Select Committee on Treasury Minutes of Evidence

Examination of witnesses (Questions 360 - 379)




  360. He has just said he is not going to answer them.
  (Mr Brown)—that I have no knowledge of and are not based on actual quotations from Lord Burns at all, as is becoming clear as Mr Ruffley reads this out.

Mr Ruffley

  361. "I refuse to be involved . . ." in relation to that conversation on the 5 December 1997. That is the quotation.
  (Mr Brown) I think, Mr Chairman, that Mr Ruffley is bringing the whole of the Select Committee system, where we are examining the Budget,—

  Mr Ruffley: You would say that, would you not?

  Chairman: It is clearly the run-up to the election. The Daily Mail is very interested in muck-raking about the election. Unfortunately one member of the Committee is prepared to act as the Daily Mail's—

  Mr Ruffley: I am quoting Sir Terence Burns.

Judy Mallaber

  362. Chairman, can we return to the Budget?
  (Mr Brown) These are not quotations from Lord Burns as you very well know.

  Mr Beard: This is out of order in a session on the Budget.

  Chairman: The majority feeling is that this is out of order. The Chancellor has made it quite clear he is not answering your question, so give way to further questions.

  Mr Ruffley: I have no further questions.

  Chairman: That was not a particularly useful use of time, I did not think.

Mr Davey

  363. Mr Macpherson, you are Director of Welfare Reform in the Treasury.
  (Mr Macpherson) Yes.

  Mr Davey: Is the Treasury more involved in welfare reform nowadays than it used to be?

  Chairman: That seems to me, if I can draw a distinction between these two questions, a perfectly valid question to ask on the remit and it is part and parcel of what we are doing.

Mr Davey

  364. Good. Mr Macpherson: is the Treasury more involved with welfare reform than it used to be?
  (Mr Macpherson) The Government is committed to bringing the tax and benefit systems closer together. It also is committed to raising employment. It is inevitable that, given those objectives, the Treasury plays a bigger role at the current time in these areas.

  365. When we did our inquiry on the workings of Her Majesty's Treasury under the Chancellor's stewardship we took evidence from Sir Michael Partridge, the former Permanent Secretary at the DSS, and he made similar comments to you, that the Treasury is more involved, but he did say: "Particularly in the last five years the Chancellor tends to cook up ideas and the DSS is either told at the last minute or not told at all. There is no chance to work it through like a proper policy and say, `Will this really work? Is it feasible? Is it practicable? What is the best way to do it?' It gets rushed in and things get done and they do not work." That is a former Permanent Secretary of the DSS. Do you recognise that approach?
  (Mr Macpherson) No, I am afraid I do not recognise it. I think actually the unique nature of working over the last few years is that the Treasury has worked more closely with other departments than it ever has before. A very good example of that is the Taylor review which the Chancellor set up in 1997, after consulting his colleagues, where Martin Taylor ran this task force and Treasury officials, DFEE officials, DSS officials and Inland Revenue officials all worked very closely together, producing a report which enabled a far better broader perspective to be brought to the problem which cut across departments. You are working here on the tax system which is the preserve of the Inland Revenue, and the benefit system which is the responsibility of the DSS.

  366. Can you think of no example then where the Treasury has taken initiative within the welfare remit without informing the DSS and has just gone ahead with it?
  (Mr Macpherson) All I can speak about is from my experience where I work extremely closely with DSS and DFEE colleagues.

  367. In the area of pension reform, for example, there has been no Treasury-driven initiative?
  (Mr Macpherson) The Chancellor was responsible for working with the Secretary of State very closely. I do not know if the Chancellor wishes to say anything—

  368. I was coming to him.
  (Mr Macpherson) The pensions system is one of the biggest areas of public spending. There is a big tax aspect to pensions as well. For example, the Chancellor announced in the Budget an increase in the personal allowances for pensioners over the Budget period. I have worked in the Treasury since the early eighties. I have worked on the Fowler review of the state earnings related pension scheme and we worked very closely then with the DSS because these were big issues. Nigel Lawson—I do not know if I am outside my remit in terms of talking about what happened under previous governments—

  369. Oh, go on.
  (Mr Macpherson) But Nigel Lawson and Norman Fowler worked very closely together, though, if you read Norman Fowler's book, he did have some questions about the extent to which Nigel Lawson would actually discuss tax issues with him. Close working has always been the case. These are big areas, huge areas of expenditure. I do not have in front of me how much we spend on the state pension scheme but we are talking in the region of £50 billion. It would be astonishing if the Treasury did not get involved in that. It would equally be astonishing if I did not work very closely with my opposite numbers in the DSS. It would equally be astonishing if the Chancellor of the Exchequer did not spend a lot of time talking to the Secretary of State, which indeed—

  370. My point was that he might not be doing that sufficiently. Can I ask the Chancellor to comment on whether he has read the Committee's report on Her Majesty's Treasury, and when the Government expects to reply to that report?
  (Mr Brown) I would have been happier if, when you were doing your work on the Treasury, you had asked me to give evidence on it. You did not seem to think it was worthwhile before you had your report to ask one of the Ministers to give evidence on how they thought the Treasury was performing. As far as the individual points about the report are concerned, let me just say that despite the suggestion in the report that there has been a degree of centralisation around the Treasury, the fact that we have made the Bank of England independent and we have set up the Financial Services Authority, we have set up three-year spending reviews and not one-year spending reviews, we are signing public service agreements which give flexibility not only to departments but also to local authorities, we are setting up a new regime with Regional Development Agencies where they have flexibility as well, the public sector pay is devolved to the departments, suggest that the Treasury has been devolving responsibilities rather than centralising them.

  371. That is helpful but you did not actually answer the question. The question was, when are you going to reply in full to the report?
  (Mr Brown) We will reply in the normal course of events.

  372. Do you think we could have a reply before the election?
  (Mr Brown) You will have a reply as quickly as possible. I would have thought it would come quite soon, yes.

  373. In paragraph 21, which is a summary of conclusions, (e): "We are concerned that the Treasury as an institution has recently begun to exert too much influence over policy areas which are properly the business of other departments. This is not necessarily in the best interests of the Treasury or the Government as a whole." Do you reject that?
  (Mr Brown) I have just explained, and that is why I was answering the question. The Treasury is exercising less influence in many areas. We do not control monetary policy. The Financial Services Authority has been set up to deal with all the issues of financial regulation when we come to these in a minute. Public sector pay was traditionally an area where the Treasury exercised such control that people complained about that. The departments make their own decisions in relation to the Pay Review Bodies, in relation to teaching, in relation to nurses' salaries. All these are matters where devolution has taken place and I believe that you have got to balance the need to have an integrated approach on pensions and social security and work related benefits, where we have been active, with the very big measures of devolution that started the first few days that I was in the Treasury when we made the Bank of England independent.

  374. The criticism, we have heard from some of the witnesses, is that through the public service agreements the Treasury is micro-managing the other departments and getting very much involved in the minutiae of the work of other departments. Would you reject that?
  (Mr Brown) Yes, I reject that, because it is the opposite that is true. Instead of the old days where every iota of public spending representations was gone over in great detail by the Treasury, we have a three-year spending plan, we have the targets that have got to be met, and within meeting these targets there is a great deal more flexibility than existed before for the departments, including end year flexibility in relation to spending. The old public spending system that we inherited was essentially not dissimilar from that created by Lord Plowden in the early sixties. It was one year, it was ad hoc, it was incremental, it was based on failure to distinguish between investment and consumption, there was very little relationship between the private and public sectors in terms of investment programmes, and it was input driven rather than output driven. As a result of the changes that we have tried to make over time it is three-year and therefore long term, it is not incremental; in other words when these spending reviews take place they look at the different things that departments are trying to achieve and not just at whether you have an incremental basis for awarding additional money. It is driven by a distinction between investment and consumption. It is driven also by a desire to bring private finance in where possible and there is a degree of cross-departmentalism that was missing under previous spending plans, for example, in Sure Start, the provision of services for the young, or work amongst drugs or services for the elderly, all the departments that have an interest in these matters are brought together. In all these areas we have made big changes. These changes give the departments more flexibility, not less, in a whole series of different areas. I just point to this, which is totally unmentioned in your report, the measures of devolution that took place as a result of the first decisions we made when we came into the Treasury, which included making the Bank of England independent, creating a new Financial Services Authority and then, latterly, devolving public sector pay to the departments themselves.

  375. Moving on to separate points in our report, Chancellor, paragraph 57, we say: "Parliament lacks the resources necessary to hold the Treasury fully to account". Would you be prepared to debate with the Committee, particularly in your formal reply before or after the election, and try to assist us in that and provide more resources to Parliament to hold your department to account?
  (Mr Brown) I do not quite know what you are suggesting. Perhaps you can tell me what you are imagining.

  376. You referred to a Liaison Committee report and indeed a report by other Select Committees where we believe there should be offices of the House set up to enable Select Committees and individual MPs to have rather more information and rather more scrutiny of the accounts and spending plans. That would require more resources. I do not know whether you as the Chancellor would be keen to see that.
  (Mr Brown) That is a matter for Parliament itself. If Parliament decides, as it has in the past, that it wants to reform the Select Committee system and it wants to reform the way the Public Accounts Committee works, that is a matter for Parliament. If Parliament wishes to vote additional resources for that to happen that is again a matter for Parliament.

  377. What I asked you was for you to express a view on it.
  (Mr Brown) I support parliamentary scrutiny. I support the maximum parliamentary debate possible on these issues. This is a matter for which you should not criticise the Treasury. It is a matter where you ought to be looking at how you could improve or make suggestions for improving parliamentary procedures. It is a matter in the end for Parliament itself.

  378. With respect, Chancellor, the Liaison Committee, which is an all-party committee, has produced a report and put that forward. I am asking you whether you would look at those reform proposals seriously to assist this Committee and other Committees to do their scrutiny job, which you said you supported, more effectively.
  (Mr Brown) Of course I am happy to look at it. I just stress to you that if Parliament wants a greater role in these matters it is a matter for Parliament to look at it in detail.

  Mr Davey: We have and we are looking for your response, Chancellor.

Sir Michael Spicer

  379. Can I just be quite clear, having chaired that Sub-Committee, exactly what you are saying, Chancellor? Would you support something similar to the Congressional Budget Office that they have in the United States to look at Treasury matters?
  (Mr Brown) I did not realise that you had recommended that. Is it your recommendation?

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