GroupFMI Financial Management InitiativeFPTP First Past the Post SystemFSA Financial Services AuthorityKRA Key Results AreaMLA Member of Legislative AssemblyMMP Mixed-Member Proportional SystemMP Member of ParliamentMSP Member of Scottish ParliamentNAO National Audit Office (UK)NPM New Public ManagementPAC Public Accounts Committee (UK)PR Proportional RepresentationPSA Public Service AgreementRAB Resource Accounting and BudgetingSDA Service Delivery AgreementSPICe Scottish Parliament Information CenterSRA Strategic Results Area

Glossary of abbreviations



1.1 PurposeThis project is a study of the role of accounting in informingand shaping the democratic accountability of key agents’actions in the newly devolved executives, national assembliesand parliaments in the UK (Northern Ireland, Scotland andWales). It explores how accounting is affected by amodernised public management culture and the new publicmanagement (NPM) movement, and how it relates tonon-accounting forms of accountability.

The emergence and development of accounting practices andthe meanings attributed to these developments fordemocratic accountability are also examined. The projectstudies annual financial budgeting, performance managementand performance audit reporting processes, and thelink/coupling between budgeting and reporting. Specifically, itexamines the linkages between mission statements,objectives and targets (including budgets) in the planningprocess and the use of performance measures and indicatorsin the reporting process. It distinguishes the macro,whole-of-government level from the micro, agency level andfocuses on the devolved governments and parliaments asaffected by whole-of-government budgeting.

1.2 BackgroundDemocratic accountability, has been substantially improvedin most western countries during the 20th century. The newlydevolved parliaments have had the opportunity to profitfrom the latest developments and best practices amongwestern democracies.

Simultaneously – and paradoxically, given increasingdemocratic representation, more transparency and theextensive public management reforms in the 1980s and1990s – there is evidence of a decline in citizens’ interest indemocratic accountability, decreasing party membership, lowvoter turnout, and political communication practicesresembling the old fashioned Westminster/Whitehall model,with ‘spin doctors’ and lobbying resulting in not sotransparent politics (Schlesinger, Millar and Dinan, 2001).

However, democratic governance is executed via a diverse setof instruments and procedures. Such arrangements may alsovary over time and between different national, institutionaland political ‘cultures’ (Hood, 1998).

While political scientists and economists often study giveninstitutions, their relationships and effects, this projectfocuses on what is going on inside the devolved institutions.This entire area is under-researched and so presents anopportunity to study the role of management accounting inthe implementation of devolution, which represents one ofthe most significant changes in British public policy indecades. This study will shed more light on severaldimensions of democratic accountability in the Westminstermodel of democracy, compared to the (non-Westminster)Nordic consensus model (Lijphart, 1999), such asrepresentation of relevant information and openness andaccessibility for the participating actors. Democraticaccountability issues will be examined in a comparativeresearch design that acknowledges historical and institutionalcontexts.

1. Introduction

This research is informed by studies of government andpublic sector reforms in general and, in particular, the NPMreforms implemented during the 1980s and 1990s (Boston etal., 1996; Pollitt and Bouckaert, 2000).

NPM reforms typically have evolved around six dimensions:

● privatisation;● marketisation;● decentralisation;● output orientation;● quality systems; and● intensity of implementation.

Several of these dimensions have been embraced by thecurrent (and former) UK government(s) as part of amodernisation strategy 1.

In particular, three of these issues will be addressed here:

● decentralisation;● output orientation; and● intensity of implementation.

An important element of the evaluation of managementaccounting practices is the context in which they are used.The UK political system of democratic accountability may becharacterised as a process within a long history of evolution(Marshall, 1991). In this regard, one central dimension incurrent public sector management reforms isdecentralisation.

Decentralisation in public sector management reforms hasbeen more developed during the 1980s and 1990s in theNordic countries and in the Netherlands. Moreover, therecent and expanding literature on devolution (Bogdanor,1999) and on non-US parliaments and legislatures (Lijphart,1999; Matthews and Valen, 1999) is also crucial.

Decentralisation and devolution may, theoretically, also becontrasted to the more radical form of constitutional changeby revolution (Skocpol, 1979) or other more relevant forms ofexit or ‘disloyalty’ as, for instance, independence for Scotland(Hirschman, 1970). While the UK has had, in a Europeancontext, a long history of a relatively centralised statestructure with little power decentralised to local government,in recent times the UK government has extended devolutionof power from Westminster to three new national assemblies.In Northern Ireland, Scotland and Wales, openness,transparency and accountability have been central subjects inthe devolution programme.

A common trait with decentralisation reforms, however, isthe parallel development of the centralisation of controls. Anincreasing emphasis on output orientation by way ofperformance measurement and performance audits may beseen as instruments for retaining (or gaining) central control,at least in the UK. These wider issues reaffirm the importanceof an international comparative study.

Furthermore, the use of planning systems integratingfinancial and management accounting and historic andforward looking figures – for instance in the form of RAB(Likierman, 2001) – indicates that a tight coupling betweenplans and actions are pursued and provide evidence of a highintensity of public policy implementation. These issues arethe subjects of this study. Accounting can therefore be seenas a vital ingredient in modern public sector reforms thatwarrants close scrutiny.

The notion that accounting is important in government andin reform is of course neither new, nor unique. Heald andGeaughan (1997), for example, have argued that accountingreform is playing a significant role in the restructuring of UKcentral government. However, there is a perceived need toinject more uniformity into the system, for instance byclearer definition of the reporting entities and continuedpublication of performance information in annual reporting.

Important elements of the new devolved arrangements arethe commitments made to improve transparency and todevelop new mechanisms for deliberating upon the businessof government. There are a number of factors that suggestthat budgetary information will assume a new significance. Inparticular, the promotion of RAB, which extends beyond thecash-based accounting used previously, will have a majorimpact.

This new system of accounting recognises assets andliabilities (full accrual accounting) and entails the use ofperformance indicators and the incorporation of departmentobjectives within budgets. In addition, it requires thatmanagement accounts better align to financial accountingstatements. All of these influences make this a particularlyopportune time to, first, evaluate the effectiveness of theseinitiatives for the devolution programme and, second,consider the potential for further development andrefinements for democratic accountability.

Management Accounting, Devolution and Democratic Accountability Introduction 7

Management Accounting, Devolution and Democratic Accountability Introduction8

1.3 FrameworkThe conceptual framework for this study is shown in Figure 1.1.

Figure 1.1 Framework

The framework in Figure 1.1 demonstrates that democraticaccountability is affected by accounting, which is, partly,intended to serve the objectives of the devolutionprogramme.

There are also, however, many other, relevant factors withpotential – intended or unintended – consequences to affectaccounting and hence democratic accountability. Some ofthem have been included in Figure 1.1. The arrows in thefigure illustrate assumed causal relations. There may, however,be more bi-directional and multi-directional relations thanwe have depicted in the framework. For example, if there is ageneral discontent with democratic accountability in asociety, this issue may induce reforms.

This project has links to other research in the ESRCprogramme on devolution and constitutional change. It drawsupon other projects within the research initiative phase(1998–2000) and the first phase of the programme (2001), inparticular the following studies:

● Boyne, Political Control of Public Agencies in Scotland andWales, Cardiff;

● Brown, Making the Scottish Parliament: Standing Orders andProcedures, Edinburgh;

● Parry, Designing the Transition from Scottish Office toScottish Executive, Edinburgh;

● Fawcett, Political Communication and Devolution inNorthern Ireland: Equality and Institutional Change inNorthern Ireland, Ulster;

● Heald, Financial Arrangements for Devolved GovernmentWithin the UK, Aberdeen;

● Mitchell, Devolution and the Centre, Strathclyde; and ● Parry, Home Civil Service as an Integrative Force in the Post-

devolution Polity, Edinburgh.

Devolution(Chapters 1 and 2)

NPM(Chapter 3)

Public managementculture

(Chapter 3)

Democraticaccountability

(Chapters 5, 8 and 9)

Accounting(Chapters 5, 6, 7 and 8)

Other social, economicand political factors

(Chapter 3)

In fact, many of the recent public sector accounting (that is,NPM) reforms are intended (and designed) to affectdemocratic accountability but do not have any formalconnections to the devolution programme. Most notably, theemphasis on targets and outputs in many NPM reforms mayaffect democratic accountability but this emphasis wouldalso be present when there is no programme of devolution.However, there are also many other factors, apart fromdevolution and NPM reforms, which could impact ondemocratic accountability.

Some of the most relevant factors in this project are generalpublic management cultures, and other general social,economic, technological and political developments. Thus, inorder to explore how accounting is affected by devolutionand the relationship between accounting and democraticaccountability, the alternative influences on accounting anddemocratic accountability must also be taken into account. Inparticular, international, as well as national and local, trendsmust be investigated, further work on these issues whichstems from this research has been published elsewhere(Ezzamel, Hyndman, Johnsen, Lapsley & Pallot, 2004;Ezzamel, Hyndman, Johnsen, Lapsley & Pallot, 2005).

1.4 Research QuestionsThe two specific, overarching sets of research themesaddressed in this report are the following.

● Political devolution and democratic accountability:Is devolution the driver for changes in accountability, or arechanges in accountability driven by the NPM movementregardless of devolution?

For example, what is the role of traditional bureaucracy ingovernments and executives in relation to transparency,accountability and the ‘third way’? Do their executivesmirror the kinds of changes we expect for the devolvedparliaments? Are there any lessons to be learned from fullyautonomous parliaments in other countries of interest thatare of comparable populations as those of the UK’sdevolved governments (DGs)?

● Accounting and democratic accountability:How does public management culture affect democraticaccountability in devolution?

For example, what role does accounting play in democraticaccountability? How is accounting information used inmodern parliaments? Who uses accounting information,and when and why is such information used? To whatextent is accounting used to underpin democraticaccountability? To what extent is democraticaccountability pursued through more traditional politicalmeans? Does the detailed and extensive informationprovided by accounting procedures undermine anddestabilise, rather than stabilise and enhance, democraticaccountability and the devolution programme?

1.5 Outline of the ReportThe remainder of this report is organised as follows:

● chapter 2 briefly outlines the process of devolution in theUK;

● chapter 3 presents information regarding key UKinstitutions and the two international comparisons in thisproject (New Zealand and Norway);

● in Chapter 4, the chosen research design of the project isdocumented;

● chapter 5 elaborates on the issue of accountability in theUK devolved parliaments and national assemblies;

● chapter 6 presents findings on the use of managementaccounting information in the UK devolved institutions;

● chapter 7 follows with a presentation of the project’sfindings regarding issues of performance measurement andauditing in the devolved parliaments and nationalassemblies;

● chapter 8 presents two international comparisons (NewZealand and Norway) of the issues relating to accountingand accountability; and

● chapter 9 contains a discussion of the findings andconclusions arising from the project.

Management Accounting, Devolution and Democratic Accountability Introduction 9


2.1 IntroductionThe idea of devolution is not a new one. It dates back twocenturies, when home rule for Ireland was proposed in 1886.Bogdanor states that devolution can be defined as ‘consistingof three elements: the transfer to a subordinate elected body,on a geographical basis, of functions at present exercised byministers and Parliament’ (Bogdanor, 2001, p. 2).

Even though Northern Ireland, Scotland and Wales haveobtained devolution at the same time, the cultural andpolitical development of the ‘quest’ for devolution has beendifferent for each country.

Northern Ireland experienced a form of devolution when itwas granted home rule between 1921 and 1972. Scotlandbenefited from separate local government and educationsystems, authority to issue banknotes and an establishedchurch since the union of the crowns; its national identity hasalways been recognised and strongly felt. Wales, unlikeNorthern Ireland and Scotland, has never been granted anyspecial legislative or administrative status, although there isthe official recognition of Welsh as an ancient language.

Scottish and Welsh nationalistic movements started duringthe late 1960s, demanding the recognition of distinctiveidentities and the opportunity to look after their owneconomic interests (Jones, 2001). In 1968, a royalcommission was set up to investigate the role of centrallegislature and of government within a devolved context.

In 1979, a referendum was held in Scotland and Wales on thematter, and it showed very little support for devolution. InScotland, only a narrow majority – not enough to achieve theweighted majority needed – voted in favour of devolution. InWales, a strong majority voted against devolution.

One of the main reasons for this lack of support wasattributed to a division in the Labour Party. Some Labourmembers did not want to challenge the unity of the state,while other members considered the issue of devolution as aproblem of equality rights (Mitchell, 2002). Furthermore, theTory government placed strong emphasis on the strength of aunitary government and on the importance of parliamentarysovereignty.

During the 1980s and 1990s, things began to alter and thelevel of support for constitutional change grew. In Scotlandthe idea, supported by the Labour Party, of a Scottishparliament elected through some form of proportionalrepresentation (PR) was emerging. In Wales, where there wasmore ambivalence on the importance of separate politicalidentity, there was a similar debate, but its pace and spiritwas different from Scotland.

However, when another referendum on devolution was calledin the late 1990s, all three countries voted in favour: in NI,71.1 per cent of voters in support of it; in Scotland, 74.3 percent; and in Wales, 50.3 per cent. The following sectionsdescribe the further development of devolution in NI,Scotland and Wales.

2.2 Devolution in Northern IrelandNorthern Ireland was under home rule between 1921 and1972. Home rule was considered a form of devolution but itdiffered substantially from the current form of devolution fortwo main reasons. First, the initial devolved parliament, homerule, was established after a long and controversial debatethat had at its centre the desire to avoid the inclusion ofNorthern Ireland in the Irish Free State. Second, the politicalscene was dominated by the conflict between the unionist(Protestant) community, which wanted to preserve the linkwith the UK, and the nationalist (Catholic) community, whichwas instead pushing towards unification with the rest ofIreland (Bogdanor, 2001).

Under home rule, the Belfast Parliament was very similar toWestminster in terms of its functions and organisation.Legislative power was conferred with specific limitations onmatters concerning foreign affairs, defence, and externaltrade.

In terms of fiscal arrangements, it was believed that NorthernIreland could finance the services with her own revenue.However, by the end of the 1970s, financial allocations weredetermined according to needs, being in practiceexpenditure-based. The budget had to be approved byWestminster and it was negotiated between the NorthernIreland Ministry of Finance and the Treasury in London,implying a tight control on the allocation of resources.

In practical terms, Northern Ireland did not have financialautonomy, as taxation matters were London’s domain andspending matters were dealt with in Belfast. Home ruleceased in 1972 due to the intensification of violence from1968 onwards.

The establishment of direct rule from Westminster wasconceived as a short-term solution. In the period between1972 and 1997, there were several attempts to introducedevolution that failed due to the impossibility of reachingagreement between the parties involved. A significantbreakthrough was made in the summer of 1994, when theIrish Republican Army (IRA) announced a cease-fire and SinnFèin participated in the political debate. In 1996, multi-partytalks were carried out between the elected representatives ofthe political parties and in 1998, the Belfast Agreement wassigned. The agreement was subsequently approved by areferendum held in May 1998, in which 71.1 per cent votedin favour of devolution and 28.9 per cent voted against it.

2. The Process of Devolution in the UK

One hundred and eight members are elected to the Assemblyby a single transferable vote for a fixed-term period of fouryears.

The areas of devolved power are:

● finance;● personnel;● agriculture;● education;● health;● social services;● economic development; and● environment.

The Belfast Agreement is built on two key principles: powersharing and the application of two forms of qualified majorityvoting for ‘key decisions’.

The principle of power sharing, an institutional novelty of theagreement (O’Leary, 2002, p. 284), affects the functionaloperations of the executive. The executive is led by the firstminister and by the deputy first ministers, who hold officetogether. This means that if one resigns, the other one loseshis/her office as well. Both positions exercise the samefunctions and have equivalent powers. The members of theexecutive are selected by party leaders in accordance withthe number of seats that each party has acquired.

The second principle that underlies the agreement is theexistence of two forms of qualified majority voting applied to‘key decisions’.

‘Key decisions’ are any of the following:

● the choice of the first and deputy first ministers;● dismissal from office;● budgetary procedures;● standing orders;● election of the Assembly’s presiding officer (speaker);● the programme for government; and● policy issues defined as ‘key’.

(Meehan, 1999, p. 20; Wilford, 2000, p. 580)

When voting on these issues, there has to be a majority ofthose members present and voting and also a majority of theunionists and nationalists present and voting. Thismechanism was devised in order to guarantee ministerialautonomy and to reinforce partnership and cooperation.Within the Assembly, statutory committees are formed. Thesehave an advisory role during the process of policyformulation, can initiate primary legislation and can scrutinisethe work of the Assembly.

2.3 Devolution in ScotlandScotland has benefited from a separate legal andadministrative system even after the Act of Union (enacted in1707), which abolished a separate Scottish parliament. In1885 the Scottish Office was established, held by thesecretary of state for Scotland. Initially, it was a departmentof the UK government with very limited functions. Gradually,its role grew and it became responsible for areas such ashealth, justice, education, agriculture, fisheries and farming.The secretary of state for Scotland ensured that Scottishmatters were handled in Scotland and that specific Scottishneeds were considered in the process of policy-making andlegislation. This arrangement reinforced the idea of a Scottishpolitical distinctiveness. As per the situation in NorthernIreland, at the end of the 19th century and throughout the20th century, nationalistic movements argued for a Scottishhome rule. Prior to the late 1990s, propositions forimplementing home rule in Scotland were presented 13times to the House of Commons but were always rejected(Bogdanor, 2001).

From the 1970s onwards, the pressure for constitutionalchange that would establish a Scottish national assemblygrew. This was partly due to discontent with the politicalsystem at that time, which was considered to be inadequatein representing Scottish needs at UK level, and partly due to agrowing sense of Scottish identity and of feelings ofdifference (Brown, 2000).

In 1989, the Scottish Constitutional Convention was set up. Itproposed a plan for devolution in the Scottish ConstitutionalConvention Report, issued in 1995, that formed the basis ofthe proposals made to the UK government in 1997. Theseproposals were subjected to referendum in September 1997and were approved with a strong majority by the electorate.The Scotland Act 1998 introduced the Scottish Parliament,which commenced its first legislative period in July 1999.

The Scottish Parliament has two main features: an innovativeelectoral procedure and a distinctive internal working.Members are elected by combining the traditional first-past-the-post system with a form of PR. This model was chosen inorder to ensure the consensual nature of the new Parliament,which was considered a fundamental aspect of the newinstitution (Mitchell, 2000). In terms of the internal workingof the parliament, a model was developed that was to besubstantially different from Westminster’s (Mitchell, 2000).The Consultative Steering Group (CSG) and the FinancialIssues Advisory Group (FIAG), set up by the secretary of statefor Scotland, developed proposals for the practical operationsof the new institution.

Management Accounting, Devolution and Democratic Accountability The Process of Devolution in the UK 11

Management Accounting, Devolution and Democratic Accountability The Process of Devolution in the UK12

Four main principles were identified:

● Power-sharing. The Scottish Parliament should embody andreflect the sharing of power between the people ofScotland, the legislators and the Scottish executive;

● Accountability. The Scottish executive should beaccountable to the Scottish Parliament, and the Parliamentand the executive should be accountable to the people ofScotland;

● Access and participation. The Scottish Parliament should beaccessible, open and responsive and develop proceduresthat make possible a participative approach to thedevelopment, consideration and scrutiny of policy andlegislation; and

● Equal opportunities. The Scottish Parliament, in itsoperation and its appointments, should recognise the needto promote equal opportunities for all.

The Scotland Act planned a parliament with substantialpowers. The areas in which the Scottish Parliament haslegislative authority are as follows:

● health and social work;● education and training;● local government and housing;● justice and police;● agriculture, forestry and fisheries;● the environment;● tourism, sport and heritage; and● economic development and internal transport.

The Scottish Parliament has full legislative competence. Thatis to say, it holds primary legislative powers across the aboverange of domestic policy areas and, potentially, the power tolegislate in any non-reserved area of policy.

Unlike the other devolved assemblies, it is also given theauthority to vary income tax, by up to three pence perpound, although there has been strong political debatearound the issue of whether – and how – to exercise thispower. Furthermore, the Scottish Parliament controls localauthority taxation. It can raise revenue by charging fees forsome public services.

A comprehensive committee system has been established,which aims to give committees a more powerful role incomparison with the Westminster system. There are 17committees (eight mandatory committees and nine subjectcommittees) that have been given power to initiatelegislation, to scrutinise and monitor government legislationand to conduct enquiries and take evidence from ministersand civil servants (Brown, 2000; Mitchell, 2000). Membershipof the committees reflects the political composition of theParliament, and conveners usually do not belong to thegoverning parties.

In its first legislative period, the Scottish Parliament enacted22 bills, in matters such as housing, the establishment ofnational parks and issues related to adults with incapacity.The ability to legislate on specific Scottish matters has beenconsidered as one of the most important achievements ofthe new institution, which would have not happened withoutdevolution.

2.4 Devolution in WalesWales, unlike Northern Ireland and Scotland, has never beengranted separate administrative institutions. Nationalisticmovements started to emerge towards the end of the 19thcentury but claims were mainly concerned with obtainingequality with England rather than being connected toarguments relating to separation from England (Bogdanor,2001). The Welsh Liberals were trying to obtain recognition ofWelsh cultural and religious uniqueness, but there was noaspiration for a Welsh Parliament. During the 1900s, aprogressive process of administrative decentralisation ineducation, agriculture and national insurance took place. Thiswas driven by the UK government’s political decisions, whichwere initiated only for pragmatic reasons.

In 1964, after the Labour Party’s UK election victory, the firstsecretary of state for Wales was established, with very limitedpowers granted by Whitehall. Due to the fact that Wales –unlike Scotland – did not have a separate legal system, theWelsh secretary only had the ability to modify policy set byWhitehall according to Welsh needs and differences.

The Scotland and Wales Bill of 1979, which proposed theapplication of home rule, devised a form of devolution for thetwo countries which, if accepted, would have resulted insignificantly fewer powers being transferred to Wales.

During the 1990s, an organised campaign for devolutionstarted without official support from political parties. Thecampaigners lacked a strong public image, as well as financialresources. The ‘Campaign for a Welsh Assembly’ wasestablished in 1987 and advocated the potential economicbenefits of a separate assembly.

Ten years later, the UK government published the whitepaper, A Voice for Wales, outlining proposals for devolution inWales that were to be approved in the referendum held inSeptember 1998. Subsequently, the UK Parliament passed theGovernment of Wales Act 1998 through which powers andresponsibilities were transferred to the Welsh Assembly on 1July 1999.

The Welsh Assembly is defined as ‘a unique institution withinthe United Kingdom’ (Laffin and Thomas, 2000) because it isa hybrid system in which there is a combination of aWestminster cabinet model with a local government modelof subject committees. As in Westminster, there is a cabinet,but there is also a system of multifunctional committees.

This model was devised after long debate among themembers of the National Advisory Group. The group thoughtthe committee model was inconvenient and inefficient andwould have delayed the decision-making process, and thatthe cabinet model would have given too much power to thefirst minister and therefore undermine the principles ofpower sharing and inclusiveness.

The powers of the Assembly are defined by NationalAssembly for Wales (Transfer of Functions) Order 1999; anarrangement that has been criticised as a potential constrainton the powers of the Welsh Assembly (McAllister, 2000). TheAssembly cannot issue primary legislation and does not havetax-varying powers but it can modify UK legislation in orderto meet specific Welsh needs. The cabinet is the decision-making institution whose members carry out most of theAssembly’s function, by authority of the Assembly. TheAssembly elects a first minister, who is the leader of thecabinet and of the Assembly. The first minister appoints eightministers (secretaries).

Similar to the other devolved institutions, there are subjectcommittees, which cover ministers’ portfolios. Their role is todevelop policies, to scrutinise the work of the Assembly andthe executive’s operations and to contribute to the debateover budgetary priorities. The membership of the subjectcommittees reflects, as much as is possible, the politicalcomposition of the Assembly.

In contrast to the other devolved institutions, ministers arepart of the subject committees, and the chairs of the subjectcommittees are usually drawn from the opposition party (oreven from minority parties) in order to guarantee theprinciple of inclusiveness.

The work of the Welsh institution is complemented by fourregional committees that are not present in the otherdevolved institutions. These committees fulfil an advisoryrole, provid consulting and representing the needs andinterests of historically different, and geographicallyseparated, areas of the country.

2.5 ConclusionThe development of devolution was not a stable and uniformprocess across Northern Ireland, Scotland and Wales. Eachdevolved institution moved towards devolution in a differentway according to its own past experience, historicalambitions and political interchange (Meehan, 1999).Northern Ireland and Scotland benefit from broaderlegislative powers than Wales. In addition, there aredifferences that affect financial arrangements, with tax-varying powers only available in Scotland (a difference thathas raised the debate on whether a parliament withouttaxation is a less powerful institution (Meehan, 1999)).

Despite these differences, the process of devolutionrepresents a major change in the UK political scene, and ithas brought with it significant innovations. The mostimportant one is the emphasis placed on the new values thatthe devolved institutions carry and represent, and theirpolitical consequences. Power sharing, inclusiveness,participation and accountability have been declared thefundamental elements upon which the devolved institutionshave built up their credibility. Their application has led tochanges to the electoral system, through the introduction ofPR. The responsibility of subject committees is different fromWestminster, strengthening their engagement with theexecutives and the parliaments/assemblies in terms ofadvisory and scrutiny role.

Since 1997, support for devolution has increased in Walesand has remained fairly stable in Scotland (ESRC, 2003). Thedevolved assemblies have begun to make a significantdifference in policy terms, introducing policies that aredifferent from those of the Westminster Parliament andwhich can generate unplanned – and positive – influences forthe UK.

Management Accounting, Devolution and Democratic Accountability The Process of Devolution in the UK 13


3.1 IntroductionThis study examines the practices of New Zealand andNorway as benchmark cases for the devolved nationalassemblies in the UK.

There are several reasons why such international comparisonsare useful:

● the inclusion of international comparisons helps locate theUK experiences within the broader international experienceof the move towards greater devolution and multi-governmental layers;

● international comparisons aid understanding by underliningthe similarities and differences between the UK and othernations and democracies;

● both New Zealand and Norway are small countries. In2002, their populations were 3.9 and 4.5 million,respectively. The small country characteristic facilitatescomparisons with Northern Ireland (1.7 million), Scotland(5.1 million) and Wales (2.9 million). England and the UKhad, in comparison, 49.6 and 59.2 million inhabitants,respectively;

● an important reason for including Norway in thecomparison is that Norway has a long experience withmulti-party proportional representation and multi-partycoalition (and also minority) governments. This is now partof the devolution experience (unlike New Zealand until1996 and the UK, with its Westminster model); and

● New Zealand is also an important comparator because ofits deserved reputation as a world leader in modernisingpublic management.

Before addressing the specific management accounting issuesthat this project is interested in in the later chapters, somepolitical and institutional aspects of New Zealand andNorway, compared with the three UK nations (cf. theframework in Figure 1.1), are described.

3.2 Political InstitutionsIn this section, some formal features of the two mostimportant political institutions in our study – the parliamentand the executive/government – are described.

Table 3.1 documents some characteristics of theparliamentary institutions in the five countries. Theparliaments of Norway, New Zealand and Northern Irelandare relatively old, being established in 1814, 1854 and 1921,respectively. These institutions, or at least the twoparliaments of Norway and New Zealand, have had ampletime to establish and develop proper rules and processes ofdemocratic accountability.

The Northern Ireland Assembly, on the other hand, has hadits operations interrupted on several occasions since 1972,and at the time of writing (June 2004), the assembly wassuspended. All of the five study settings have now adoptedsome variant of PR. In New Zealand’s case, this was the MMPsystem (Mixed-Member Proportional System) that came intouse in the 1996 general election.

The Welsh Assembly is the smallest body regarding size,representatives and powers, with only 60 representatives. TheNorwegian Parliament was the biggest, with 165representatives. The New Zealand Parliament had only 120representatives, less than Scotland and Norway.

The New Zealand Parliament is a national parliament withrelated powers. Measured in terms of parliamentaryrepresentatives however, it is relatively small, possiblyindicating that the representatives in New Zealand haverelatively large ‘control spans’ and hence relatively limitedcapacity in holding the government to account.

With the exception of the Northern Ireland Assembly, all theparliaments had a relatively high proportion of womenrepresentatives. In Wales, 50% of the representatives werewomen.

Generally, the standing committees perform importantfunctions in contemporary legislatures (Matthews and Valen,1999). The standing committees (and the party groups) makethe division of labour possible for a large group of politiciansto handle a large number of complex issues simultaneously,particularly under conditions of intense interest group andmedia attention. An interesting characteristic of the study, inaddition to the relatively small size of the New ZealandParliament, was the portfolios and size of the standingcommittees. The Welsh Assembly had no finance committee.The finance committee in the New Zealand Parliament, theFinance and Expenditure Committee (FEC), only had 12members, nearly the same as the number of members (11) inthe equivalent committees in the three devolved nationalassemblies and parliaments. Note, in particular, that the NewZealand Parliament had no equivalent to the powerful PublicAccounts Committee (PAC) at Westminster. And the numberof committee members on the Finance Committee in theNorwegian Parliament was higher than in any of the otherfour countries.

3. International Comparisons

Notes:

1 AMS=Additional Member System, MMP=Mixed-MemberProportional System, PR=Proportional Representation, FPTP=FirstPast the Post System.

2 For the devolved parliaments and national assemblies, it was the1999–2003 election period. For Northern Ireland, the numbers werebased on MLAs until 28 April 2003. For New Zealand, it was the2000–2002 election period. For the Norwegian Storting, it was the2001–2005 election period.

3 Termed Audit Committee in Scotland and termed The StandingCommittee on Scrutiny and Constitutional Affairs in Norway.

4 The Welsh Assembly had no Finance Committee.

5 See Lynch (2001) Table 5.1 regarding the Scottish Parliament.

6 The committees also have private meetings.

Management Accounting, Devolution and Democratic Accountability International Comparisons 15

Table 3.1 The Parliamentary Institutions (December 2003).

Northern Scotland5 Wales New Zealand NorwayIreland

Year of establishment 1921/1999 1999 1999 1854 1814

PR AMS AMS MMP PRElection system1 (73 FPTP (40 FPTP

& 56 PR) & 20 PR)

Tax raising power No Yes No Yes Yes

Number of representatives2 108 129 60 120 165

Women representation 14% 37% 50% 30% 36%

Committee meetings Public6 Public6 Public6 Closed Closed

Number of standingcommittees

16 17 11 13 15

Number of representativesin Public Accounts 11 11 10 – 10Committee or equivalent3

Number of representativesin Finance Committee 11 11 – 12 20or equivalent4

Number of representativesin Education Committee 11 11 10 10 16or equivalent

Number of representativesin Health Committee 11 11 10 11 14or equivalent

Management Accounting, Devolution and Democratic Accountability International Comparisons16

Furthermore, while openness, transparency and equality arevalues that are held in high esteem in Norway, thecommittee meetings are closed to the media and the public(although the plenary sessions are open to the public). Thesefacets may reflect the crucial importance of the committeesin the Norwegian, consensual way of practising politics.However, closed select committee meetings were not uniqueto Norway. In New Zealand, this was also the case, as it wasin Northern Ireland, Scotland and Wales.

Table 3.2 documents some central features of the executivesand cabinets in the five countries. Most distinctly, two of theexecutives in the three UK countries, and both New Zealandand Norway, had coalition cabinets. The presence of coalitioncabinets was distinct from the traditional Westminsterpractice. However, coalition – and especially minority –governments may not enact policies as easily as majority andone-party governments can do.

Notes:

1 According to the Northern Ireland Assembly website, the Assemblywas suspended from midnight on 14 October 2002 and wasdissolved on 28 April 2003. Elections to the Northern IrelandAssembly were held on 26 November 2003. The secretary of stateassumed responsibility for the direction of the Northern Irelanddepartments. A new executive was not established at the time ofwriting (June 2004).

2 Wales had a Labour Party executive in December 2003. However,for most of the period for our empirical study (2001–2003), Waleshad a centre-left majority coalition cabinet of Labour and the LiberalDemocrats, led by Rhodri Morgan (Labour) as first minister.

Table 3.2 The Executives and Cabinets (December 2003)

Northern Scotland Wales New NorwayIreland1 Zealand

Prime/first minister David Trimble Jack McConnell Rhodri Morgan Helen Clark Kjell Magne(Ulster Unionist) (Labour) (Labour) (Labour) Bondevik

(ChristianDemocrat)

Government type Majority Centre-left Majority Centre-left Centre-rightcoalition majority cabinet2 minority minoritycabinet coalition coalition coalition

cabinet cabinet cabinet

Member parties Social Democratic Labour Party, Labour Labour Party, Conservativeand Labour Party, Liberal Progressive Party,Democratic Democratic Coalition ChristianUnionist Party, Party DemocraticSinn Féin, Party,Ulster Unionist Liberal PartyParty

Number of departments 11 10 9 20 19in the cabinet (including (+9 Deputyfirst/prime and deputy) Ministers,

Lord AdvocateandSolicitor general)

Number of departments 10 9 6 52 23(excluding first/prime/deputy ministers’ offices)

On the other hand, coalition governments may haveadvantages when it comes to learning (Olsen and Peters,1996). It could be argued that in political systems withcoalition governments, management accounting models thatinclude such features as RAB, performance measurement andperformance audits may be used more for ‘learning’ than for‘blaming’ compared to practice in systems with majoritygovernments (Westminster).

There are some notable differences between the fivecountries. The national governments in New Zealand andNorway had about twice the number of members comparedto the executives. Note also the large number of departments(52) in the New Zealand government, about twice thenumber of those in Norway (23).

3.3 National Audit InstitutionsThe last institution we shall compare in this chapter is thenational audit institution. Table 3.3 presents informationregarding the names, year of establishment, legal basis, andnumbers of staff of the national audit institutions. As aconsequence of the option of the contracting out of certainservices, the audit institutions in the UK and New Zealandconsist – in principle – of the auditor general and an auditinstitution. In Norway, all central governmental audits arecarried out by the Office of the Auditor General. Some of theaudit institutions are relatively old. The national auditinstitution in Norway was established in 1816. The NAO, inthe UK, was established in 1983, but it took over theresponsibilities of the former Exchequer and AuditDepartment, which was established in 1866. The auditinstitution in New Zealand was established in 1865, modelledon UK legislation.

The audit institutions vary in size from 50 staff in Wales to450 in Norway. Note, however, that the size of theNorwegian audit institution was large, compared to the NAO,which had 800 staff in total (including in Wales).


Table 3.3 Audit Institutions in the Five Countries

Name ofinstitution

Year ofestablishment

Legal basis

Number ofstaff

NorthernIreland

Northern IrelandAudit Office

1987

Audit(Northern Ireland)Order 1987

145

Scotland

Auditor General/Audit Scotland

2000

Public FinanceandAccountability(Scotland)Act 2000,asp 1, s. 10

250

Wales

Auditor Generalfor Wales/National AuditOffice (NAO)

Current set updates from1998

Governmentof WalesAct 1998,c38, s. 90

NAOemploys 800;50 work inWales

New Zealand

The Office of theAuditor General/AuditNew Zealand

1865, butcurrent set updates from 1992

Public Audit Act2001

44 in the AuditOffice (in 1995)and 244 in AuditNew Zealand(in 1995)1

Norway

Office of theAuditor General

1816

NorwegianConstitution Article75k, Act on theAuditing ofGovernmentalAccounts 1918, andvarious parliamentaryinstructions anddecisions

450

Notes:

1 Source: Boston et al. (1996, ch. 15)


3.4 New Public Management (NPM)In general, New Zealand and the UK have been in theforefront in implementing NPM. While NPM, in both the UKand New Zealand, has been in broad conformance with theideas, principles and practices of ‘managerialism’, the NewZealand model is distinguished by its conceptual rigour andintellectual coherence (Boston et al., 1996).

In the UK, there has been widespread public managementreform via privatisation, marketisation and outputorientation. The UK government has developed performancemeasurement and performance auditing more than in NewZealand and Norway (Pollitt et al., 1999). At least untilrecently, however, the degree of decentralisation in the UKhas been very low, evidenced by the fact that the governmenthas relatively strong control over local government.

Like the UK, New Zealand has also adopted market-type-models and contractualism enthusiastically. New Zealand hasextended the use of strategic planning in public managementbeyond that in the UK and Norway (Boston and Pallot, 1997).

Both the UK and New Zealand have been renowned for theirintensity in the implementation of public managementreforms (Pollitt and Bouckaert, 2000). For instance, in 1992,New Zealand became the first country to produce financialstatements on an accrual basis for its national government. Incomparison, the UK implemented RAB in 2001 (Likierman,2001) and accrual accounting in government is currentlyunder consideration in Norway. However, even though theNew Zealand model is distinct, there is a high degree ofpragmatism with regard to its implementation (Boston et al.,1996).

The high implementation intensity in the UK and NewZealand contrasts to Norway, which has developed along thehighly consensual, decentralised, Nordic political model.Norway is often labelled as a ‘slow learner’, or as a reluctantor hesitant reformer, at least at governmental level (Olsenand Peters, 1996). Compared to the UK and New Zealand,policy in Norway is implemented incrementally followingconsensual policy-making, even though (coalition)governments change (Matthews and Valen, 1999).

3.5 Public Management CulturePublic management culture in the five countries in our studycan be compared using public management culture theory todescribe potential important traits of those countries.Opinions on what the ‘best’ public management is will,according to Hood’s (1998) public management culturetheory, depend on cultural platforms and on history.

The public management cultural theory frameworkdistinguishes four styles of public management:

● hierarchist;● egalitarian;● individualist; and● fatalist.

A hierarchist approach features socially coherentorganisations and operates according to well-understoodrules of procedure. In the UK, there are the traditionalhierarchies of aristocracy, middle class and working class.Westminster, with its division in the House of Lords and theHouse of Commons, frontbenchers, backbenchers and partywhips, is another possible example of a hierarchist publicmanagement style. A hierarchist style is also the traditional,public sector bureaucracy.

An egalitarian approach has organisations that are sociallydistinct from the world outside, but where the rules of thegame are debated constantly. Examples of an egalitarianmanagement style could be rules regulating voting andrepresentation, rules for the political representatives’, and thepublic’s, access to governmental information, and lobbyingfrom environmental, feminist or fundamentalist interestgroups, as recently depicted in sociology by the individualistand informal, reinvented notion of politics (Beck, 1997). TheScandinavian tradition of democratic corporatism could alsobe included as part of the egalitarian management style. Theconsultation element, including corporatism and lobbyingactivities, is well established in Scandinavian publicmanagement and is now also a significant aspect of theprogramme of devolution.

An individualist approach involves antipathy to collectivismand a preference for handling transactions by trading ornegotiations rather than by pre-set rules. Typical approachesalong the ‘bottom-up’, individualist management style couldbe found in the extended use of the market in NPM. NewZealand and UK public management have probably utilisedthese kinds of models – including performance (VFM)auditing, performance measurement, league tables, targets,annual reporting, privatisation and contracting out –relatively extensively since the 1970s.

A fatalist approach features conditions with littleco-operation, widespread distrust and much apathy. Typicalfatalist management would be to acknowledge that crisesand scandals happen, and work to prevent or minimise theimpact of such events. This style is rarely found as apre-meditated management style in practice, but it should bevery familiar to politicians. Note, however, that theopposition and government MPs at Westminster are seatedfacing each other in the Commons, while the MLAs in Walesand MSPs in Scotland are seated in a ‘horse shoe’ form, andMLAs in Northern Ireland debate in a layout utilising threesides of a rectangle. Thus, the Westminster assembly roommay facilitate debate and confrontation, while the devolvedassembly rooms may facilitate debate and consensus, at leastmore than at Westminster.

Many of the roles that accounting, media and whistleblowershave in politics, may be attributed to a fatalist style ofmanagement. Furthermore, in such a culture, the governmentmight expect the political opposition to use accounting as anammunition machine (Burchell et al., 1980) for scrutinisingthe government. At the same time, expert knowledge of thedesign of the accounting system and the assumptionsunderlying the disclosed information, could be cunninglyutilised, for example by ‘insiders’, or by the government.

Based on the available literature and preliminary evidence,Westminster predominantly has a strong hierarchist (andindividualist) culture but the three UK countries in our studyhave less so.

Furthermore, observations of meetings in the NorthernIreland and Welsh national assemblies indicate that thesehave a more informal, egalitarian political culture thanScotland. This is supported in the interviews where it isevident that Scotland’s point of reference still is (hierarchist)Westminster. (For a description of the research methods thatwe use, see Chapter 4).

New Zealand and Westminster have the most individualistculture, while the other four countries have a medium level ofindividualist culture.

Norway has a predominantly egalitarian public managementculture, more so than any of the other four countries.Schlesinger, Millar and Dinan (2001) have revealed a fiercemedia competition in Scotland where the media, especiallytabloid newspapers, actively utilise political scandals. Norwayhas traditionally had a relatively high level of trust in peopleand in political institutions, including the government and theparliament, Stortinget (Matthews and Valen, 1999). Thesepatterns may indicate that Scotland (together withWestminster) has a more fatalist political culture than theother four countries in this study.

3.6 ConclusionIn this chapter, some traits in our five countries have beendocumented and compared. According to the framework inFigure 1.1, traits like these may influence the use ofaccounting and how accounting affects democraticaccountability. Both the similarities and the distinctionsshould be kept in mind in analysis and comparisons acrosscountries and over time in the subsequent chapters. Beforeturning to an analysis of the empirical evidence that wasgathered, the research methods will be discussed.


Management Accounting, Devolution and Democratic Accountability Research Methods20

4.1 Research DesignThe research design is a multi-case, embedded case study(Yin, 1994). A multi-case study means that each devolvedcountry was studied with its institutions as single cases. Thus,each case may serve as a replication study, an ‘experiment’,within the total study. An embedded case study means thatwithin each case, several units and subunits of analysis wereused. Individuals as politicians, civil servants and audit officerswere studied, as were groups as meetings, committees andparties. Organisations as parliamentary, governmental andaudit institutions were also studied.

The overall research strategy was to ensure a plannedvariation design between the five cases (Eisenhardt, 1989). Asimilar approach was employed in Northern Ireland, Scotland,Wales, New Zealand and Norway in order to develop a sharedproject ‘database’ and to ensure sensible and meaningfulcomparability. There are multiple sources of data andmethods (Denzin, 1970).

4.2 Data CollectionThe embedded research approach used both qualitative andquantitative data, focussing on key actors in five studysettings: the devolved parliaments/assemblies of Scotland,Northern Ireland and Wales and the Parliaments of Norwayand New Zealand. Key actors within three groups in thisstudy were distinguished.

The first group of key actors were members of the ScottishParliament (MSPs), and members of the legislative assemblies(MLAs) in Northern Ireland and Wales. Such key actors wereseen as elected members of these bodies in oversightcommittees, particularly those parliamentary selectcommittees with overall responsibility for major parts ofpublic expenditure programmes such as health care,education and local government. These actors can be furtherlabelled as spokespersons, ‘frontbenchers’ or committeeconveners versus laymen politicians. The second group of keyactors were ministers and eventually other members of theexecutives. The third group consisted of other key actors, suchas audit officers, advisers, civil servants and other experts.

The data collected involved informal semi-structuredinterviews, backed by documentation and policies. Therationale for this is based on the interactionist’s premise that,when the aim of the research is to understand a complexprocess where those involved have different perspectives onthe matter in question, it makes sense to adopt a researchstrategy which allows these perspectives to be understood inthe same terms in which the participants understand them(Blumer, 1969).

Early on in the project three important research strategieswere decided upon:

● to sharpen the focus of the project by focussing on specificpolicy areas;

● to standardise the data collection by developing aninterview guide that should be used for all the interviews;and

● to conduct semi-structured interviews, and to have a seriesof research group workshops for the analysis of preliminaryfindings.

In order to develop in-depth insights, it was decided to focusthe project on issues and committees concerning two of themain policy areas: education and health. These policy areasrepresent major expenses in public budgets and are areas ofsignificant interest and importance to citizens and clients, aswell as to the political establishment. However, it should benoted that, in some countries, the politicians served in two ormore committees simultaneously. Thus, politicians and otherinterviewees with lengthy experience may have hadbackgrounds spanning wider policy areas than education andhealth.

The interview guide was developed by discussing theinclusion and operationalisation of relevant issues andconcepts drawn out of a literature review, relevant legislationand an understanding of the key issues pertinent to theresearch questions. Important considerations in the design ofthe interview guide were to keep the interview to areasonable length and focussed. The interview guide wastested in two pilot interviews, in Edinburgh, in January 2002.The main interviews were conducted in the period January2002 to May 2004. All of the interviews were tape recordedand transcribed. The interview questions encompassedquestions on personal background, the interviewees’conception of accounting and accountability issues, on thegeneral availability and use of information, on RAB,performance information and budgeting.

Due to the sensitive issues that were studied, and due to thefact that most politicians and civil servants are very busy, itwas anticipated that using ordinary surveys by mail ortelephone would result in a low response rate and/orsuperficial data. Therefore, face-to-face interviews wereconducted with a smaller number of interviewees, and withthe possibility of more than one member of the researchteam participating in the interviews each time. In order toachieve conceptual representation in the data relative to thepopulation of elected politicians, there was an attempt toachieve variation with regard to age, gender, party affiliationand committee experience. This procedure produced a totalof 70 interviews. In addition, all the interviewees consentedto be re-approached, in order to follow up emerging themesor unsettled issues. The interviews varied in duration from 30to around 75 minutes each. Table 4.1 shows the numbers ofinterviews by country and organisation. One of the membersof the research team had recently participated in extensivestudies of the New Zealand case. Therefore, this informationbackground was added, with two more interviews, in order tocover the focus area of this project.

4. Research Methods

The interview data was supplemented with non-participantobservation, documented by field notes of the focal group inaction, in committees, where feasible; with the study oftranscripts of committee meetings; and with analysis ofpublished documents on policy-making and policyimplementation. In addition to interviews and observation,the most relevant planning documents were analysed(budgets, accounts, annual reports and performance audits)from the 2001–2002 and 2002–2003 budget cycles for eachcountry. The issue of accountability in the UK devolvedassemblies and parliaments was also analysed.

4.3 Way of WorkingThe project has developed through many stages. So far, themajor milestones have been project workshops and thepresentation of papers at academic conferences andseminars. The project participants met on 7 June 2001 for theinitial workshop in Edinburgh, for a discussion of researchquestions, research instruments and the overall researchstrategy. The first paper on the project was presented at theSixth International Research Symposium on PublicManagement (IRSPM VI) held at The University of Edinburghfrom 8–10 April 2002. The paper developed the conceptualframework and research propositions, and also included issuesemerging from the pilot interviews that had been conductedin Edinburgh in January 2002.

On 4 September 2002, a second workshop was held for theproject team in Dublin. A second paper was presented at theIrish Accounting and Finance Association’s annual conferencein Dublin held from 15-16 May 2003. This paper presentedearly evidence from the Northern Ireland Assembly. On12–13 June 2003, a third paper was given as a plenarypresentation at the bi-annual Conference on InternationalGovernmental Accounting Research (CIGAR), in Bodø,Norway. That paper discussed the implementation of RABand presented preliminary evidence from Scotland. On 7 May2003, a presentation of preliminary findings from theNorwegian case was given at Agder University College,Kristiansand, Norway.

On 17 June 2003, the third workshop for the research projectteam was held for the analysis of preliminary data andplanning of papers and the research monograph. This wasfollowed by a fourth workshop on 25 September 2003 for theresearch team, with further analysis of data and drafting ofpapers. A fourth paper from the project was presented at theannual CIMA Workshop in Edinburgh, held from 25–26September 2003, with the theme ‘devolution and democraticaccountability’. The latest workshop was held in Edinburgh 14May 2004. A fifth paper was presented at the EuropeanAccounting Association Congress in Prague, held in April2004, and a paper was presented at the European Institutefor Advanced Studies in Management (EIASM) PublicManagement Conference in Oslo, October 2004, with morepapers to follow at future conferences. All these workshopsand conference presentations provided opportunities fordissemination as well as stimulating feedback to the researchteam. This report brings together the key findings from theproject.

Management Accounting, Devolution and Democratic Accountability Research Methods 21

Table 4.1 Interviews by Country and Organisation (May 2004).

Northern Scotland Wales New Norway TotalIreland Zealand

Parliament 8 14 10 0 6 38

Executive 2 3 8 0 1 14

Audit institution 2 3 0 2 3 10

Others 6 2 0 0 0 8

Total 18 22 18 2 10 70


5.1 Introduction: ‘The Accountability Gap’Accountability is one of the key principles adopted by thedevolved institutions, and one that underlines their operation.In its broader concept, accountability means that someone isresponsible to give an account of his/her actions to someoneelse. In the UK, the debate over the issue of accountability ofparliaments, governments and civil servants started threedecades ago (Day and Klein, 1987). The increased scale ofgovernmental activity and its complexity have led to anincrease in demands for demonstrating accountability(Stewart, 1984; Day and Klein, 1987; Glynn, 1993; Power andBrazier, 2001) and an argument that the straight-linerelationship of accountability, which links civil servants toministers and ministers to parliament, has been fractured. Thecomplex relationships between parliamentary institutionsand governments have modified and expanded the conceptof ‘what to account for’ and how (Heald, 1983). Parliamentsand governments are subject to a general form of ‘publicaccountability’ that incorporates three different areas ofaccountability, as shown in Table 5.1.

The link between political and ministerial accountability is animportant element of the debate. In particular, the issuearises as to who is to be held to account, and for what arethey to be held to account. Ministers are accountable toparliament for the activity of their department. At the sametime, they are accountable for the actions of the civilservants that work in their departments. The discharge ofaccountability to parliament is an expression of politicalaccountability, while the accountability for civil servants’actions reflects managerial accountability. The questioning ofthe effective capacity of ministers to be held accountable forthe work of the civil service, and the need to show to theelectorate a clear link between policies and what has beenachieved, has increased the demand for greater openness ofthe political institutions. Different mechanisms for assuring amore reliable discharge of accountability needed to beimplemented. Thus, a number of initiatives – the NPMinitiatives – were implemented from the 1980s on. Thesecalled for enhancing accountability through improvingefficiency and implementing systems for measuring andmonitoring performance.

5. Accountability in the UK Devolved Parliaments and Assemblies

Table 5.1 Public Sector Accountability

Political accountability

● constitutional accountability:the characteristic of parliamentarysystems

● decentralised accountability:devolution of control

● consultative accountability:involvement of interested partiesand pressure groups

(Source: Glynn, 1993, pp. 18-19.)

Managerial accountability

● commercial accountability:publicly owned organisationsfinanced by user charge and not bybudgetary appropriations

● resource accountability:adopting managerial practices thatwill promote the efficiency andeffectiveness of non-commercialentities by the establishment of anappropriate budgetary controlframework

● professional accountability:self-regulation by professionalgroups employed in the publicsector

Legal accountability

● judicial accountability:a review of executive actions at theinstigation of an aggrievedindividual

● quasi-judicial accountability:the control of administrativediscretion, eg, by review tribunals

● procedural accountability:a review of decisions by an externalagency, usually by an ombudsman

The Hansard Society’s Commission on Parliamentary Scrutinyin 2001 looked at how members of Parliament (Westminster)exercise accountability. The result of the enquiry brought tolight an inadequate and disconnected system. Governmentalscrutiny appears to lack rigour and systematisation, and littleevidence has been found on the ability of parliamentaryenquiries to identify responsibility for failures of theexecutive, and to make sure that the executive puts intoplace adequate measures and follows recommendations. Thereport issued by the Commission, The Challenge forParliament:Making Government Accountable, identified thefollowing issues:

● parliament has to remain the leading institution forguaranteeing accountability;

● parliament should use available resources (both externaland internal) better, for example, promoting the role of theselect committees;

● MPs need a better understanding of their role asscrutinisers of the executive;

● committees should be more prominent within parliament;● financial scrutiny should be fundamental in ensuring

accountability; and● parliament should improve its communication process with

the public.

The devolved assemblies/parliament have taken on-board theneed to improve the accountability process in the light of therecommendations of the commission, and following thedebate on the gap in the process of discharging political andministerial accountability. In this way, devolution has becomean instrument that fosters ‘new politics’ (Hazell, 2003), inaccordance with the principles of inclusiveness, mutualunderstanding and participation.

5.2 Accountability Arrangements in theUK Devolved InstitutionsThe devolved institutions have included accountabilityamong their key founding principles (The National Assemblyfor Wales, 2001; The Northern Ireland Assembly, 2002;The Scottish Office, 1998). In Scotland, the ConsultativeSteering Group specified that ‘the Scottish Executive shouldbe accountable to the Scottish Parliament and the Parliamentshould be accountable to the People of Scotland’. In Walesand Northern Ireland, there is no equivalent formal statementbut usually the process of devolution is associated with theneed for straightening the line of accountability withinpolitical institutions. The devolved institutions have similararrangements for guaranteeing and enacting accountability.The overall scheme is summarised in Figure 5.1.

Management Accounting, Devolution and Democratic Accountability Accountability in the UK 23

The full parliament/assembly

The committees

Individual members

Holding the executive to account

Interest groups: lobbyists, media.

Figure 5.1 The accountability process in UK devolved institutions

Management Accounting, Devolution and Democratic Accountability Accountability in the UK24

5.2.1 The Full Parliament/assemblies These exercise their role of scrutiny of the executive throughthe debating, in plenary sessions, of the legislativeprogramme and of its subsequent revisions.

5.2.2 The Committees Their role has been considered pivotal in discharging politicaland ministerial accountability. Committees have been givenpowers to scrutinise the work of the executive through thefollowing different mechanisms:

● conduct enquiries and take written and oral evidence fromministers, civil servants and others;

● play an important role in policy development andpre-legislative process, as they need to be consulted duringthe process of policy making, and they can expressreservations or complaints to the executive at an earlyenough stage to make an impact; and

● be involved in the process of introducing bills, expressingtheir opinion in written reports on whether a bill should beapproved or not, making recommendations on spendingpriorities during the budgetary process and commissioningvalue-for-money studies.

In Scotland, with regard to financial scrutiny and participationin the budgetary process, the Finance Committee isresponsible for addressing overall budget priorities. It isrequired to gather and consider the views of the subjectcommittees and individual MSPs, and to scrutinise theexpenditure proposals of the executive. The results of theFinance Committee’s analysis inform the debate of theplenary on budgetary issues. The executive should then takethe outcome of the plenary debate into consideration in theirfinancial plans.

Northern Ireland is similar to the Scottish system. TheNorthern Ireland Finance and Personnel Committee hasresponsibility for advising and assisting the Minister ofFinance and Personnel in policy formulation and policydevelopment, and has a consultation role in respect tomatters within the minister’s responsibilities. In addition, thiscommittee has the central role of prompting the scrutiny ofthe budget proposals, considering and advising ondepartmental budgets and annual plans, and co-ordinatingthe assembly committees’ responses to the executive’sposition report to the Assembly (Northern Ireland Executive,2002).

Wales is different from Northern Ireland and Scotland in thatit does not have a finance committee. The budget proposalsare scrutinised by the subject committees, which are invitedto provide their views on their spending priorities during thebudget planning round, and to examine and comment on thedraft budget.

5.2.3 Individual Members Individual members can hold the executive to accountthrough oral and written parliamentary questions, and canask for information in order to proceed with their enquiry.The Standing Orders regulate the procedure for thesubmission of the MPs’ questions.

5.2.4 Interest GroupsThe new parliament/assemblies can be easily approached bylobby groups and are subjected to a tighter process ofscrutiny by local media, which can exercise stronger pressureon members of the executives, of the parliament/assembliesand also on civil servants.

5.3 What Accountability Means for theParticipants to the StudyParticipants to the research where invited to describe whatmeaning and significance accountability has in their roleswithin the devolved institutions. The majority of them had abroad view of accountability that was mostly public/political.They saw themselves as having to give an account of theirwork to the electorate, in the case of politicians. The processof accountability is described according to the straight-linerelationship between the electorate, parliament, governmentand civil servants. There was also recognition of thecomplexity of the concept, and many of them identified aclear division between political, ministerial and managerialaccountability. The first was associated with the process ofrepresentative democracy, providing an account to theelectorate. The second was related to the responsibilities ofministers in having to give an account of their decisions andactions to parliament. Managerial accountability wasassociated with the need to identify responsibilities clearly,the implementation of a system of control for ensuring thatactions correspond to plans, and the power to scrutinise howpublic money has been used.

Among the participants there is a general consensus of thebenefit of devolution, as a mechanism that has intensifiedaccountability and made it stronger. This improvement hasbeen explained by the increased level of scrutiny ofministerial activity. Scrutiny has been enhanced as a result ofproviding the members of parliament, as well as theelectorate, with the means for understanding better what thegovernment does and why. Enhancing and broadening thesubject committees’ responsibilities has played a major rolein improving the accountability process, as they have beenactive in scrutinising the executive’s members and civilservants at work, more often in an open and collaborativeclimate. Civil servants felt that they were more engaged withthe members of parliament/assemblies, and that the processof communication was improving.

Criticisms have been raised on the issue of accountabilitybeing undermined by problems in the provision ofinformation, mostly to elected members. The communicationprocess has been considered by some elected members asinadequately structured, with too much documentation thatin some instances does not ‘tie up together’.

The sheer volume of the information provided has beenconsidered problematic, and there has been generalconsensus among the interviewees on the need to improvethe quality of the information, to make it sharper and morefocussed. Elected members are overwhelmed by the amountof information that reaches them, and managing the sheervolume of information is seen as problematic; something thatpossibly weakens the accountability process.

Furthermore, some criticisms have been raised on the abilityof the system to hold ministers effectively to account. Morespecifically, concern has been expressed on the extent towhich committees have the power to influence ministerialdecisions.

In Northern Ireland, some members expressed scepticism inrelation to the way in which the executive is appointed, andhighlighted that, as members of the Assembly do not appointministers, therefore the accountability link and obligation areundermined by the system itself.

In Wales, problems have been identified with thearrangement whereby ministers themselves are part of thecommittees and this arrangement might undermine thecapacity of the committee to exercise fully their scrutiny role.

In Scotland, critical views have been expressed, pointing outthat the media has the capacity to play a fundamental role inthe process of discharging accountability.

5.4 ConclusionThere is a definite link between accountability anddevolution. Devolution has provided the framework underwhich managerial and political accountability can bestrengthened. The process of devolution has been positivelyassociated with the initiation of a search for alternativepolitical measures and procedures for shaping and regulatingpolitical institutions and their relationship with society. Thelevel of scrutiny of ministers and civil servants has increasedaccountability. Subject committees can and should exercise amore active role in scrutinising the executive but also inparticipating in the legislative process.

On a formal level, committees can exercise some influenceon the decisions made by the executive at an early stage ofthe process, as they have a specific role and a statutoryresponsibility for advising and for consulting with ministers,during the phase of policy development. Similarly, they holdimportant advisory and scrutiny functions in the budgetaryprocess.

On an informal level, attention has been given to developinga process of dialogue between the political actors (includingcivil servants) and the citizens, and this has had a positiveimpact on the content of information shared amongparliament, executive, civil servants and the public.

The practical operational arrangements, as well as theresources made available to committees and individual MPs,have had a positive impact on the accountability process inthe following ways:

● better flow of information and less controlled availabilityof it for committees and backbenchers; and

● civil servants have more opportunities to be in directcontact with the members of the parliament/assemblies, asthey can be invited to give evidence and to answerquestions by the committees.

However, many politicians, executive members and civilservants expressed the opinion that the experimentation withnew mechanisms and operational procedures is still a ‘work inprogress’. A lot remains to be done to improve the quality ofinformation and its volume. Less information – but morefocussed and easily accessible information – is required,especially by committees and individual members. Similarly,the capacity and strength of the committees in holding toaccount the members of the executive and, to a certainextent, the civil servants, is still under trial. Scepticism hasbeen voiced by members with regard to the presence ofloopholes in the system that do not allow committees tofully exercise their powers, as well as the inability of membersthemselves to appreciate the potential of their role and totake advantage of the new arrangements. Even though thereis still more work to be done, it is possible to say thatdevolution has increased accountability overall.

Management Accounting, Devolution and Democratic Accountability Accountability in the UK 25


This chapter is concerned with accounting practices,particularly as they affect budgeting matters, in the devolvedparliaments. At each devolved institution, the budget cycle,targets and budget-setting, and the interpretation ofaccounting information is examined.

6.1 Northern Ireland

6.1.1 The Budget CycleThe first budget, presented to the Assembly on 15 December1999, was a roll-forward of the product inherited from directrule, as the then finance and personnel minister took officevery late in the budgetary planning cycle. Since then, aprocess has blossomed with the executive developing its ownbudget and programme for government and introducing, forexample, public service agreements (PSAs) and servicedelivery agreements (SDAs).

The process typically begins with Recall Seminars to seekviews from a wide range of stakeholders in May and June. Theexecutive’s Position Report, published in June, highlightssome of the key issues affecting public services in the comingyear. This is circulated widely and the resultant consultationprocess allows the Assembly and the wider community toconsider and provide views on some of the key strategicissues relevant to the review of the Programme forGovernment and the preparation of the draft budget (DFP,2001). Indeed, a key change made to the process in 2001 wasthe development of a more comprehensive pre-consultationphase on the review of the Programme for Government andthe preparation of the budget (DFP, 2001; Northern IrelandExecutive, 2001).

The plans of the executive are laid out in the Programme forGovernment. The Programme for Government is a high levelstatement of the executive’s key priorities and programmes.It is meant to inform decisions on the budget and is viewedas a central focus of the executive’s work (DFP, 2001;Northern Ireland Executive, 2001). Thus, the Programme forGovernment and the budget are clearly linked.

The Programme for Government covers plans for three years,but concentrates on the details of the upcoming financialyear. It is subject to approval by the Assembly after scrutinyin departmental committees, and is reviewed and rolledforward each year.

Following presentation of the draft Programme forGovernment and the draft budget to the Assembly inSeptember , there is an eight-week joint consultation period.There is a dedicated website and consultation events are heldinvolving councils, equality scheme consultees, andrepresentatives from business, farming, trades unions, thevoluntary sector, the community sector and senior citizens. InDecember, the budget is presented to the Assembly, where itis scrutinised by the departmental committees before beingvoted on. Finally, in the following spring, the Assembly voteon the Appropriation Bill, presented by the minister of financeand personnel, resulting in final authority for the publicexpenditure.

Resource accounting and budgeting (RAB) was beingimplemented in Northern Ireland, on a similar timetable tothe rest of the UK, at the time the Assembly was beingestablished, with each department being required to produceresource accounts and resource budgets. However, resourceaccounting had only one year running in parallel withcash-based appropriation accounts in Northern Ireland,compared with the rest of the UK, which had three years ofparallel running. The first live year for resource accounting inNorthern Ireland was 2001-2002. Resource budgeting wasintroduced throughout the UK in the transitional years of2001-02 and 2002-03, with 2003-04 being the first live year.

The executive pledged from the outset to lead the mosteffective and accountable form of government in NorthernIreland (Northern Ireland Executive, 2000) and has laid claimto a desire to be open and responsive. In addition, itarticulated a belief that wide consultation was necessary andthat many parts of society, including the community andvoluntary sectors, have key roles in shaping policy.

A particular nuance, peculiar to Northern Ireland in itsdevolution arrangements within the UK, relates to the role ofopposition. In parliamentary democracies, oppositions havetwo roles: criticising government programmes; anddeveloping alternative programmes for governments.However, the Northern Ireland devolution settlementincorporates all major parties in government, through apower-sharing arrangement. This principle shapes the way inwhich the executive is formed, and determines the votingprocedures for taking ‘key decisions’.

6. Management Accounting Informationin the UK Devolved Institutions

6.1.2 Targets and the Northern Ireland BudgetsThe Programme for Government is supplemented by itssupporting budget documentation. The budget is developedin the context of supporting the Programme for Governmentpriorities and principles. The minister responsible for itscontents sees it as setting out, in detail, the spending plansthat have been agreed by the executive to deliver thepriorities and actions in the Programme for Government(DFP, 2001). The budget’s financial resource allocations aretherefore closely linked with the Programme forGovernment’s priorities.

The linkage between the Programme for Government and thebudget is enhanced by PSAs. These PSAs describe what adepartment will deliver, in the form of measurable targetsover the public expenditure review period, in return for itsresource budget. So, PSAs link objectives, actions and targetsto the budget for each department PSA and, like other areasof the budgetary process in Northern Ireland, these aredeveloped through a process of extensive consultation(Northern Ireland Executive, 2001).

Service Delivery Agreements (SDAs) underpin PSAs andprovide detail on how targets will be delivered. SDAs wereintroduced for the 2002/03 financial year, in order to supportthe Programme for Government and the PSAs, and providemore detail on how the PSA targets will be delivered. Theintended result of this is that there will be ‘a clearrelationship between budgets, actions, and outcome oroutput measures, including clear targets for delivery’ (DFP,2001, section 3.16).

6.1.3 Interpreting Accounting InformationBoth political respondents and ‘other respondents’ expresseda view that there was often too much irrelevant informationavailable. However, they provided very different explanationsfor the cause of this. Politicians perceived that providers ofinformation tended to use a ‘scattergun’ approach,disseminating everything to everyone regardless of individualinterests, while ‘other respondents’ viewed the politicians’compulsion to have everything that is available (regardless oftheir ability to use the information) as problematical.

The responses also indicated that department officials andsupport civil servants to committees (and the relationshipsbetween them) are seen as crucial in a necessary filteringprocess. Effective mechanisms that ensured filtering andfocusing in on important issues were identified as beingneeded. Interviewees were keen to stress, however, that thesubject of information provision was one of learning andeducation. At the heart of this process, the interactionbetween actors and the relationship between Assembly anddepartment officials was identified as being important.

The interviewees, when asked about RAB, provided a similarpattern of responses. ‘Insider politicians’ (that is, politicians atministerial level and those involved in departmentcommittees focusing on accounting and accountabilityissues, plus a few politicians who had prior experience ofaccounting and accountability issues) and ‘otherinterviewees’ were conversant with the intricacies of RAB,and, although a proportion were clearly struggling with someof the concepts of RAB, were able to identify a range ofpotential benefits and drawbacks of it. However, ‘outsiderpoliticians’, including chairs of committees, knew little ornothing about RAB. Overall, these two groups, whileacknowledging disadvantages, were generally positive aboutthe possible contribution of RAB.

A main theme of the responses of politicians, particularly‘outsider politicians’, to questions on budget issues was thatdifficulties had arisen regarding scrutiny because of overlytechnical presentations. One politician specifically linked thisto the difficulty of understanding the language of accounting(possibly related to a lack of understanding of RAB issues).Furthermore, politicians were generally perceived as beingmore concerned with how much was being spent rather thanon what it might achieve, with limited consideration beinggiven to planning and performance issues.

Management Accounting, Devolution and Democratic Accountability Information in the UK Devolved Institutions 27

Management Accounting, Devolution and Democratic Accountability Information in the UK Devolved Institutions28

6.2 Scotland

6.2.1 The Budget CycleBefore the Scottish Parliament was established in 1999, agroup of experts in financial matters was established toprovide guidance in accounting and budgetary matters forthe new Parliament. The Financial Issues Advisory Group(FIAG) was very critical of the budgetary processes atWestminster. This group observed that there was little timefor serious discussion of budgetary matters on the floor ofthe house at Westminster. This situation was exacerbated bythe manner in which financial documents were presented,which were inaccessible to most MPs, a situation made worseby the limited time and expertise amongst them to scrutinisebudget proposals. Consequently, the FIAG recommended athree-stage process for the executive to be held accountablefor the financial resources at its disposal (Scottish Office,1998).

These three stages are summarised as follows:

Stage 1At this stage, the Scottish executive publishes its detailedproposals for the following year and its outline proposals forthe two years beyond that. These proposals are subject toscrutiny by the subject committees of the ScottishParliament, with the Finance Committee of the ScottishParliament co-ordinating the response of the Parliament. Atthis stage, members of the public or other organisations maycomment directly to the Scottish executive on its plans. Thisstage is a scrutiny of strategic priorities.

Stage 2The Scottish executive produces its detailed plan for a three-year period after taking account of the views ofparliamentary committees and comments received fromother persons or organisations. The Finance Committee of theScottish Parliament has a central role in this process, as itgathers comments from subject committees of theParliament. The Finance Committee provides a comment onthe proposed spending plans of the Scottish executive. This isits review of the Scottish executive’s draft budget.

Stage 3This is the formal approval of the Budget Bill that givesauthority to the Scottish executive to incur expenditure. Thisprocess takes place at the beginning of the year in which thebudget takes effect. This third stage is concluded by 14February to ensure that the budget can take effect from 1April.

6.2.2 Targets and the Scottish BudgetThe Scottish executive has worked towards an integratedframework for financial and performance management. Thisframework includes targets and objectives for eachdepartment. The overall intent of this framework is toenhance efficiency, accountability and transparency (ScottishExecutive, 2002).

This intent was reaffirmed in the Scottish executive’sspending proposals of 2002 (Scottish Executive, 2002), inwhich it outlined its overall approach to the stages of budgetdevelopment. These are the:

● identification of the key improvements for the people ofScotland (‘the vision’);

● articulation of key priorities, including two cross-cuttingthemes (closing the opportunity gap and sustainabledevelopment) and five priorities for action (health,education, crime, transport and jobs);

● promulgation of key service delivery targets forperformance management and accountability; and

● statement of how resources will be allocated to achievebetter outcomes.

Building on this approach, the Scottish executive hasestablished five criteria that it uses in developing its budget.These are as follows:

● resources are targeted on priorities set;● expenditure decisions will be based on knowing what will

be delivered and when;● commitments to spend will be accompanied with a

statement of benefits to be obtained;● results of decisions to spend will be monitored, measured

and assessed, both publicly and critically, to ensure servicedelivery; and

● the overall focus will be priorities, best value for money andreal improvement.

(Scottish Executive, 2003)

6.2.3 InterpretationWhile advances have been made in the construction andpresentation of budgetary information along the linesadvocated in RAB (HMT, 2001), there remains the issue ofthe sense made of the information by key actors in theScottish Parliament. The following is based on 18 interviewswith a number of key actors, including MSPs, providers andauditors of accounting information at the ScottishParliament.

The dominant view of accounting, from the perspective ofthe groups interviewed, was limited to financial issues. Therewas little awareness of the broader issues of RAB amongstMSPs – what it is, what it is intended to do, and hownumbers have changed because of it. There is a small group ofexperts within the Parliament who have the expertise tointerrogate and challenge accounting information. This resultsin a restricted dialogue between two groups of experts: theproviders of government accounting information and thesmall group of MSPs with knowledge of public finances (‘theinsiders’).

To understand the implications of central governmentaccounting, many MSPs are reliant on the guidance of otherMSPs (‘the insiders’) whom they regard as knowledgeable, oron the advisers to subject committees.

For many MSPs, there is a huge amount of information,extending across many subjects, to make sense of. It rangesfrom electronic information, research papers, governmentpolicy papers, individual party policy papers, and unsolicitedreports by parties seeking to influence opinions. In all of this,the accounting/financial aspects of decisions can be lost.There is a tendency for MSPs to focus on narrative aspects ofaccounting information and avoid the financial figures.

In terms of the budgetary process, the persistent picture toemerge is one of a parliament that has sought to improveupon the quality of the information that it receives, ratherthan acting upon the information to reshape policies of theScottish executive. Most subject committees have mademinor suggestions for changes in expenditure. Interestingly,the MSPs share the aims of RAB, which is a keen interest intargets and outcomes. However, this is against a backgroundof a lack of knowledge of RAB. (An inability to define RAB isan inability to explain, in technical terms, how RAB isdifferent from cash accounting.)

6.3 Wales

6.3.1 The Budget CycleThe mechanism of the budget cycle in Wales proceeds asfollows. In the early summer (around mid-May), the financeminister invites other ministers to consult committees abouttheir priorities, submit and discuss proposals for the nextthree years (the first year is a firm budget, while the secondand third years are indicative), and contribute to cabinetdiscussion about overall priorities. Each minister consults withcommittees up to late May/early June. June is the deadlinefor responses to budget consultations. In August, the financeminister holds bi-lateral meetings with each minister overtheir budget bids, and this is further discussed in cabinet inmid-September. In early October, a draft budget motion istabled at cabinet, which is subjected to plenary debate aweek later. To facilitate openness and transparency of thepolitical process, the budget document is made available toopposition parties five days before the debate. In the thirdweek of October, subject committees discuss draft budgetsand, in late October, a final budget motion is tabled incabinet. A plenary vote takes place in the first week ofNovember.

6.3.2 Targets and the Welsh BudgetThere is a general feeling among politicians and civil servantsthat the Welsh Assembly and its associated bodies bothproduce, and are subjected to, a massive battery of targets. Inan important sense, targets seem to almost flow from, whilenot necessarily being equivalent to, political announcementsby ministers. Yet frequently, quantifying suchpronouncements is problematical. Many of the targets for theAssembly and its associated bodies are expressed in theannual budget. During the first term of the Welsh Assembly,no single political party enjoyed an outright majority.

The Welsh Assembly operates under a set of standing orders.One of them (Standing Order 19) stipulates that every year,the Assembly must carry out the annual corporate andbudget planning round. This is a process through which theAssembly makes decisions about how to allocate its budgetbetween the various sectors of the Welsh economy. As anexample, in 2003/4, the Assembly’s budget was £11.3 billion,which was shared among all sectors.

Annual budget resources flow from Whitehall to Wales underthe ‘Barnett formula’, which is calculated mainly onpopulation shares between the countries that constitute theUK. Annual budget increases accruing to any of the UKdevolved governments is essentially a ‘Barnett’ share of anyincrease to Whitehall departments’ existing budgets.

The Welsh budget has two key ground rules. First, until theAssembly votes upon the budget, all Wales’ money,irrespective of the sources of Barnett flow, is a resource to bespent according to the priorities of the Assembly. Second, theAssembly can decide to allocate more money to any givensector than the amount it would get under the Barnett share.

Management Accounting, Devolution and Democratic Accountability Information in the UK Devolved Institutions 29

Management Accounting, Devolution and Democratic Accountability Information in the UK Devolved Institutions30

6.3.3 Interpretation of Accounting InformationCivil servants involved in preparing the budget haveacknowledged that it may not be easy for the uninitiated tounderstand fully the figures contained within it. The extent towhich the budgets can be considered user friendly, or evenreadable, by the politicians depends to a large extent on thepoliticians’ own educational backgrounds and experience, aswell as on the availability of support from civil servants andcolleagues. An equal difficulty, if not more difficulty, inunderstanding budget figures and other statistics is alsoexperienced by pressure groups.

There is unanimous agreement right across the politicaldivide of the Assembly that the quantity, quality andtransparency of information is far greater since devolution.Most members interviewed did not consider themselves tobe numerate, and hence sought help from others to interpretthe numbers. The interviews revealed that the extent of helpobtained by members of the Assembly with regard toinformation varied according to whether they were cabinetmembers or ordinary members. This report initially focuseson those at the higher ministerial level.

The concern of civil servants is to develop an informationinfrastructure that generates data for historical trend analysis,rather than simply attend to what is identified as theimmediate needs of their ‘customers’. Ministers have theright and power to prevent civil servants from collectinginformation that the civil servants believe to be valuable butthat the ministers consider costly. Yet, if civil servants aresanctioned by ministers to collect certain information, thedetails of how that information is used are left entirely in thehands of civil servants. To help collect such information, anew model known as ‘synthetic estimation’ began to bedeveloped. This model uses past aggregate data and anumber of parameters to predict, and generate, futuredetailed information.

Ministers and their senior advisers are given five days(previously it was two days, but this period was found to beimpractical) of advanced sight of any information that wouldbe made part of the public domain. For information coded as‘market sensitive’, advance sight is reduced to two daysbefore the morning of release. Civil servants decide on theformat of the information released, despite pressure fromministers to manipulate this format.

Decisions by the Welsh cabinet are carefully scrutinised byWhitehall to ensure that they do not depart from Whitehallpractice, hence putting greater pressure on Welsh ministers toaccede to the advice of civil servants. The cabinet has begunmore recently to ask for a more analytical interpretation offigures, to help with its own deliberations and sessions.

6.4 ConclusionThe phenomenon of limited expertise of financial mattersamongst elected members is common in all three settings, asis the situation whereby small groups of experts (‘insiders’)hold significant positions of influence because of their abilityto interrogate financial information and to advise othermembers.

There are other characteristics that prevail in all threeinstitutional settings: the preoccupation with targets; thenarrow concept of accounting as being purely mattersfinancial; and the contradictory desire for performanceinformation.

At this stage of development, it is hard to be definitive aboutthe success or otherwise of RAB.

7.1 IntroductionIn this chapter, the findings on how devolution has affectedhow performance and audit information is used in the UKdevolved institutions is reported. In particular, the broaderissues of decision relevance, availability and use, sources andaccessibility, and the impact of reforms and devolution onperformance and audit information aim to be addressed.

A focus on performance, and providing feedback mechanismson results and effects, has been one of the components ofNPM reforms during the 1980s and 1990s. Such elementshave been judged to facilitate accountability as well asproviding a vehicle for organisational learning in government(Carter, Klein and Day, 1992). While the use of performanceand audit information has been extensively studied in centraland local government, the use of such information in thedevolved parliaments and national assemblies has beenneglected. This chapter attempts to bridge this gap.

Olsen and Peters (1996) defined learning in two ways. First,learning signifies a positive outcome and an accomplishmentin terms of improved knowledge, skills, performance, andpreparedness for the future. Second, learning is a processthrough which experience is consulted and acted upon. Thejudgement on the outcome, according the first definition oflearning, would often be contested in politics and is part ofpolitics. The second definition of learning will therefore beused in this analysis.

Government organisations, like many other large-scale andcomplex organisations, face many barriers to effectivelearning (Olsen and Peters, 1996). Such barriers may take theform of cognitive human biases, technological constraintsand administrative capacity. Such barriers are commonlyaddressed with the term ‘bounded rationality’ (Simon, 1947).

In addition, barriers to effective learning may also stem fromideological constraints and political manoeuvring. Suchbarriers may be addressed through the term ‘politicalrationality’. Olsen and Peters (1996, p. viii) argued that ‘(t)hereal weakness in the patterns of learning appears to be indeveloping effective institutional mechanisms for learning,and for improving patterns of learning across time’.

Furthermore, based on studies of administrative reforms ineight democracies, they concluded:

‘Many reformers learnt what was often new technicalabilities. Many reformers learnt about the difficulties oflearning, for instance the limitations of computerizedmanagerial information systems and quantified indicatorsof performance. (…) There was a reconfirmation of thelessons that managerial accounting and control systemshave improved in sophistication, without producingconvincing evidence that system sophistication isassociated with effective performance and success.’(Olsen and Peters, 1996, p. 14)

The devolution programme is an interesting test bed forexploring whether this pattern has been stable over time andover government levels, or if implementation now has turnedinto operation and more interestingly, if use of managementaccounting in devolved government is fundamentallydifferent from central government.

Despite barriers to effective learning, governmentorganisations engage in learning about the environment,about the past and about themselves. Furthermore,government organisations often specifically try to learn fromsimilar organisations or from relevant organisations at otherlevels of government, either nationally or internationally(Powell and DiMaggio, 1983). This report assumes thatperformance information provided by formal models, such asperformance measurement and performance audit, arefundamental for democratic accountability and effectivelearning in ‘modern’ government and parliaments. Hence, theactors’ use of performance information was specificallyaddressed in the interviews.

More specifically, the following issues on performance andaudit information were addressed:

● availability and use;● sources and accessibility;● the impact of reforms; and● the impact of devolution.

The research now turns to what evidence there is for judginghow devolution has affected democratic accountability byway of performance information in Northern Ireland,Scotland and Wales. (However, given that the Welsh NationalAssembly did not have a Finance Committee in its first term,the main emphasis in this chapter is on Northern Ireland andScotland. Information on Wales is given when feasible.)

7. Issues of Performance Measurement and Auditingin the UK Devolved Parliaments and Assemblies


Management Accounting, Devolution and Democratic Accountability Issues of Performance Measurement32

7.2 Availability and Use of Performance InformationIn addressing the availability and use of performanceindicators and performance audit, the question posed withregard to performance information was, what information didthe actors receive and use?

7.2.1 Northern IrelandSome argued that the politicians only received performanceinformation in briefings, when they actually searched it out.Most answers discussed different issues related to targets.These were, arguably, set low and were relatively easy toachieve. One committee deputy chair argued that it wouldbe an improvement if more committees, other than the PAC,would take direct ownership of key indicators. This informantalso pointed to the fact that performance indicators forsuccessful departments did not get much publicity while badperformance most certainly did, both from media andpoliticians. Some argued that the performance information islimited and varied and that there was still an amount ofindividual departmental subjectivity within it as well.

7.2.2 ScotlandThe main users of accounting information, in general, seemedto be the Audit Committee and the Finance Committee.However, one Scottish minister argued that MSPs usedperformance information frequently. He said that a lot of thedebates, party political attacks and scrutiny of the executiveare based on this kind of information. He mentioned a reportproduced by the Audit Commission the same week, whichraised many questions. According to a civil servant workingwith finance in the Scottish executive, there has been a bigincrease in the amount of performance information that theexecutive provided, but that the quality of the performanceinformation needed to be improved.

The performance information had different levels andcomprised of about 300 targets that were set againstperformance. One executive member said that theperformance information came from many sources. Therewere about 1,000 different performance monitors that werekept centrally. The executive ministries also had their ownpublications that were updated several times a year. Theexecutive was working on rationalising the performancemonitors down into a core set of 100 measures that reallymattered.

An opposition MSP said that the separate publication oftargets from budgets and financial information was aproblem. This was confirmed by an adviser to the ScottishParliament, who pointed to the problem that performanceinformation was not reported in a standardised way andlinked to targets in one separate document. The adviserargued that there was not a systematic way of linkingresources to performance and that there was no clear linkbetween strategy, budgets and performance.

The issue of reporting performance was under development,with unofficial talks going on between the executive and theScottish Parliament. Most of the performance monitoring wasdone by Audit Scotland and the Accounts Commission bybenchmarking. This was a major means by which theexecutive sought to improve performance. A representativefor Audit Scotland said that there had been somestreamlining of performance information, and that theinformation had provided transparency – a kind of ‘goldfish’effect, he argued.

7.2.3 WalesOne interviewee, who was working in the Welsh StatisticalDirectorate and had formerly worked in the Welsh Office,pointed to certain problems with using targets. Sometimespoliticians used targets that were not possible to link toavailable statistics.

Another problem with performance information in Wales(and England) was due to the fact that some statistics cametop-down – that is, that certain statistics, like the census,were survey-based. This meant that it could be difficult to usethese kinds of statistics as a basis for targets because at thelocal level the statistics could have low reliability. However,once a person, for instance a cabinet member, has set atarget, it is inevitable that any failure against that target willbe picked up by the opposition – for instance by researchersworking for the opposition party – and will be used in thecourse of political debate. In a sense, this is a public form ofaccountability because there are people waiting for theexecutive not to achieve its targets. The opposition couldalert the media to that information.

7.3 Sources and Accessibility of Performanceand Audit InformationPoliticians and bureaucrats usually are well informed, but as isthe case with many leading figures, they have many agendasand tight schedules. Subsequently, it was expected that theactors would access relevant and reliable information in themost cost effective way (Downs, 1957). They were thereforeasked where the performance and audit information camefrom. They were also asked if the information was presentedin a way that was useful to them, and if the performance andaudit information could be improved.

7.3.1 Northern IrelandSources that were mentioned were the Northern IrelandAudit Office, the Northern Ireland Research and StatisticsAgency (NIRSA), the departmental annual reports andagencies, the annual budgets, the Programme forGovernment, the FSA and the PSAs. Almost all intervieweesanswered that the information could be improved, especiallyon targets. Many felt that the targets were too easilyachieved and did not function as intended. Some alsoexpressed the view that the information was not presentedeffectively. Many talked, however, about learning curves, andsome argued that improving the reporting and presentationwas a matter for the respective committees to address, andthat improvements were gradually being made. Two clerks toparliamentary committees pointed out that at present, manyof the MLAs did not have the capacity, resources orcompetence to deal effectively with performance informationbut that a new awareness of this information was a positivedevelopment. Some argued that measurements of customersatisfaction, outcome and using peer reviews wereunderdeveloped. One interviewee said the committees wouldneed four to five years to get to grips with the workings ofthe departments and their financial structures.

7.3.2 ScotlandThe Auditor General and the Audit Office was mentioned asvery capable sources of documentation and briefings for theAudit Committee. For the Finance Committee, a specialadviser was mentioned by many as crucial for the functioningof the committee in its scrutiny and oversight functions. Theadviser filtered the information and then suggested questionsor the basis of questions. This made the committee membersable to turn the information into their own language andtheir own experience. Civil servants and ministers who werealso interviewed confirmed the quality of the questionseventually posed. They acknowledged that someone veryskilled had guided the committee members’ attention incertain directions. Many interviewees also mentioned theScottish Parliament Information Center (SPICe) as a veryuseful resource. It produces non-partisan briefing notes onissues that are discussed. Some also mentioned externalinterest organisations as sources of information.

7.3.3 WalesIn Wales, the NAO was mentioned as important for givingadvice to the Audit Committee. Regarding statistical datathat might be valuable as performance information, theprovision of the data is public service. However, giving adviceand the interpretation of the data was limited to governmentonly and this advice was confidential. (This is changing as aresult of the recent Freedom of Information Act, on freedomof information but at the time of the interviews, in 2002,advice to ministers was confidential.) For instance, ministerscould ask for advice on the most potentially damagingaspects of the statistics that had just been published –potentially, the bad news items,or the potentially good newsitems, which might have been more likely to have been askedfor – and the statisticians would give them that advice. Eventhough this service is not available to backbenchers, there isanother part of the National Assembly, called the Members’Library – modelled on the Commons Library – that wouldprovide that service.

Management Accounting, Devolution and Democratic Accountability Issues of Performance Measurement 33

Management Accounting, Devolution and Democratic Accountability Issues of Performance Measurement34

7.4 The Impact of Reforms on Performanceand Audit InformationThe following question was asked: Given the major changesin the way in which public services have been managed overthe last 20 years (for example, the Financial ManagementInitiative (FMI), Next Steps, Citizen’s Charter, Service First,Modernising Government), how do you think these initiativeshave affected the type of performance information that isproduced and used?

No significant reported results were reported in Wales;however, there were contrasting experiences in NorthernIreland and Scotland.

7.4.1 Northern IrelandThere was almost a universal agreement that the manyreforms that had taken place since the early 1980s had had asubstantial impact on the terminology, technology andsupply of performance information. Only one intervieweeargued that the reforms had not worked (but that devolutionhad).

Some audit officers argued that FMI did result in much betterfinancial information but this was often not observedbecause FMI was an internal process, and the effects of theNext Steps reform are still being absorbed. Furthermore,‘agencification’, where agencies tried to improve financialinformation and which sometimes involved agencies withlarge capital bases, in effect started an accounting revolutionwhere RAB could be seen as only putting the finishingtouches to something Next Steps had started.

Some politicians also indicated being overburdened by theamount and detail of information. One even believed thatthe reforms had created cynicism and a fatigue of thesystem, to some degree. This could be due to the impressionthat reforms were being presented as disintegrated politicalpackages that were layered on top of the previous ones.However, the same interviewee also stated, based on theinterviewee’s own working life experience, that the reformshad made a difference and that the public service today is ina vastly better state than it was 30 years ago.

There was also a sense that the reforms had increased theexpectations for those that are concerned with particularissues as to what the government will achieve. One MLAargued that there now was too much consultation, rapidlymoving towards a situation of ‘consulting to death’.

7.4.2 ScotlandThere was a general opinion that public management reformsover the last 20–25 years – and, due to work by the AccountsCommission, especially over the last 10 years – had increasedthe availability and use of performance information. The FMIreform in 1983, which set forth the idea that the managerwas an accountable officer with responsibility for the efficientuse of money, was also mentioned as very influential for lateryears. Although one former member of the Scottish executivethought that the focus of MSPs was still on input, severalinterviewees argued that, over recent years, the performanceindicators had been made more detailed, and that there hadbeen a shift from focus on input to outcome.

7.5 The Impact of Devolution on Performanceand Audit InformationThe last issue regarding performance information the projectassessed was if devolution had had any impact on providing amore open and accountable way of government and politics,other than that attributable to general trends and NPMreforms. Interviewees were asked to what extent access andopenness of accounting information and performanceinformation on public services had changed with devolution.Did the actors think that any such changes were a result ofdevolution, or would they have occurred in any case?

7.5.1 Northern IrelandThere were some divergent views as to how much impactdevolution had had on the supply of performanceinformation. Some argued that most of the relevantinformation was around, regardless of devolution, due to themany NPM reforms that had taken place. However, themajority of the interviewees stated that devolution hadmarkedly affected openness and – possibly most significant –the demand for performance information. One intervieweeargued that devolution had changed local performanceinformation paradigmatically but that these effects wereneglected in ‘high level’ media. The devolution may havespurred many MLAs to act locally for improvement becausetheir re-election base is local. These actions and results arereported in the local press but seldom in national news.

One committee chair said that, judging by what is going onon the floor of the House, there might not seem to be muchuse of performance and audit information. However, thereseems to be regular use of such information in thecommittees, and it is the committees that are performing thebulk of, and maybe most important, work regarding budgetscrutiny and discussion of specific policy issues.

One interesting issue is that many MLAs have their politicalexperiences from local government. (One MLA maintainedthat 60% or more of the members had local governmentexperience.) In local government, it is common to use leaguetables and comparisons. Hence, the devolved parliaments andnational assemblies might have a relatively high competencein accessing, judging and debating performance information.Thus, there are many people who are now able to scrutiniseand ask awkward questions. One committee chair said,though, that devolution had increased openness but thatthere were lots of hidden details that the members have toextract and know how to query. They need advisers if they donot posses the competence themselves.

7.5.2 ScotlandA civil servant in the Scottish executive argued thatdevolution had resulted in a cabinet with ministers havingpersonal ownership of the targets, creating clearresponsibilities. This contrasted to the pre-devolutionsituation where there was a secretary of state who had allthe responsibility because there were no ministers.Post-devolution, every minister is formally responsible forhis/her portfolio. However, devolution has not only facilitatedbut has actually increased dissemination of performanceinformation. One civil servant stated that, in the initial years,the work on devolution itself slowed down the work onperformance information.

7.5.3 WalesThere seemed to be a shared view that, in general, devolutionhad improved the accessibility of information. For instance, amember of the Audit Committee was convinced that thetransparency of information was greater after devolution. Thisinterviewee stated that, at the central government level,there used to be one meeting a year (on Wales) in the PAC,whereas after devolution there were ten meetings a year.Another member of the Audit Committee, who also hadexperience from the House of Commons, argued that,without doubt, there was greater accountability in Walesafter devolution than before.

7.6 ConclusionThe overall conclusion is that there is more performanceinformation in use due to devolution, not because of moresupply but because of increased information processingcapacity in the political system and, hence, increaseddemand. Even though many reported the traditional,allegedly dysfunctional, effects – such as measuring what iseasy to quantify, decoupling of performance indicators fromtargets, and the proliferation of performance measures –many pointed to the salience of also using performancemeasures as political ammunition.

The performance information seems to have the capacity forenhancing transparency and learning. Thus, it may notfunction merely as symbols for effective performancethrough sophistication, as has commonly been stated inpublic management theory.

Performance indicators and performance auditing may beespecially decision-relevant for learning in politics for twomain reasons. First, it might be easier for the executives andgovernments to agree on, or at least to admit theresponsibility for, bad performance, than for identifying ortaking the credit for good performance. At the same time, forthe opposition, there is not much reward in identifying goodperformance. It is exposing and blaming bad performancethat may eventually bring the opposition into the ministerialseats after the next election.

An interesting emerging issue is the possible asymmetricincentives in public management relative to performancemeasurement in business. In the public sector, avoiding badperformance that could result in ‘naming and blaming’, whatMayston (1985) called ‘the embarrassment effect’, that couldbe as strong an incentive as performing well. There might notbe any strong incentive in performing ‘best’ because thewinner hardly ‘takes all’ in public management. Some of theinterviewees indicated that only bad performance gotattention, while good performance went unnoticed, at leastin the political system. On the other hand, for many publicservices, achieving a certain basic level of performance forspecific, often vulnerable, users and clients could be asimportant as achieving a high level of service.

This chapter has focused exclusively on issues within the UKdevolved institutions. In the next chapter, the focus is shiftedto the international comparators of New Zealand andNorway.

Management Accounting, Devolution and Democratic Accountability Issues of Performance Measurement 35


8.1 IntroductionIn this chapter, the same set of empirical issues that arepresented in chapters 5, 6 and 7 are discussed, but with thefocus on our international comparators, New Zealand andNorway. As mentioned in Chapter 4, the comparisons canprovide relevant benchmarks to the patterns anddevelopments in the UK devolved institutions.

8.2 Empirical Issues on Accounting and Accountability inNew ZealandDue to the fact that the New Zealand case has beenextensively studied recently, including studies where amember of the research team has been pivotal, this projectalso relies on recent previous research. Some of the analysisof New Zealand in this chapter is based on Newberry andPallot’s (2003) documentation of budget setting and financialscrutiny in New Zealand.

Hence, the present analysis of the New Zealand case is basedon a limited number of interviews.

8.2.1 AccountabilityAccountability issues have been a central part of theextensive reforms in New Zealand. For instance, theabolishment of the ‘first past the post’ (FPTP) system and theintroduction of the MMP electoral system in 1996 weresupported, at least in part, by the belief that the FPTP systemdelivered extensive control over the governmental process tothe party that gained a simple, and possibly narrow, electoralmajority. This result made the political system increasinglyunresponsive to citizens (Boston et al. 1996). In our parlance,the old system did not facilitate democratic accountabilityon important dimensions of the concept. However, Boston etal. (1996, p. 49) modified this view somewhat by stating that,‘MPs in New Zealand have always been remarkably accessibleto their constituents and have always placed great emphasisupon this aspect of their role’. (This project, on the otherhand, has no information to state that this was different inthe other, similarly relatively small countries in this study.)

So far, the advent of MMP in New Zealand appears to haveresulted in a wider range of views being expressed withinselect committees, freer and better informed debate andmore inquiries being initiated.

The select committees receive considerable assistance fromthe Audit Office in their scrutiny of estimates andperformance. This assistance includes:

● advice on the form and content of any standardquestionnaires or other standard material to be used bycommittees in their examinations or reviews;

● written or oral advice to assist a committee in determiningits questions;

● review of evidence given during the committee’sexamination or review; and

● support in compiling the committee’s report to the House.

To maintain expertise in specific areas, the Office of theAuditor General has a number of sector managers withresponsibilities for advising a portfolio of select committees.The Audit Office also has expertise in, and can provide adviceon, technical accounting and financial management matters,including the interpretation of financial statements.

8.2.2 Provision of General and Accounting InformationThere did not seem to be formal barriers to access orobtaining general or accounting information. However, overthe last decade there has been a reduction in the timeallocated for parliamentary review. Parliament’s standingorders were changed in 1992, 1996 and 1999, reducing thetime available for parliamentary scrutiny and debate eachtime.

A surprising feature of the reformed financial managementsystem is its lack of clear definition of crucial terms, such as‘the Crown’ and ‘appropriations’. Whether these ambiguitiesin the financial management system matter in practice maybe open to debate but it does increase the discretionavailable to the executive (in particular, the Minister ofFinance and the Treasury) and there may be someconstitutionally important principles involved.

A new Public Finance (State Sector Management) Bill wastabled on 3 December 2003. It is a major review of the PublicFinance Act, State Sector Act and Fiscal Responsibility Act andso may have many implications for accounting, performancereporting and budgeting in the state services. The bill was a392-page document, which may have been obscure to manypeople. Therefore, potential changes with significantimplications for democratic accountability could have beenregarded as technical accounting matters holding minorinterest for the majority of politicians. The study of theoutcome of this legislative process lies beyond the scope ofthis project. The issue of how roles and division of labourbetween accounting experts within governments andparliaments affects democratic accountability, however, isone of the emergent and important issues of our research.This issue is discussed further in Chapter 9.

8.2.3 Resource Accounting and Budgeting (RAB)New Zealand introduced a regime similar to RAB in 1991.There are now studies available that document some of theexperience with RAB in New Zealand. Pallot (2001) reviewedNew Zealand’s experience with RAB 10 years after it wasintroduced in 1991. She reported that managers andpoliticians, on the whole, shared the view that thespecification of outputs has been improving, with the resultthat objectives are clearer, expenditure was better targetedand transparency enhanced.

8. International Comparisons:Issues of Accounting & Accountability in New Zealand & Norway

While the views of operational managers and those displacedfrom the public service as a result of the latest reforms havenot been canvassed to the same degree, there did not seemto be any support at any level for a return to cash accountingand input controls. Ministers believed they were able to makemore informed choices about outputs, and select committeesfelt able to ask questions more relevant to what departmentsand ministers were trying to achieve. At the whole ofgovernment level, the range and clarity of informationavailable was enhanced dramatically. For example, the set offinancial statements that were available to Parliamentexceeded, in comprehensiveness, those provided by privatesector companies.

Pallot argued, however, that accountability will ultimatelydepend on Parliament, select committees, and the public atlarge having the skills, time, resources and motivation tomake use of the enhanced information that has becomeavailable.

Furthermore, there were some concerns regarding theoreticaland practical issues that were raised during theimplementation. For example, there was a need for improvedinformation on capability. Information on capability isimportant for accountability because it could be difficult toestablish accountability if it is unclear whether theorganisation in question has the resources to do the jobrequired of it. Behind this concern were the cost-cutting andapparent efficiency gains of the previous decade, which mayhave been at the expense of long run efficiency andeffectiveness.

Moreover, the Auditor General in New Zealand had, in the1999 report, ‘The Accountability of Executive to Parliament’,addressed the issue of accountability with an emphasis onviewing accounting (in a broad sense) as a matter ofcommunication between Parliament and the executive andnot only as a matter of measurement. In this view,accounting and performance measures are not exact but arethe basis for discussion and negotiation.

Newberry (2002) reported that the New Zealand publicsector financial management system eroded the governmentdepartments’ resources and damaged the departments’capability to perform even core functions. Often there areunintended consequences of reforms. However, Newberrysuggested that these consequences might not have beenunintended but could have been designed-in in order tofacilitate privatisation. Thus, RAB seems to have hadimportant intended – as well as some unintended –consequences for democratic accountability.

Our interviewees indicated that, even though New Zealandhas been at the forefront of implementing accrual accountingand RAB, reforms that were intended to provide more andbetter general and accounting information than before, theparadox seems to exist that the committees and members ofthe Parliament often do not have the necessary competence,time or capacity to use the information effectively.Much – maybe too much – reliance is put on the AuditorGeneral. Thus, effectively, the government and thegovernmental departments are the main users of thefinancial accounting information.

8.2.4 Performance InformationThe management performance systems in New Zealand areformalised, comprehensive and exacting compared to otherOECD countries. A major objective has been to integrateperformance agreements into the government’s strategicplanning system based on strategic results area (SRAs) andrelated key results areas (KRAs). Each KRA was expected tohave a medium-term focus of around three years, and tohave been formulated in such a way as to facilitateassessments. By the mid 1990s, the evidence suggested thatperformance agreements between the chief executives andthe ministers provided a valuable management tool. Theintroduction of annual performance reviews in 1988–1989did undoubtedly bring significant benefits. However, it wasexpected that the introduction of PR (the MMP system) in1996 would change the nature of politics and thus makestrategic planning more difficult and governments less stable(Boston, et al., 1996). However, this project’s intervieweessupported the notion that the performance information wasuseful to the politicians.

8.2.5 Budget IssuesGiven that there is minimal direct select committee inputinto the process leading up to the publication of the budget,there is also minimal public input at this stage. New Zealand,however, does not have the closed and secretive type ofpolicy and budget-setting process found inWhitehall/Westminster because MMP has changed thedynamics of policy-making. Under MMP, a single party isunlikely to have a majority in the House, or in selectcommittees, and the policy stances and priorities of allpolitical parties, even very small ones, have to be taken intoconsideration. Priorities need to be debated and agreed inestablishing coalitions or other arrangements for forming agovernment. Officials, in producing their advice, consult withpoliticians from a much wider range of parties. Thus the viewsof a range of parties, and public comment in the media onthese policy stances, is informally taken into account inarriving at the budget.

The publication of the budget, and the FEC’s consideration ofit and subsequent debate in the House, provide ampleopportunity for public discussion of the overall policydirections. The content of the budget itself a few monthslater therefore comes as little surprise. Our interviewsexpressed, however, that at present it seems as if there is notenough consultation in the budget process. Furthermore, thebudget is probably not scrutinised enough in Parliament.



8.3 Empirical Issues on Accounting and Accountabilityin Norway

8.3.1 AccountabilityThe general notion of accountability among interviewees wasthat it was concerned with reporting the use of moneyaccording to rules and regulations. However, it should benoted that there were some broader views on accountability– more resembling democratic accountability – representedalso. All three interviewees from the Office of the AuditorGeneral emphasised compliance with law and regulations.This also encompassed performance audits in order for theParliament to control implementation and the totalgovernmental use of resources.

One MP preferred to use the English concept, ‘accountability’,instead of using the Norwegian concepts for responsibilityand obligation to report to superiors. What this conceptimplied, to this MP and other MPs whom we interviewed, waseconomic responsibility, documentation and transparency.This combination was regarded as important for facilitatingdemocratic accountability. One MP emphasised thataccountability in particular was giving an account ofhistorical events.

One senior opposition politician held a important view onthe political need for keeping closed (private) parliamentarycommittee meetings. When this representative heard of thepractice of holding committee meetings in the ScottishParliament that are open to the public, he said that it wascrucial for the conduct of substantial politics, with informalnegotiations and bargaining, that such processes beperformed under strict rules of confidentiality within thecommittees. He therefore strongly defended the practice ofthe Norwegian Parliament to keep committee meetingsclosed to the public. Otherwise, he contended, suchnegotiation and bargaining processes would disappear fromthe formal parliamentary organs – the committees – only toreappear in some informal organs outside of parliamentarycontrol.

Thus, even though closed committee meetings apparentlycould be seen as counter productive, relative to consultativeaccountability, it should be acknowledged that the businessthat takes places in closed committee meetings is subject toconstitutional and decentralised accountability within theparliamentary system. The alternative to closed meetings,open committee meetings, could result in an additionalinformal, ‘shadow political processes’ in private meetings orother forums, which may not be subject to any form offormal political accountability.

8.3.2 Provision of General and Accounting InformationThe most active users of accounting information in thepolitical system were the committees within the Parliament,and the ministries and interest group organisations outside ofthe Parliament. The general opinion was that there was nolack of data. Rather, there was an abundance of it. However,the quality of certain data could be improved upon. No groupof actors felt that there was any problem in obtaininginformation. Furthermore, neither the auditors nor theopposition felt that disclosure of information in itself was aproblem. However, the opposition had to be alert and closelyscrutinise how the government presented information inorder to avoid ‘interesting’ or controversial issues beingunderexposed in the narrative parts of the planningdocuments.

The Norwegian political model builds on openness andtransparency, as one could expect in an egalitarian politicalculture, (see Chapter 3). Norway is a highly organised society.The larger and more powerful organisations in Norway havetraditionally been in regular contact with the governmentthrough the network of commissions, councils, committees,advising boards, steering boards, conferences and so on. It iscommon to state that neo-corporatism is, or at least was, amajor attribute of Norwegian political life (Matthews andValen, 1999). This project’s informants also pointed out thatorganisations – small and large – actively seek to influencethe Parliament. However, such influence was seen as positiveand as contributing towards enhancing the quality of thepolitical decision premises.

8.3.3 Resource Accounting and Budgeting (RAB)The Norwegian government uses a cash based accountingsystem, and accruals-based RAB principles are not in use inNorway. However, during the interview period, the Ministry ofFinance published an official report (NOU 2003:6) whichdocumented the use of accruals accounting in differentcountries and made proposals to experiment and eventuallyimplement such a system in Norway. The Norwegiangovernment later addressed the issue of implementingaccruals accounting in the planning documents for the 2004budget process.

All the politicians interviewed were satisfied with theaccounting information provided under the present cashbased system, but hardly any of the politicians were wellinformed about accrual accounting. The auditors and thegovernment official interviewed, however, were very wellinformed, and even though they argued that they wouldnevertheless work effectively with the present cash basedsystem, they were receptive to a shift towards accrualaccounting.

8.3.4 Performance InformationThere did not seem to be substantial problems in availabilityor use regarding performance and audit information. Thegovernment had improved its method of reporting in theexisting planning documents, and the systems were improvedincrementally. However, there were some views indicatingthat more standing committees could use available auditinformation more in their areas of responsibility.

8.3.5 Budget IssuesThe scrutiny of financial accounts is marginal compared tothe extensive budget scrutiny process. The Parliament and theindividual politicians seem to have established an efficientdivision of labour with specialisation between committeemembers, between committees and, in particular, betweenParliament and the Auditor General.

The representatives normally do not take much interest inaccounts (unless these can be used for blaming an official orminister for careless or irregular use of often relatively smallamounts of, public money). If the Auditor General, on theother hand, gives qualified opinions or reports interestingperformance audits, the politicians will take relevant action.Thus, the Parliament has developed a reactive managementstyle relative to using non-budget, or financial accountinginformation. Note that this arrangement has developed eventhough – or maybe because – the legislature today mostlyconsists of career politicians (Matthews and Valen, 1999).

8.4 ConclusionThe experiences from New Zealand indicate that accountingprinciples, and making management accounting systems andplanning reports comprehensible and user friendly, areimportant issues in politics. However, it must beacknowledged that accounting systems and reports are to beused in, and for, politics (Downs, 1957).

There are at least two important implications for accountingfor democratic accountability. First, due to uncertainty andconstraints, political actors such as politicians and lobbyistsuse information economically. This means that they onlysearch for and use information that presents news relative towhat the actors perceive is common knowledge in thepolitical system at present. Second, political actors only useinformation that they perceive as useful in their politicalcompetition. In practice, this means that, due to the motivesof being re-elected, budget information will tend toovershadow accounting information, and single issueinformation with potential interest for specific interestgroups will tend to overshadow information on broaderissues for the general electorate.

If accounting information becomes relatively more complexfor the laymen politicians and proper scrutiny iscompromised, then suitable institutional arrangements mightbe necessary in order to secure enough scrutiny anddemocratic accountability. Such arrangements mayencompass increased specialisation, more training,duplication of responsibilities, or simply adding more capacityby seeking external advice or devoting more parliamentarytime and capacity to scrutiny of accounting information.

Even though some potential arrangements may be regardedas a step back relative to the current practices of the NewZealand model, such arrangements may be important forsafeguarding democratic accountability. Thus, democraticaccountability may depend more on how the whole politicalsystem manages information than on how the individualpoliticians manage accounting (Stone, 1995). If, on the otherhand, the political system ends up (too) reliant on externalexperts and advisers, without sufficient checks and balanceswithin it, this could threaten democratic accountability.

In any case, accounting for democratic accountability seems,to a large extent, to be highly dependent on accountingexperts – auditors, certain parliamentary committees,individual politicians, lobbyists, and political advisers – within,as well as outside of, the parliaments.

The New Zealand and Norway cases may provide severalinsights with implications for the analysis of managementaccounting in the UK devolved institutions. First, budget andperformance information is apparently perceived bypoliticians as more useful for democratic accountability thantraditional accounting information. Second, politicians maybe satisfied with cash-based accounting information for theirpurposes, but after experience with RAB, accrual accountingseems to be preferred, at least in New Zealand. Third, certainNPM reforms, including the introduction of performancemanagement and RAB, seem to be conducive for democraticaccountability.

Thus, even though the UK devolution facilitates an increase indemocratic accountability, some of the positive effect may beattributable to NPM reforms that would have happened inthe UK regardless of devolution.

Finally, some accounting reforms designed for enhancingdemocratic accountability may have unintendedconsequences. Thus, facilitating democratic accountability isan ongoing process.



The study of parliaments, national assemblies andgovernments is traditionally the domain of political science,and often such studies are concerned with representation(Matthew and Valen, 1999) and ministerial accountability toParliament (Stone, 1995).

Most empirical research on representation has beenconducted by American political scientists, assuming theAnglo-American system of two dominant parties and thesingle-member FPTP electoral system. How democraticaccountability operates in parliaments and nationalassemblies that have PR electoral systems has been largelyneglected.

Furthermore, the empirical research on parliaments andrepresentation has tended to be static and ahistorical.However, a significant exception from this is the work ofLijphart (1999), who studied democracy in 36 countries from1945 to 1996. Lijphart concluded that:

‘(T)he enormous variety of formal and informal rules andinstitutions that we find in democracies can be reduced toa clear two-dimensional pattern on the basis of thecontrasts between majoritarian and consensusgovernment. (…) (T)he consensus democracies do clearlyoutperform the majoritarian democracies with regard tothe quality of democracy and democratic representation aswell as with regard to what I have called the kindness andgentleness of their public policy orientations.’(Lijphart, 1999, p. 301)

This report has argued for the importance of studyingmanagement accounting in politics and for taking intoaccount the possible influence of institutions, national size,public management reforms and culture. Theseconsiderations seem to be supported by Lijphart’sconclusions regarding institutions and culture:

‘(C)onsensus democracy may not be able to take root andthrive unless it is supported by a consensual politicalculture. (…) It appears more plausible to assume that bothconsensus democracy and these kindler, gentler policiesstem from an underlying consensual and communitarianculture than that these policies are the direct result ofconsensus institutions.’(Lijphart, 1999, p. 306–307)

Although representation and policy outcomes are importantingredients in assessing democratic accountability, by whatinformation – and how – the representatives conduct theirrepresentation, scrutiny and influence, is also a potentialimportant dimensions of democratic accountability.

How political and governmental representatives useaccounting information, that can govern substantial parts ofpolitical life through the means of budgets, financial reports,targets, performance indicators and audit reports, may havebeen a relatively neglected area of research – albeit being animportant part of practical life in government and politics.This study has tried to bridge some of these gaps. It has alsoattempted to address some developments over time, as wellas taking into account some historical and institutionalaspects using national and international comparisons.

Before turning to the findings of this report regardingdemocratic accountability in the devolved UK institutions,the state of democratic accountability in the UK Parliamentat Westminster shall first be reviewed briefly.

One view regarding the democratic achievement in the UK in2002 states that:

‘The constitutional doctrine of ministerial responsibility toParliament is ultimately a fiction. It is the prime ministerand the government majority who primarily decide the fateof ministers in trouble. The media play a greater role thanParliament as a whole. Legally undefined royal prerogativepowers give the prime minister and ministers executivefreedom unchecked by Parliament. (…) Select committeeshave improved its ability to scrutinise, but overall theHouse of Commons cannot make government accountablefor its policies and actions and has a negligible impact onlegislation; the Lords is unelected and has only a marginaleffect on government legislation.’(Beetham et al., 2003, p. 342–343)

Acknowledging that this is only one view on the state ofdemocracy and accountability in the UK Parliament, it does,nevertheless, support the notion that there might beimportant differences between how democraticaccountability is facilitated under majoritarian (FPTP)systems compared to consensual (PR) systems, as Lijphart(1999) argued. It also supports the notion that ministerialresponsibility remains too important a part of democraticaccountability compared to other forms of accountability(Stone, 1995).

This research project has drawn on many conceptions ofaccountability and, instead of comparing devolution with theWestminster democracy and its institutions directly, it hascompared the devolved parliaments and national institutionsin the UK with New Zealand and Norway. The Westminstermodel of democratic accountability is, however, the modelthat many in the UK, and elsewhere, explicitly or implicitlyuse as a reference.

9. Discussion and Conclusions

The report’s main conclusion is that devolution hasunequivocally improved democratic accountability inNorthern Ireland, Wales and Scotland, resulting in moreopenness, consultation and scrutiny of national issues thanbefore devolution. Even though some improvement indemocratic accountability may be due to general NPMreforms over the last 20 years or so that have increased thesupply of management accounting information, devolutionhas increased the demand and salience for this information.The interviews, observations of committee meetings,document analysis and media reports that were analysed inthis project have provided a sound foundation for drawing aseries of more specific conclusions:

● users of management accounting information in politicsand government seem to be subject to informationoverload. There is, therefore, extensive division of labourbetween representatives and committees, and accountingexperts such as national audit offices, committee clerks,special advisers, research officers and lobbyists, whofunction as ‘buffers’ and ‘filters’ of accounting information;

● budget information and scrutiny is (still) by far most theimportant use of management accounting in politics;

● financial accounts are hardly used in politics, unless tostage a ministerial crisis due to monetary misconduct;

● introducing RAB may improve the quality of informationrelevant to political decisions. However, for most laymenpoliticians, the information may be perceived as toocomplex and incomprehensible. If RAB is to be used inpolitics, the system should be simple, it must beaccompanied by training, and the Parliament must havethe capacity to effectively scrutinise the budgetinformation, given that the budget is still the mostimportant accounting device in use in politics;

● politicians are, in general, ignorant of technical accountingissues but there are always some experienced and/orknowledgeable accounting ‘experts’ among therepresentatives. In addition, many representatives in thedevolved parliaments and national assemblies in the UKwere former members of local councils. These members areused to handling management accounting information, inparticular budgets and performance indicators;

● organisational and institutional performance, in a widesense, is very important for politicians. The national auditoffices, committee clerks, special advisers andparliamentary and partisan research officers are, in thisrespect, important in informing and assisting therepresentatives and parliamentary committees in theirfunctions. Hence, performance information andperformance audits are increasingly used and valued in theparliamentary system in checking and balancingdemocratic accountability;

● the budget processes in the devolved parliaments andnational assemblies are regarded as open, consultative andtransparent;

● the relationships between the devolved parliaments andnational assemblies in the UK are marked by a moreegalitarian and less fatalist public management culturecompared to the Westminster model of democraticaccountability. The MLAs and MSPs have relatively goodaccess to information from the devolved executives, andthere is a relatively co-operative working spirit between theexecutive ministers and the parliamentary committees;

● developing parliamentary structures, processes,competence and confidence in handling managementaccounting information relative to governmental andexecutive proposals, takes time. Establishing properaccounting institutions for democratic accountability in thedevolved parliaments and national institutions, is anevolving learning process that will require time. However,the New Zealand experience documents that suchinstitutional learning processes are, of course, not uniqueto the devolution programme;

● active use of management accounting in the newparliaments and national assemblies in the UK seems to bereliant on political ‘insiders’ and accounting ‘experts’.However, this reliance is also evident in the establishedparliaments of New Zealand and Norway; and

● new parliaments and national assemblies deliberately –albeit under conditions of constraints – seek out practicesand models that are used in similar institutions, especiallywithin the UK. However, the process of detecting andselecting these institutional role models is relativelyunknown.

There are also some emerging issues from our findings thatneed to be discussed in theory and practice.

With improved availability of accounting information, morequantities of accounting information and more relevantaccounting information, politicians and executives are, to anincreasing extent, subject to even more problems of boundedrationality (meaning that there are limits on the extent towhich politicians and executives can act in a completelyrational manner) and information overload than before.

The technological developments and institutional demandsfor openness and accountability have increased the politicalinstitutions’ information processing capacity and competenceby extending capacity (new support departments), new tools(intranet, i.e. SPICe), and use of external experts. However,this process may increase specialisation and the division oflabour and increase the knowledge division between political‘insiders’ and ‘outsiders’ and between accounting ‘experts’and ‘naïve users’.

Management Accounting, Devolution and Democratic Accountability Discussion and Conclusions 41

Management Accounting, Devolution and Democratic Accountability Discussion and Conclusions42

Openness and transparency are held by many as importantdimensions of democratic accountability. There is, however, apossible trade-off between the importance of keeping closedparliamentary committee meetings for facilitatingsubstantive politics (as in Norway) versus the demand for,and practice of, open committee meetings due to opennessand transparency for legitimacy (as in Scotland).

Under PR electoral systems and minority parliamentarism,there may be many – albeit unstable – governmentplatforms. A coalition government, and even more so aminority government, must occasionally establish a majorityof different supporting parties from issue to issue, or what iscalled ‘slalom politics’ in Norwegian.

This tendency may increase the power of the parliamentsrelative to the executives and governments in question. Thedifferent competing parties may therefore try to reapshort-term political benefits more often than under majorityparliamentarism. Use of typical management accounting asnon-financial performance information and other statisticsmay be particularly opportune ammunition in such politicalcompetition. Thus, management accounting may be moredecision-relevant – and hence used more – in politics in thedevolved parliaments and national assemblies with PR,compared to Westminster with FPTP.

While minority parliamentarism may increase the power ofthe parliament relative to the executive, the political,democratic accountability of the representatives and partiesrelative to the voters and society at large, may seem todecrease. (However, this opinion may be debatable anddepend on what model of democratic accountability –majoritarian or consensual – is used as a benchmark.) Thus,there may be some paradoxical effects of the politicalsalience of introducing more decision-relevant managementaccounting information for enhancing democraticaccountability.

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