or the Consolidated Revenue Fund
is the term used for the main bank account
A Bank account is a financial account recording the financial transactions between the customer and the bank and the resulting financial position of the customer with the bank .-Account types:...
of the government in many of the countries in the Commonwealth of Nations
The Commonwealth of Nations, normally referred to as the Commonwealth and formerly known as the British Commonwealth, is an intergovernmental organisation of fifty-four independent member states...
The idea of a single government bank account was first established in 1787 by Prime Minister William Pitt the Younger
William Pitt the Younger was a British politician of the late 18th and early 19th centuries. He became the youngest Prime Minister in 1783 at the age of 24 . He left office in 1801, but was Prime Minister again from 1804 until his death in 1806...
as part of his reform of government finances influenced by the ideas of Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
. Prior to this, funds had accrued through the Exchequer of Receipt into three main funds: the Aggregate Fund, the General Fund, and the South Sea Fund. The Consolidated Fund was so named as it consolidated these existing accounts together, and ensured proper parliamentary oversight of the spending of the executive – it was defined as "one fund into which shall flow every stream of public revenue and from which shall come the supply of every service"
The Treasury established this account, formally known as The Account of Her Majesty's Exchequer
, at the Bank of England
The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world...
where it remains to this day, and the legal term 'Consolidated Fund' refers to the amount of credit held in this particular account. Under the Exchequer and Audit Departments Act 1866 most of the revenue from taxation, and all other money payable to the Exchequer
The Exchequer is a government department of the United Kingdom responsible for the management and collection of taxation and other government revenues. The historical Exchequer developed judicial roles...
must be paid into the Consolidated Fund.
The General Fund was established in 1617, the Aggregate Fund in 1715, the South Sea Fund in 1717. These funds were established in relation to specific Government borrowing authorised by Parliament, which had a defined type of revenue appropriated to put towards the interest and repayment. That particular revenue would be paid into the fund related to the loan. For example, the South Sea Fund was related to the debts of the South Sea Company. The Aggregate Fund was paid all the hereditary revenues of the English Crown, such as profits from the Crown Estate
In the United Kingdom, the Crown Estate is a property portfolio owned by the Crown. Although still belonging to the monarch and inherent with the accession of the throne, it is no longer the private property of the reigning monarch and cannot be sold by him/her, nor do the revenues from it belong...
and the Royal Mail
Royal Mail is the government-owned postal service in the United Kingdom. Royal Mail Holdings plc owns Royal Mail Group Limited, which in turn operates the brands Royal Mail and Parcelforce Worldwide...
. The hereditary revenues of Scotland were paid into the Consolidated Fund from 1788 onwards.
From 1716 onwards the surplus of the first three funds, after the interest and principal
A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...
payments, flowed into a fourth fund, the Sinking Fund
A sinking fund is a fund established by a government agency or business for the purpose of reducing debt by repaying or purchasing outstanding loans and securities held against the entity. It helps keep the borrower liquid so it can repay the bondholder....
. This was intended to be applied to the repayment of the National Debt but was instead mainly used for day-to-day necessities. It was eventually placed into the hands of the National Debt Commissioners
The Commissioners for the Reduction of the National Debt , is a non-ministerial department of the UK Government, established in 1786, which manages the investment portfolios of a number of government and public bodies including HM Revenue & Customs , National Savings and Investments , Her Majesty's...
, and was abandoned in the 1820s.
In 1752, before the Consolidated Fund was formed, the debts owed to the three existing funds had themselves been consolidated, and became irredeemable (the principal would only be repaid if the Government chose to do so). They therefore became annuities
An annuity can be defined as a financial contract which provides an income stream in return for an initial payment with specific parameters. It is the opposite of a settlement funding...
, paying an annual rate of interest of 3%, and known as Consolidated Annuities, or Consols
Consol is a form of British government bond , dating originally from the 18th century. The first consols were originally issued in 1751...
Ireland's Consolidated Fund
The Consolidated Funds of Great Britain and Ireland were merged by the Consolidated Fund Act 1816 into the single Consolidated Fund of the United Kingdom that exists to this day.
Payments into the fund
All tax revenue is paid into the fund unless Parliament has specifically provided otherwise by law.
Any money received by the government which is not taxation, and is not to be retained by the receiving department (for example, fines), is classed as a Consolidated Fund extra receipt (CFEG). These are to be paid into the Consolidated Fund as soon as they are received.
Appropriation Acts and Consolidated Fund Acts
Parliament gives statutory authority for the Government to draw funds from the Consolidated Fund by Acts of Parliament known as Appropriation Act
An Appropriation Act is an Act of Parliament passed by the United Kingdom Parliament which, like a Consolidated Fund Act, allows the Treasury to issue funds out of the Consolidated Fund...
s and Consolidated Fund Act
A Consolidated Fund Act is an Act of the Parliament of the United Kingdom passed to allow, like an Appropriation Act, the Treasury to issue funds out of the Consolidated Fund....
s. Funds are made available under the Acts only for a specified financial year, a concept known as annuality
, although an individual Act can cover more than one financial year, listing separate amounts for each. Often a two year period is covered by a Consolidated Fund Act, and roughly two or three are passed in each parliamentary year.
A Consolidated Fund (Appropriation) Bill is brought in and passed at the end of the parliamentary year before the Summer recess. When passed, this is known as the Appropriation Act, and allocates the monies from the Consolidated Fund to the purposes set out in the main annual departmental expenditure estimates (the annual government department budgets, known as Estimates
In countries using the Westminster system the Estimates are a series of legislative proposals to parliament outlining how the government will spend its money....
In the interim period between the start of the financial year and the passing of the Appropriation Act, a process known as Votes on Account is used to grant to departments up to 45% of the amounts they were allocated in the preceding financial year. These Votes on Account, and any necessary changes to departmental budgets (Supplementary Estimates) are passed as Consolidated Fund Acts, normally twice each year in November and February. Additional funds may be requested at any time, and will either require an additional Consolidated Fund Act, or will be included within other legislation.
The preamble of these supply acts is different from that on most other Acts of Parliament. It currently reads:
Whereas the Commons of the United Kingdom in Parliament assembled have resolved to authorise the use of resources and the issue of sums out of the Consolidated Fund towards making good the supply which they have granted to Her Majesty in this Session of Parliament:—
Until a few years ago, an older form of wording was used:
This follows the constitutional principle that the Crown
The Crown is a corporation sole that in the Commonwealth realms and any provincial or state sub-divisions thereof represents the legal embodiment of governance, whether executive, legislative, or judicial...
(Government) demands money, the House of Commons
The House of Commons is the lower house of the Parliament of the United Kingdom, which also comprises the Sovereign and the House of Lords . Both Commons and Lords meet in the Palace of Westminster. The Commons is a democratically elected body, consisting of 650 members , who are known as Members...
grants it, and the House of Lords
The House of Lords is the upper house of the Parliament of the United Kingdom. Like the House of Commons, it meets in the Palace of Westminster....
assents to the grant. Since the Glorious Revolution
The Glorious Revolution, also called the Revolution of 1688, is the overthrow of King James II of England by a union of English Parliamentarians with the Dutch stadtholder William III of Orange-Nassau...
of 1688 only once, in 1784, has the Commons refused to grant access to funds.
If money paid from the Consolidated Fund is not spent by the end of the financial year, it must be repaid to the Fund. Grant-in-aid
A grant-in-aid is money coming from central government for a specific project. This kind of funding is usually used when the government and parliament have decided that the recipient should be publicly funded but operate with reasonable independence from the state.In the United Kingdom, most bodies...
payments are however excluded from this rule.
Certain expenditure is by law charged directly to the Consolidated Fund and is not subject to Parliament's annual budget process, ensuring a degree of independence of the government. Services funded in this way are known as Consolidated Fund Services and include judges' salaries, payments to the European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
, the Civil List
-United Kingdom:In the United Kingdom, the Civil List is the name given to the annual grant that covers some expenses associated with the Sovereign performing their official duties, including those for staff salaries, State Visits, public engagements, ceremonial functions and the upkeep of the...
payments, the salary of the Comptroller and Auditor General
Comptroller and auditor-general is the abbreviated title of a government official in a number of jurisdictions, including the UK, the Republic of Ireland, India, and China....
, and the expenses paid to returning officer
In various parliamentary systems, a returning officer is responsible for overseeing elections in one or more constituencies.-Australia:In Australia a returning officer is an employee of the Australian Electoral Commission or a State Electoral Commission who heads the local divisional office...
s at elections. In the case of the judges, this is to ensure the judicial independence introduced by the Act of Settlement 1701
The Act of Settlement is an act of the Parliament of England that was passed in 1701 to settle the succession to the English throne on the Electress Sophia of Hanover and her Protestant heirs. The act was later extended to Scotland, as a result of the Treaty of Union , enacted in the Acts of Union...
National Loans Fund
The National Loans Fund is the government's main borrowing and lending account. It is closely linked to the Consolidated Fund, which is balanced daily by means of a transfer to, or from, the National Loans Fund.
In the early part of the nineteenth Century the Civil Contingencies Fund
was created in the United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
. It is held by the Treasury
HM Treasury, in full Her Majesty's Treasury, informally The Treasury, is the United Kingdom government department responsible for developing and executing the British government's public finance policy and economic policy...
, and its use is regulated by the Miscellaneous Financial Provisions Act 1946. It may be used for urgent expenditure in anticipation that the money will be approved by Parliament, or for small payments that were not included in the year's budget estimates.
The Contingencies Fund Act 1974 sets the size of the fund as two percent of the amount of the government budget in the preceding year.
When Parliament votes to approve the urgent expenditure, the monies are repaid into the Contingencies Fund. As Parliament is effectively forced to approve actions ex post facto
(after they've happened), the Treasury's use of the fund is actually scrutinised in detail by the Public Accounts Committee.
A comptroller is a management level position responsible for supervising the quality of accounting and financial reporting of an organization.In British government, the Comptroller General or Comptroller and Auditor General is in most countries the external auditor of the budget execution of the...
(who is also Auditor General
- Auditor General of National Audit Offices :*Auditor General of the Australian National Audit Office*Auditor General of Canada*Auditor General of China*Auditor General of Pakistan*Auditor General for Scotland*Auditor-General...
and head of the National Audit Office
The National Audit Office is an independent Parliamentary body in the United Kingdom which is responsible for auditing central government departments, government agencies and non-departmental public bodies...
) controls both the Consolidated Fund and the National Loans Fund. The full official title of the role is Comptroller General of the Receipt and Issue of Her Majesty's Exchequer
The Comptroller must authorise each requisition request received by the Bank of England from the Treasury, to assure that the request is compliant with the amounts and purposes authorised by Parliament in statute. If funds are mistakenly paid into the Consolidated Fund then both the Comptroller and the Treasury must agree to its return.
Payments can only be made from the Consolidated Fund to one of the principal accountants defined by law. These are the Paymaster-General
HM Paymaster General is a ministerial position in the United Kingdom. The Paymaster General is in charge of the Office of HM Paymaster General , which held accounts at the Bank of England on behalf of Government departments and selected other public bodies...
, the Commissioners of Revenue and Customs, the National Debt Commissioners, and the Chief Cashier at the Bank of England.
The Westminster Parliament provides a sum of money annually to provide a budget for the Scottish Government and fund the operation of the Scottish Parliament
The Scottish Parliament is the devolved national, unicameral legislature of Scotland, located in the Holyrood area of the capital, Edinburgh. The Parliament, informally referred to as "Holyrood", is a democratically elected body comprising 129 members known as Members of the Scottish Parliament...
and the salaries for judges of Scottish courts. This money is transferred from the UK Consolidated Fund into an account known as the Scottish Consolidated Fund
The Scottish Consolidated Fund is the main fund operated by the Scottish Parliament. It receives a block grant from the UK Parliament's Consolidated Fund plus the operational receipts of the Scottish Government...
If the income tax varying powers of the Scottish Parliament
The Scottish Variable Rate is a mechanism which enables the Scottish Government to vary the basic rate of UK income tax by up to 3p in the pound...
were to be used (the rate can be changed by plus or minus three percent), the additional revenue raised would be paid by the HM Revenue and Customs directly to the Scottish Consolidated Fund. If the tax is reduced, then the amount paid from the UK Consolidated Fund in that year would be correspondingly reduced.
There is also a Welsh Consolidated Fund to provide a budget for the Welsh Assembly.
The Northern Ireland Consolidated Fund has existed since 1921.