Examination of witness (Questions 679
- 699)
WEDNESDAY 12 APRIL 2000
MR STEPHEN
TIMMS
Chairman
679. Welcome to the Committee. Before asking
Mr Timms to introduce himself I want to place on record the appreciation
of the Committee to all those who helped on our visit to Yorkshire
last week. We are very grateful to everybody, including all the
staff of the Committee, who arranged the visit. The only slight
fly in the ointment was the amount of snow and wind that we encountered.
The visit was very useful. Mr Timms, I welcome you to the Committee.
Please introduce yourself for the record and perhaps you have
a few words to say by way of introduction.
(Mr Timms) Thank you, Chairman. I am Stephen Timms,
the Financial Secretary at the Treasury. I shall begin by saying
how much I welcome this opportunity to appear before the Committee
again. Urban regeneration is a key issue for the whole Government.
In the Treasury we are working closely with other departments
to develop a strategy that joins together all of us. We welcome
the report of Lord Rogers of Riverside. We are giving very careful
consideration to the recommendations that he has made. The Government's
strategy will be set out in more detail in the Urban White
Paper which will be published later this year. We have made
a number of responses already to Lord Rogers' recommendations.
You may want to talk about some of them. He focused on physical
regeneration and I think it is important that we also look at
social and economic measures in considering how to take his proposals
forward. Of course, today the consultation version of the Social
Exclusion Unit's national strategy for neighbourhood renewal is
being launched. I believe that the final version of that will
appear in the summer. We are working closely with the DTI on the
economic regeneration side of the package. You may want to ask
me about some of those measures. I am looking forward very much
to this discussion and to hearing the Committee's views on how
we can take this very important programme forward.
Mrs Ellman
680. In what specific ways will the Treasury
contribute to creating urban renaissance?
(Mr Timms) We see this very much as a joint package
of work. We shall be working very closely with the DETR, the DTI
and other government departments to take forward the ideas that
will emerge in the Urban White Paper. There are a number
of recommendations in the Rogers' report which are specifically
for the Treasury. At the moment we are looking very carefully
at what he has proposed. In the Budget we have announced that
we are attracted to the idea of an exemption from stamp duty for
developments on brownfield sites. The Paymaster General will take
forward consultation on that specific measure. That is something
that is clearly Treasury-specific. More broadly, on taking forward
these measures, it is important that we work across government,
and we are committed to doing that.
681. Are you considering any other changes on
taxation?
(Mr Timms) Lord Rogers made a number of recommendations
on taxation and we are looking at all of them. We have not resolved
what to do on those recommendations as yet, but we are actively
considering all the proposals that he has made, including the
proposals on taxation.
682. Are there any specific proposals that you
would like to bring to our attention?
(Mr Timms) There is nothing specific that I can announce
today, beyond what we announced in the Budget, but there are some
very ambitious proposals in the Rogers' report. I am a fan of
the report. I think it is a visionary and an inspirational document.
It proposes a large number of ideas that we need to work on, to
reflect on and to do detailed work on, particularly in the area
of tax. A lot of detailed work is called for by his ideas. What
he says about fiscal measures is, "Here's a set of interesting
ideas that may help". There needs to be a debate around them
and there needs to be lots of detailed work done on precisely
what the impact of those measures would be if they were introduced,
or some variation of them was introduced, and that is the work
that we need to do before we are in a position to say, "Yes,
we want to take this measure forward", or, "No, we do
not want to take that measure forward". We have made an important
and a significant start on the consultation on the statutory exemption
for brownfield site development.
683. The previous government introduced active
legislation to restrict local authority involvement in companies.
Has the Treasury been consulted about any proposals to rescind
or to alter that legislation?
(Mr Timms) I am not aware of any consultation on that,
but if you would like me to check, I would be happy to do so.
Mrs Ellman: Yes, I would please.
Mr Forsythe
684. It is estimated that some £200 billion
is spent in United Kingdom towns and cities each year, yet public
spending on all urban regeneration programmes amounts to less
than £1.5 billion. Are there ways of bringing in more state
spending to help the situation?
(Mr Timms) The point that you have made underlines
very forcefully a key part of what Lord Rogers said, with which
I agree, which is that the key is to make sure that all of that
very large sum of money being spent at the moment is being spent
in an effective way. We need to make sure that it is being spent
in a joined-up way and that there are not unhelpful contradictory
things being done by different bits of government. Clearly, urban
regeneration spending itself is a substantial sum and, in my experience,
has the potential to have a significant impact on conditions in
our cities. But the real task is to make sure that the great bulk
of government spending in our urban areas is spent effectively
and well. We can achieve much more if we can spend that £200
billion well—if the figure you have given is correct—than
we can by the relatively comparatively modest amounts of additional
targeted investment in what we would normally call urban regeneration.
It is a very telling statistic.
685. The UK public spending on urban infrastructure
and management lags well behind most EU countries. Are you happy
with that?
(Mr Timms) I would be interested to see the data on
which that statement is based. I have not seen those figures.
They sound interesting. My guess is that there are tricky issues
of definition here about precisely what counts as, as you term
it, urban infrastructure and management.
686. Urban infrastructure and management.
(Mr Timms) Yes. I would be interested to see that
data. I do not think that the fundamental problem is a shortage
of funding. Of course, the Chancellor has announced that we shall
be able to double the proportion of GDP that will go into public
investment between now and 2004. So things are moving strongly
in the right direction on that front because of the excellent
way in which the economy has been performing. Going back to your
first point, I think that the effectiveness of what is being spent
is the real test rather than the debate about whether £200
billion more ought to be spent under a particular heading.
Mr Gray
687. I have a supplementary to Mrs Ellman's
question. I think she referred to the fact that the previous government
decided that if a local authority takes a stake of more than 50
per cent in an outside company or in setting up an outside company
it takes 49 per cent or less, that none the less would count within
the PSBR. Does your Government take the same view?
(Mr Timms) The question was whether I had been consulted
about a proposal to change that measure. I personally have not
been.
688. I am asking whether you should be.
(Mr Timms) I said that I would check that.
Mr Gray: I am asking you whether you should
be consulted. What is your view? Do you believe that companies
with 51 per cent owned by local authorities is or is not within
the PSBR?
Chairman: We have been offered a note and if
we are unhappy with the note, then we can pursue it further.
Mr Gray
689. As long as the note is more substantial
than just whether or not you have been consulted. Please do not
write back saying simply that you have not been consulted. All
we want is an answer to whether you believe that a 51 per cent
owned local authority company does or does not come within the
PSBR.
(Mr Timms) It is not a matter that I have recently
reflected on, but I am happy to do so.
690. That is fine. I really want to ask about
VAT. Lord Rogers said equalise it at zero per cent, which you
cannot do under European law. I know that is the case. Why did
the Chancellor not take some steps towards that in the Budget?
(Mr Timms) I think we have taken a significant first
step by initiating the consultation on stamp duty. However, Lord
Rogers gave a full set of recommendations—105 in all. A
number of them are proposals that require a very good deal of
careful analysis, discussion and reflection before being implemented.
I do not think that we are yet in a position to say whether it
would be right to do this or that on VAT or quite how to respond
to a number of the recommendations that he made. We are looking
at them all very carefully. In due course, we shall be able to
say which of them we think it would be right to take forward.
My reading of the report was that the spirit in which he made
those proposals was, "Here is a list of what we think are
interesting proposals—
691. Let us go back to VAT. He made a specific
recommendation to equalise at zero. In your evidence you say that
if it were equalised, an increased number of houses would be created
in inner city areas. How did you come to that view?
(Mr Timms) Let me point you to what Lord Rogers actually
said on the tax measures: "Over 50 different measures were
subjected to tests in terms of their potential to influence market
behaviour and their overall effectiveness, practicality and acceptability.
The measures which survived these tests are presented in this
section. None of them are without difficulties but they all have
some merit. We hope that some of them can be introduced".
That is on page 272 of the report. That refers to the spirit in
which he put forward the tax recommendations that are in his report.
692. We accept that. We too have read the report.
I want to focus on your view of the VAT equalisation effect on
housing. I shall repeat the question. In your evidence you state
that there would be an increase in the number of houses in inner
city areas if VAT were equalised. How did you come to that conclusion?
(Mr Timms) I am not clear about which part of my evidence
you are referring to.
693. Paragraph 7(a) in the second paragraph:
"through research commissioned by the DETR in 1997".
(Mr Timms) I am not sure that that relates to the
point that you associate with it.
694. Am I right in thinking that Customs and
Excise are currently studying the equalisation of VAT?
(Mr Timms) I have made it clear that we are looking
at all—
695. It is quite a specific question. Are Customs
and Excise currently undertaking a study into the effect of the
equalisation of VAT?
(Mr Timms) We are looking at all Lord Rogers' recommendations
on tax, including VAT.
696. I am raising a specific point. I understand
that Customs and Excise are currently undertaking a specific study
into the effect of the number of houses that would be increased
in inner city areas as a result of the equalisation of VAT on
conversions. Is that correct?
(Mr Timms) There is a wide range of work going on
within the Treasury on all the recommendations that Lord Rogers
has made. We are certainly looking, in detail, at the proposals
that he has made on VAT.
697. I shall take that as either you do not
know or a yes. I am not certain which it is. This Committee has
been told by our advisers that Customs and Excise are currently
undertaking a specific examination of the number of houses that
would be increased if VAT were equalised. I am asking you whether
or not that study is happening. To say that you are looking at
all the recommendations is not an answer to the question.
(Mr Timms) I do not actually know whether the work
is being carried out by Customs and Excise, but we are certainly
looking at the impact that would follow were Lord Rogers' VAT
proposals—
698. The fact that you do not know is probably
why you do not mention it in your evidence. It seems odd, if Customs
and Excise are doing that, that you do not mention it.
(Mr Timms) I am telling the Committee that there is
a wide range of research being carried out within the Treasury,
and for these purposes I include in that within the Customs and
Excise and Inland Revenue, on the tax proposals that Lord Rogers
has made. It is an exhaustive piece of work that is being carried
out. All I am saying is that I am not sure which bit—
699. Perhaps you would let the Committee know.
When you let the Committee know about the specific Customs and
Excise study, it would be helpful to know when it will be completed
and perhaps you will let the Committee know the outcome of the
study. Can you do that?
(Mr Timms) I can certainly check where among our various
organisations that work is being carried out and where it has
got to.
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