Examination of witnesses (Questions 160
- 179)
THURSDAY 15 MARCH 2001
MR GUS
O'DONNELL, MR
NICHOLAS MACPHERSON,
MR ADAM
SHARPLES, MR
ALEX GIBBS
and MR CLIVE
MAXWELL
Chairman
160. Just on agriculture, have you taken a view
yet of the likely impact of the foot and mouth epidemic on, firstly,
public finances and, secondly, on the economy as a whole?
(Mr Sharples) There clearly are some immediate costs
in the statutory compensation to farmers for the destruction of
livestock that are immediately affected by foot and mouth disease.
The latest estimate is those costs are something like £40
million for the animals that have been destroyed so far. There
may be some additional costs beyond that and clearly, at this
stage, it is difficult to forecast precisely what the final bill
will be.
(Mr O'Donnell) In terms of the economy as a whole,
certainly foot and mouth disease has potentially serious implications
for specific sectors like livestock and related areas like tourism
because of the knock-on effect but, in terms of overall macroeconomic
effect, livestock, arable products, forestry and fishing account
for slightly more than 1 per cent of GDP and less than 2 per cent
of employment, and as regards leisure-related expenditure about
20 per cent of that is in the countryside. So 80 per cent of leisure
spending is not countryside-related which gives you some idea
of the orders of magnitude.
161. We now turn to the micro issues. If I could
ask you one general question, we have suggested in our previous
reports that we would like to see at least more announcements
in the Red Book of the results of evaluations of micro policies.
I am not sure that there are any in particular in this Red Book
or, if there are, perhaps you could point them out to us.
(Mr O'Donnell) The Red Book is getting longer and
longer every year.
(Mr Macpherson) A good example of where there is going
to be a lot of evaluation is the whole tax credit agenda. At the
time the working families tax credit was introduced in October
1999, the Inland Revenue decided to embark on a very significant
evaluation programme building on the sort of programmes in place
already at the DSS. There are lags in this process. First, the
policy comes into effect. Then you want to analyse how it is affecting
people. That requires surveys and a lot of analysis. In my Treasury
experience, I think there is a commitment now to more and higher
quality evaluation—that has been reflected in the New Deal—than
ever before. So I would ask for a certain amount of patience.
A lot of these results will only really start emerging through
2002 and beyond.
(Mr Gibbs) There are a couple of others that are probably
worth mentioning in this context. One is the enterprise investment
scheme and the Venture Capital Trust, where the Inland Revenue
are commissioning external research. This is mentioned in the
Red Book, paragraph 3.53. Five bidders have been asked to tender.
A one year contract for an evaluation of the policy is going to
be offered before the summer recess. The Revenue have also been
collecting data on ISAs. In July 2000, there was an NOP survey
of ISA holders which provided quite a lot of information on the
pattern of take up and some early indications of ISA additionality.
That was fed into the report on savings which was published at
the time of the PBR. As a third example, the Revenue again are
part funding a survey with the Charities Action Foundation and
the NCBO of giving to charity in order to evaluate the impact
of the Budget 2000 measures which changed the charity giving regime.
As with the ones that Nick referred to, it is still early days
on that. That will be reported further in due course.
Mr Fallon
162. When we had the hearing on the Pre-Budget
Report, the director of budget and public finances was Colin Mowl.
Is that right?
(Mr O'Donnell) Yes.
163. Where is he now?
(Mr O'Donnell) He is still director of budget and
public finances but what we wanted to do today was, because the
Budget announced significant environmental measures brought along
environmental and transport tax—
164. Who is in overall charge of the Budget?
(Mr O'Donnell) The Chancellor.
165. Of the five of you.
(Mr O'Donnell) I am in charge of things like fiscal
framework, fiscal judgments, advice for those to the Chancellor.
166. I have a question about the presentation
of the Budget. This year you only published with the Budget the
press notices. The Budget notices were not provided for the House
or for Members of Parliament until the Paymaster General was forced
to provide them the following day. Why was that?
(Mr O'Donnell) We decided to put all of the press
notices on the web. Being in the forefront of knowledge management,
we assume that makes them available very rapidly to all. We have
a commitment to transparency and we want to make it apparent,
so we produced one overall press notice which went in the packs
that went out to people and all the other individual press notices
are available on the web.
167. I cannot recall a Budget where the press
notices were not available to Members of Parliament on the same
day in the bundle.
(Mr O'Donnell) This is because we are moving forward.
168. Moving forward cannot be denying Members
of Parliament information.
(Mr O'Donnell) Members of Parliament can get all the
information they want from the web. It is all there.
Chairman
169. Your web was not working.
(Mr O'Donnell) There is a problem about precisely
how many people hit it at the same time.
Mr Fallon
170. Before we come on to the web, you changed
the policy. Usually, you provide all the press notices the minute
the Chancellor sits down. This year you did not do that. You concealed
the press notices. They were placed in the Vote Office the following
day which rather conveniently delayed the discovery of things
like VAT on spectacles.
(Mr Gibbs) I think it is the case that it was not
the press notices which were—
171. The Budget notices.
(Mr Gibbs) The Budget notices are an innovation this
year. In previous years, Customs and Excise have pursued a policy
of issuing press notices accompanied by technical detail and Budget
notices. We have extended that to the Revenue this year, so the
technical detail went into the Budget notices. They have not been
produced by the Revenue before. Because this was the first time
they did it, they were issued on the same basis that Customs ones
have always been issued, which is to make them available on the
web, but they were made available in the library of the House
following the request that this should be done. The spectacles
measure is not a Budget measure at all. I do not think it would
have been featured.
172. Do you think this is satisfactory? Do you
expect MPs in the middle of the Budget debate to go off and start
printing all this stuff out? In previous years, it was all made
available in the Vote Office.
(Mr O'Donnell) As we move forward, I would expect
the use of the web to be something that we will try and develop
more and more, trying to make information available more widely,
more quickly.
173. Are you going to look at this again next
year, because you have changed the policy this year. Members of
Parliament did not have all the Budget notices on Budget day.
(Mr O'Donnell) It is something that we will certainly
look into.
174. What about the website itself? Obviously
everybody is going to want to get into it. How are you going to
make sure next year that it does not break down?
(Mr O'Donnell) It is to do with the various servers
and there are peak load problems which we will again look into.
175. You did not foresee them?
(Mr O'Donnell) We have tried to make this information
available. We have been assured that these problems will not recur,
but it is something that we need to look into again.
176. You forecast everything else in the Red
Book. It would not be too difficult to forecast that quite a lot
of people might want to see the web on Budget day.
(Mr O'Donnell) Indeed, and we will try and meet that
demand.
177. Let us have a look at some of these personal
taxes. You do put in the Red Book a boast that the direct tax
burden on a single earner family has fallen to its lowest level
since 1972. Given the huge switch from direct to indirect, how
useful is that? Should you not tell us about the overall burden
or the indirect tax burden?
(Mr Macpherson) The direct tax burden is something
which is in a sense incontrovertible. For a given level of income,
you can calculate what direct tax will be on the basis of personal
allowances, national insurance limits and child benefit. There
is a real methodological problem about calculating what the level
of indirect tax will be for a specimen household. This is because
household spending patterns vary hugely. For example, two thirds
of households do not smoke. What is then a specimen degree of
smoking? What the Red Book does though is provide detail on the
effect of duty changes on, for example, a litre of fuel or a packet
of cigarettes or a bottle of wine. It is possible for people to
devise their own specimen calculations and indeed people do. You
can claim that a specimen household smokes 400 cigarettes a day
and you can get a certain result, but what is clear to us is that
there is no basis on which you can average out these indirect
tax changes and the Red Book is very clear that, when it does
refer to distributional effects or tax ratios, this is on the
basis of direct tax and benefit changes.
178. Is it not rather likely that, if the indirect
tax burden had fallen, you would find a way of telling us?
(Mr Macpherson) It is funny you should say that because
this Budget cuts the indirect taxes in a number of areas. For
example, in relation to petrol. Also, alcohol duties were frozen.
There is no real increase in the duty on cigarettes. The duty
was simply revalorised. It would have been nice to be able to
demonstrate what sort of effect that was having on specimen households
but we could not because of these very real, statistical problems.
179. It is not that the indirect tax burden
has gone up; it is just too difficult to calculate the effect
on particular, different groups?
(Mr Macpherson) It is too difficult. It may be that
over time people can develop some new methodology, but we have
not found one yet.
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