The National Audit Office's role has changed massively over the last forty years. Henry Midgley, Aileen Murphie and Laurence Ferry discuss the evolution of this constitutional institution and consider what accountability means in the modern UK, how it relates to public sector reform and how government and Parliament relate to each other.
The National Audit Office (NAO) has continually evolved in response to political contexts, institutional reforms, and the shifting priorities of its leaders, shaping how government spending is scrutinized and understood. In this blog, Henry Midgley, Aileen Murphie and Laurence Ferry show that this institutional history reveals not only why the NAO was created and how its remit has changed, but also how past choices open up alternative possibilities for the future of public audit and UK democracy.
Institutional histories matter. We conduct our politics and our democratic lives through institutions, some famous world-wide, like Parliament and many less so. The history of institutions does two things: firstly, it elucidates why institutions were brought into being, especially the question of why those who created them did so and what gap were they filling. Secondly, it gives staff within institutions options about how they do their jobs in the future. Present practices are the things we do now – history is filled with alternatives that others who held the same jobs did in the past. The history of the National Audit Office (NAO) illuminates both of these themes.
The National Audit Office itself is an inheritor of an older institution. In 1866, William Gladstone founded the Exchequer and Audit Department (E&AD). Gladstone’s auditors were given the role of hunting down instances in which Government departments spent money on things that the House of Commons had not authorised or in which departments spent more than the amount allotted by the House of Commons. A natural alliance formed between the auditor and the UK’s finance ministry, the Treasury: both were concerned about departmental extravagance and departments who exceeded their instructions: they were, to quote one Treasury senior official, “like two policemen on the same force”. A few decades later, the auditor’s remit was extended: Parliament could never intend for the government to waste its money, and the auditors would therefore monitor waste.
In 1983, Parliament chose to create the NAO on the foundations left by the E&AD. Parliament made its new NAO more independent: the appointment of the NAO’s boss, the Comptroller and Auditor General (C&AG) was to be made jointly by the government and the Chair of the Public Accounts Committee and Parliament would control the new organisation’s budget. The C&AG was made an officer of the House of Commons. Furthermore, investigations of waste evolved into investigations of the economy, efficiency and effectiveness of public spending, a much more extensive remit for the new organisation. Parliament constructed this new machinery to ensure that it could hold the government to account more effectively. The NAO was one part of a package of reforms which included the development of the departmental select committees (originally set up in the 1960s and the final ones in 1979) and the creation of the Parliamentary and Health Service Ombudsman (1967). The government of the day did not oppose the NAO’s creation because they saw the NAO as a mechanism to modernise public services and public administration in the UK. These two different priorities have set the agenda for the modern organisation even though this clash of ideas is largely forgotten internally today.
The NAO’s interpretation of these powers has changed down the years. C&AGs have both pursued their own interests and responded to political pressure in framing what the office does. In 1988, Sir John Bourn thought that the NAO’s work was too tied to what departments knew about the success of their own programmes: over his tenure, he pushed the NAO to conduct its own research into the experiences of the users of public services and this produced ground-breaking studies. This included a series on cancer care and the treatment of stroke which had a huge impact on the way that public services were run by implementing the reports’ recommendations on standardising treatment guidelines, focusing more attention on rehabilitation and on the role of carers.
Lord Morse, who succeeded Bourn, disagreed: for him, producing performance data constituted research not audit. Instead, he ensured that the NAO focussed on how far government programmes were constructed based on an understanding of good practice. Government was conceptualised corporately: with a corporate centre in the Treasury and Cabinet Office, and NAO budgets for the examination of economy, efficiency and effectiveness were slashed.
Context has shaped the NAO’s activities as well. Politics has had a huge impact: though Lord Morse was an incredibly decisive figure as C&AG, he was cautious on Brexit due to its political sensitivity, and the NAO published data heavy reports to support the debate over the UK’s exit from the European Union (EU) which focussed on the technical process of the UK’s exit from the EU rather than any wider questions about value for money. Both sides of the debate were able to use material from the NAO’s reports but neither side saw the NAO as a participant in that debate. However, context can also embolden the auditor. On COVID-19, Gareth Davies, the current C&AG, saw the event as a crisis for the UK state and ensured that accountability continued throughout the pandemic.
The same pattern can be seen on the audit of the accounts. Gladstonian audit, examining the legality of spending, survived through the 1980s and into the 1990s. From the mid-1990s onwards, government began to account using private sector accounting standards, adopted for the public sector. Again, the NAO followed: the financial audit practice evolved to become much closer to what would happen in a private sector audit firm. By the 2020s, the NAO had accepted regulation by the private sector audit regulator and senior NAO officials told Parliament they measured the quality of their audits based on what that regulator told them. A different agenda is possible: within the NAO and within Parliament, other voices argued that the accounts should be framed around the needs of Members of Parliament to understand public services. Sir John Bourn argued this point strongly in the late 1990s and the Public Accounts Committee agreed with him. In 2009, 2017 and 2018, the Public Administration Committee and its successor, the Public Administration and Constitutional Affairs Committee, under successive chairs (Dr Tony Wright and Sir Bernard Jenkin), argued that financial accounts should be constructed around a comparison between finance and performance.
The NAO today appears a stable and central part of the UK constitution. It’s a phrase you hear on the BBC Radio 4 Today programme and it posits its work as unchanged and unchanging. However, public sector audit in the UK has a specific rationale behind it. Over time, successive members of NAO staff have reinterpreted and reconsidered that mandate and that has shaped their work. As the NAO is one of the principal sources of independent advice to Parliament about government policy, this means that the judgements taken by its staff over the years have reshaped the meaning of democracy and public sector performance. The history of the NAO reveals the rationales behind these decisions and how contingent they were. And it shows the many different potential futures public sector audit and the UK’s democracy might have.
Henry Midgley, Aileen Murphie and Laurence Ferry co-wrote the Holding Government to Account: democracy and the National Audit Office. In October 2025, Henry and Aileen presented this work at the Bennett School of Public Policy.
The views and opinions expressed in this post are those of the author(s) and not necessarily those of the Bennett Institute for Public Policy.
