Examination of Witnesses (Questions 40
- 59)
THURSDAY 11 MAY 2000
SIR ANDREW
TURNBULL, MR
JOHN GIEVE,
MS MARGARET
O'MARA AND
SIR STEVEN
ROBSON
40. Do you see it leading to evolution for specific
policy frameworks for areas like social policy?
(Sir Andrew Turnbull) It is a specific policy framework.
What we are agreeing with the Department of Education is agreements
about the budget and how that budget can be managed and the time
frame of it and also agreement about what is to be delivered.
That is not totally dissimilar from the relationship with the
bank, the Debt Management Office or whatever. It is a framework
of a kind. The relationship between the Treasury and the other
Government departments is not quite the same as between the Treasury
and Debt Management Office or the National Savings, or whatever.
41. Can you give us some examples of evidence-based
policy making in recent years outside the main economic area?
(Sir Andrew Turnbull) I think the whole world of work
incentives and quality analysis has been based on a great deal
of analytical work. We have already had a tax/benefit/income distribution
model. A lot of work was done by ministers and their advisers
in opposition when they brought that into Government. We have
recruited Paul Gregg on a part-time basis, who is an expert in
his field, so that we know a lot more now about poverty, for example,
not just at a particular point in time. If you are in the bottom
ten per cent of distribution this year where are you likely to
be next year and where you might be possibly be in five years
time. That is information that has only become available in the
last few years and it has enabled us to get a better appreciation
not just of the static position but of the dynamics. If people
are simply swopping places, going from the bottom ten per cent
into the ninth decile and back again it is a different world from
the one in which people are able to move up the scale. The truth
is that people in the bottom decile do not move far from it. They
might get a job for a while that moves them up but if their skills
are poor they are likely to fall back into it. That conditions
the way in which we design programmes. The second point on this
kind of policy analysis is the major piece of work done by the
PIU but actually led by Gus O'Donnell, a big Treasury input, called
Adding It Up which is how one gets hold of analysis, how you maintain
databases, how you get access and expose your ideas to academics
and other practitioners. That has given us a new impetus to the
way in which we go about maintaining the analytical base.
Mr Cousins
42. You have mentioned the importance of the
supply side before and that means you have to have some knowledge
of the real world in order to inform supply side reform decisions.
Can you point to something where you think there has been a significant
improvement in policy-making in the supply side?
(Sir Andrew Turnbull) You could go back to privatisation,
go back to private finance, now public/private partnerships, the
greater emphasis on competition, measures to improve the labour
market, measures to reduce the impact of the unemployment trap
and the poverty trap, measures to encourage the formation of small
enterprises and enable them to grow, and measures to ensure that
the finance and support that is necessary for that process is
there. All these things we have worked on. We have quite often
done it by going to someone in the outside world and saying write
us a report on this. We have had several. Steve will be able to
list a number of these. We draw in experts, Alex Trotman or Peter
Williams, people of this kind. So if we have not got the expertise
ourselves, we are much readier than we were to go outside and
find it.
43. Let us just look at one recent example of
the implications of that approach, the concern about Myner's and
the commissioning of the report on fund management and how it
affects the supply side drivers of the economy, of course the
guy himself was a very prominent fund manager with Gartmore. I
do not for one moment suggest that there is anything improper
about that but you will have to accept that in terms of conventional
government policy making values, there is an issue there.
(Sir Andrew Turnbull) In commissioning a report from
someone like that the first thing you get is a report from someone
who is an expert in the field. That is the plus side. The negative
side is, as with all reports from all experts, they may carry
a bias and you try to get round this by choosing someone you think
has some capability to think independently, is an innovator. I
think we have done that in this case. We are looking for a source
of ideas and it is difficult to see where you would go if you
wanted an authoritative report on institutional investors if you
did not at some point involve someone who is deeply expert in
the subject.
44. If the Committee said to you we would like
to see the exact terms of reference determining this particular
inquiry, what its real targets and objectives are, what internal
checks you are putting in to take account of the fact that the
guy himself is a prominent actor in that particular field, would
you be happy to share it with us?
(Sir Andrew Turnbull) Yes, we would. There is another
check, of course, which is the report is not simply about institutional
investors. The first place you would go to see if is this system
working is people trying to develop businesses and getting their
views. We would except to see in the report of this kind the views
of the customers.
(Sir Steven Robson) Could I add in that regard that
one of the first things that is going to come out of Myner's work
will be a consultation document in the next few weeks triggering
what we hope will be a wide-ranging debate and will give some
transparency to the Myner's process and the sorts of questions
that it is asking. One point I would also add is this is not simply
an investigation of fund managers, it is also an investigation
of government. He will be looking, equally, at some of the things
government does or has put in place in relation to the fund management
industry and asking whether they are introducing any perverse
incentives, things like the minimum funding requirement and the
regulation of insurance companies. It is not just looking at the
private sector part of this equation.
45. You have indicated that you are happy to
share that with the Committee. Can I move on to another slightly
different question which raises the same issues. There is a lot
of talk now about the introduction of pensioner tax credits. How
are you doing the preparatory work on that? Which department is
leading it? Which Ministers are leading it?
(Sir Andrew Turnbull) This is a tri-partite thing
with the Treasury, Social Security and Inland Revenue. They are
all necessarily involved in development of policy on pensions.
It is not unusual that the development of a major area of new
policy involves several departments at once.
46. If we said in the interests of transparency
would you share with the Committee what sort of broad terms of
reference have been given to whatever inter-departmental teams
are working on this, would you be happy to share that with us?
(Sir Andrew Turnbull) Yes, we will set that out for
you, that work, where it has got to, where it is going and how
we are going about it.
47. And the broad terms of reference, because
after all the pensioner tax credits, unlike the previous ones,
are not welfare to work. There is a structure for dealing with
welfare to work but pensioner tax credits are taking that model
and applying it in a quite different context.
(Sir Andrew Turnbull) They are still tax credits but
we will give you some information on that.
48. That would be very interesting. Could I
just ask you about something else. Just let's take the phrase
"locking in fiscal tightening".
(Sir Andrew Turnbull) Yes.
49. Where did that phrase come from in the Treasury?
Who thought of it? Who thought this is what we are doing and "locking
in fiscal tightening" is a way to describe it?
(Sir Andrew Turnbull) I do not know where it came
from.
50. You do not know?
(Sir Andrew Turnbull) I do not know if we have patent
on it or whether we do not. It may have been something people
in OECD have been talking about for years but I do not know whether
we invented it. It is a metaphor.
51. A metaphor?
(Sir Andrew Turnbull) But this year is not the first
year it was used. The first year it was used was probably two
years ago when the ESFR produced a document in June or July of
1998 setting out the fiscal targets for the next three years and
the original description of the process of taking a three per
cent deficit in 1996-97 and coming then down close to balance,
small surplus, small deficit either side, and having achieved
that fiscal tightening then maintaining it, so this phrase has
been around for at least two years.
52. Because it is quite a powerful phrase, is
it not? One does not want to be cheap about this but it lends
itself to headlines and speeches.
(Sir Andrew Turnbull) Yes.
53. It would be nice to know where it came from.
(Sir Andrew Turnbull) I think it is a way of describing
a process where having achieved a major tightening of fiscal policy,
the decision was to hang on to that and to then operate a system
where basically from now on, that was in the middle of 1998, there
would be small deficits somewhere in the range of nought to one
per cent of GDP.
54. Without in any way labouring the point,
you have used other phrases like "maintaining" and "holding
on to" but "locking in" is a much more powerful
phrase, is it not, but it is purely metaphorical?
(Sir Andrew Turnbull) It seems to have achieved its
affect or over-achieved. It is describing in a vivid way what
is the policy intention. As I say, the first time I was conscious
of it was in talking about the reduction in the deficit from the
mid-1990s to now and holding on to that and then conducting policy
to maintain this borrowing in this fairly small, narrow range.
55. What part do Ministers play in the way that
the Treasury is organised?
(Sir Andrew Turnbull) Basically they set the agenda.
56. No, in the way that the Treasury is organised.
(Sir Andrew Turnbull) And then we have to organise
ourselves to make sure that we are capable of delivering that.
If I wanted to propose a major restructuring of the Treasury directorates
I would not say, "This is my management prerogative, I am
going to do it", I would put it to the Chancellor and I would
have to convince him this was going to deliver an improvement
in the service we were offering him. Who the particular people
are is largely determined by the Civil Service but the structure
has got to be one that they have confidence will deliver their
objectives.
57. You described your going to the Chancellor
with a proposal for internal reorganisation and I think the Committee
can obviously see that. Has it ever happened that the Chancellor
or one of his advisers has come to you for a proposal for internal
organisation?
(Sir Andrew Turnbull) Yes they may well come and say,
"We do not think we are doing enough in this area. Can you
put together a team to do it"? and we have done that.
58. Can you think of an instance of that?
(Sir Andrew Turnbull) I think the productivity team
responded to their particular wish to increase the Treasury's
activity in this area. It is difficult to know whether they came
to us and said, "Please set up this team." For example,
one of the other teams we have created is European taxation. We
suddenly noticed that this was becoming a much bigger issue and
treating it as an adjunct of the main tax policy team was not
giving it the priority so we said, "We will set up a dedicated
team to deal with it." Sometimes they may suggest it. Sometimes
we may suggest it interpreting the priorities that we are under.
59. When Sir Nigel Wicks retired the international
finance section was wrapped up, was it not?
(Sir Andrew Turnbull) Yes.
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