Britain: An official handbook > 1959

XII. FINANCE
PUBLIC FINANCE
Public finance is concerned with the way public authorities (i.e. the central
Government and local authorities) finance their activities—how their expenditure
is decided upon and how their revenue is obtained.
Money administered by public authorities1 can be roughly divided into two
categories:
1. The funds of the central Government, raised mainly by taxation, but also
in part by borrowing, and paid into and out of the Exchequer2 in accordance
with the proposals of the Government, as approved by Parliament (princi¬
pally the House of Commons).
There are also funds administered for special purposes by central Govern¬
ment Departments and wholly or partially maintained by receipts which
do not come from the Exchequer. The only important one is the National
Insurance Fund, administered by the Minister of Pensions and National
Insurance, used for the payment of benefits under the National Insurance
Scheme.
2. The funds of local authorities, obtained partly from rates (local taxes on
dwelling houses and other real estate) and income from property and trading
receipts, partly from grants and loans from the Exchequer, and partly from
loans raised in the open market.
The following broad account of Government finance will be concerned mainly
with the Exchequer and only incidentally with local government3 and other public
funds.
Financial control, as exercised by the House of Commons, is based on law,
parliamentary rights and custom.
As the power of Parliament grew in late medieval and Tudor times, the principle
that taxation by the Crown required parliamentary consent was gradually evolved.
The principle was established, at the end of the constitutional struggles of the
Stuart period, by the Bill of Rights, 1689.
In medieval, Tudor and Stuart times, it is broadly true to say that once the King
was granted the right to raise a given sum by taxation, he was free to spend it as he
chose. In the eighteenth and nineteenth centuries, the House of Commons gradually
developed the modern system of controlling expenditure through the device of
Appropriation, which was embodied in its final form in the Exchequer and Audit
Departments Act, 1866.
From the very early days of Parliament it had been established that such financial
control as Parliament possessed should be exercised by the House of Commons.
This control became effective, as regards taxation, in the seventeenth century, but
1 For an account of public finance in Northern Ireland and its relationship to that of the
United Kingdom, see pp. 415-6.
2 The term ‘Exchequer’ took its name from the ‘chess-board’, or table with chequered
cloth, round which the King’s financial officials sat for accounting purposes in the twelfth
century.
3 For further information on local government finance, see pp. 73—5-
405