APPENDIX 1
Letter and Memorandum from HM Treasury
MONITORING OF TREASURY COMMITTEE RECOMMENDATIONS
I enclose the paper you requested in your letter
of 3 August giving details of progress on recommendations made
by the Treasury Committee.
Please let me know if there is anything more
you need.
31 October 2000
"LIVE" TREASURY COMMITTEE RECOMMENDATIONS
FIRST REPORT,
1997-98: ACCOUNTABILITY OF
THE BANK
OF ENGLAND
The terms of appointment of external MPC members
should be increased
The Government believes that a period of appointment
of three years strikes the right balance between accountability
and independence in the appointment of external MPC members. Each
external member is eligible for re-appointment, so that the possibility
of individuals serving as members of the MPC for longer periods
of time is not ruled out.
The non-executive members of the reconstituted
Court are to be appointed for shorter, three-year, terms. We favour
establishing the status quo ie a four-year term of appointment
for members of the Court.
The Government remains of the view that three
years is the appropriate term of office for non-executive Court
members. This is in line with the Governance Principles of the
Hampel Committee which state that, "All directors should
submit themselves for re-election at regular intervals and at
least every three years". Non-executive members of the Court
will be eligible for appointment for two or more terms.
SECOND REPORT,
1997-98: THE BARNETT
FORMULA
The Committee believes that it is time to bring
the needs assessment up to date; this would help to show whether
the Barnett Formula remains the appropriate method of allocating
annual public expenditure increase (or savings) to the four nations
of the Union.
The Government's position on these matters was
set out in the White Papers on Scottish and Welsh devolution published
in the July 1997. The White Papers said that the Government had
concluded that the financial framework for the Scottish Parliament
and National Assembly for Wales should be based on the existing
arrangments for the Block and Barnett formula, which had produced
fair settlements. They also said that any more substantive revision
to the Barnett formula would need to be preceded by an in-depth
study of relative spending requirements and would be the subject
of full consultatiions between the devolved administrations and
the UK Government.
The details of the funding arrangements were
published by the Treasury in the Statement of Funding Policy in
March 1999. A second edition was published in July 2000, setting
out the arrangements which applied in the 2000 Spending Review,
including for example updated population figures.
FOURTH REPORT,
1997-98: THE 1998 BUDGET
FSBR to show cumulative effects of tax changes
as a whole as well as changes in current budget separately.
It is not practical to show the cumulative effects
on the public finances of all past Budgets, and no government
has ever done so. However, the effects of each Budget are clearly
set out in the relevant Financial Statement and Budget Report.
Moreover, Chapter 2 of the March 2000 FSBR included various additional
tables that showed the effects of Budget 2000 and PBR 99 on the
current budget surplus and net borrowing.
The Government should examine the issue of savings
as a whole to ensure that the tax treatment of savings, the services
provided by the National Savings Department and proposals for
stakeholder pensions are co-ordinated. The Committee also recommended
that the effects of the savings limits and tariff income scheme
for social security benefits should be re-examined.
The Government's recent quinquennial review
of National Savings recommended that it should in future focus
on delivering a positive contribution to the cost effective management
of the national debt. National Savings has been set a clear and
overarching objective to that end. The Agency offers a range of
retail savings and investment products, including a cash ISA,
and is committed to improving quality of service and levels of
access, to ensure it is competitive and that all its customers
are offered a fair deal. But the review concluded that National
Savings is not well placed to address financial exclusion or to
increase the level of savings in the economy.
ISAs and stakeholder pensions have been driven
by a common desire to encourage more people to save in a tax-free
environment. They provide simple and flexible savings products,
reflecting people's wide-ranging saving needs for the short, medium
and longer term. The Government continues to give favourable tax
treatment to pensions because it recognises that an additoinal
incentive may be required to encourage people to save for the
longer term.
The Government wants to ensure that benefits
are targeted at those who need them while ensuring that people
are not unfairly penalised for having saved for their retirement.
From April 2001 it is doubling the amount on savings that pensioners
can hold without losing some benefits—from £3,000 to
£6,000. And the new Pension Credit will abolish these capital
tests altogether, by introducing a fairer system which takes into
account the income that people derive from their capital, and
will reward savings in retirement.
The next phase of the modernisation of tax credits
provides an opportunity to review the treatment of income and
capital in assessing a person's or family's entitlement. The current
rules applied to Income Support and those inherited from Family
Credit by the Working Families Tax Credit have developed over
a considerable period of time and reflect a process of incremental
change. A modern system should be simple and aim to promote work,
fairness and incentives to save.
The effects of tax measures designed to affect
behaviour should be regularly assessed.
The Treasury and Revenue Departments monitor
the effects of all tax changes. For tax measures designed to affect
behaviour which have only recently been implemented, it will take
time for the full effects of Budget measures to work through.
This is particularly the case for tax changes to encourage enterprise
and raise productivity growth. Similarly, there is a time lag
before sufficient data becomes available to enable a proper assessment
of taxes designed to affect behaviour.
FIFTH REPORT
1997-98: THE UK AND
PREPARATIONS FOR
STAGE THREE
OF ECONOMIC
AND MONETARY
UNION
We recommend that the Treasury and the Bank of
England should continue to press for the UK to have access to
the TARGET system on the same terms as member states participating
in Stage Three.
In December 1998, the Bank of England concluded
an agreement with the European System of Central Banks (ESCB),
which permitted the Bank to operate a euro-based payments system
in the UK (CHAPS Euro) and connect it to the TARGET system. The
agreement allows the Bank to provide intra-day liquidity of up
to
3 billion from a credit position in euro held by
the Bank. The Bank is required to deposit
3 billion with the ECB each day; at the end of each
day, the Bank withdraws the same amount and invests it in the
markets overnight.
The terms of the agreement mean that UK institutions'
access to TARGET differs to that of euro-area institutions in
two aspects.
First, euro-area banks have access to unlimited
intra-day credit through TARGET (subject to fulfilling collateral
requirements), whereas UK banks' intra-day credit is limited to
3 billion. In practice, this limit is not perceived as a significant
problem. Where it is needed, UK banks raise additional intra-day
euro credit through subsidiary banks in the euro-area.
Second, access to the TARGET system closes at
1700 hours central Europe time for members of CHAPS Euro, compared
to 1800 hours central Europe time for euro-area members. UK institutions
therefore have one hour less access to the system each day.
The agreement is considered to have met the
needs of the Bank satisfactorily and CHAPS Euro is heavily used.
Moreover, TARGET is considered to be operating successfully with
limited operational problems—it is now the dominant euro
payment system.
If the euro did become widely used in the UK it
might be necessary to consider shortening the period between entry
and the formal introduction of notes and coins if the UK did join
Stage Three. We recommend that the Treasury give urgent consideration
to the implications of the widespread use of the euro in the UK
after 1999.
Were the UK to decide to join EMU a number of
factors would influence the length of the period between entry
and the introduction of notes and coins. All sectors would need
to prepare over this time, but the ones that would dictate the
overall timescales the UK would follow are the retailers and utilities,
key parts of the public sector, and those involved in the process
of producing and distributing euro notes and coin.
If the UK were subject to transitional arrangements
equivalent to those applying to the first wave, any euro cash
from the first wave would not be legal tender in the UK during
this period. Businesses and individuals would not be obliged to
use euros, but some might decide to do so for commercial reasons.
The pattern and scale of euro use would have
some influence on a changeover. Assumptions on demand for euro
services during a UK transition will be refined as the experiences
of the first wave and patterns of euro use in the UK become clearer.
NINTH REPORT,
1997-98: THE MIS-SELLING
OF PERSONAL
PENSIONS
Attribution of assets of life assurance companies
and definition of "policyholders' reasonable expectations"
There have been a number of developments that
bear on the issues identified by the Committee since the Government
responded in December 1998 to the Committee's report.
Attribution of assets of life assurance companies
[This section of the Memorandum has
not been printed because of a related court case.]
Definition of policyholders' reasonable expectations
The Government is aware of continuing calls
for greater clarity of the phrase "policyholders' reasonable
expectations" (PRE). As stated in the Government's earlier
response, current legislation contains no definition of policyholders'
resonable expectations. Rather, it remains a legal concept that
must be interpreted purposively in the light of the particular
circumstances of each case. Indeed, this is an approach followed
by the Courts in the recent case by a policyholder against Equitable
Life, concerning the application of a guaranteed annuity rate
to a with-profits pension contract.
Earlier this year, the Financial Services and
Markets Act 2000 received Royal Assent. The Act does not refer
to PRE, but the high-level objectives of the FSA say that a firm
must pay due regard to the interests of its customers and treat
them fairly. When the relevant provisions of this Act have been
implemented, the FSA will be able to make rules and issue guidance
to authorised insurance companies for the purposes of protecting
the interests of policyholders and potential policyholders. The
Government believes that this modernisation of the statutory framework
will provide for increasing clarity on the concept of PRE as the
FSA makes use of its new powers in the interests of policyholders.
Progress on Basle Committee's principles on effective
banking regulation
There are strong advantages in complete capital
account liberalisation; however, if this liberalisation is not
undertaken in a regulated manner, there may be potentially damaging
consequences. It is therefore imperative that is done in the correct
sequence and that appropriate methods of regulation and supervision
are devised. We look forward to this being done by the Basle Committee.
The Treasury's response to the Report noted
that the UK, along with other G7 countries, is encouraging all
countries to implement the Basle Committee's core principles for
effective banking supervision. This work is on-going, including
through the Financial Stability Forum which recently endorsed
recommendations on market and official incentives to foster implementation
of international standards for strengthening financial systems,
such as the Basle core principles.
Work of Financial Stability Forum (arising from
the Third Report, 1999-2000 on the IMF)
We welcome the Fund's new proposals on Codes,
standards and financial regulation but are concerned that, without
continuing input from developing countries, they may not achieve
their objectives. We urge the Chancellor to give this work a higher
priority, and to ensure that the Financial Stability Forum works
in an open and transparent way.
The Financial Stability Forum recognises the
importance of openness and transparency. The Chairman of the Forum,
Mr Andrew Crockett, of the Bank for International Settlements,
reports on the work of the Forum to the IMF's International Monetary
and Financial Committee (formerly known as the Interim Committee).
The Forum also publishes press releases following its meetings
and these, together with reports of working groups established
by the Forum and other documents, are available on the FSF's website.
THIRD REPORT,
1998-99: FINANCIAL SERVICES
REGULATION
As we have received many representations about
the inadequacy of competition in the field of financial services,
we attach particular importance to improving competition. The
Government should consider whether this can be done better by
adding this as a fifth objective for the FSA, or whether primary
responsibility should remain with the Office of Fair Trading.
The Government shares the Committee's view about
the importance of competition between financial services providers.
As it made clear in its initial response to the Committee, it
believes that this requires two things. First of all, there needs
to be a mechanism by which any unjustifiably anti-competitive
agreements or behaviour arising within the industry can be identified
and dealt with. Secondly, there need to be powers to remove any
unnecessary regulatory barriers to competition, should these arise.
The first of these matters is currently dealt
with under competition law, by the general competition authority,
that is to say the Office of Fair Trading (OFT). The Government
remains of the view that this is right. It is the OFT's responsibility
to detect and deal with unjustifiably anti-competitive agreements
or behaviour by businesses in the financial services industry,
just as it is in all other sectors of the economy. The new powers
which it has acquired under the Competition Act 1998 will strengthen
its effectiveness in this regard. To involve the FSA in this area
would simply lead to confusion about the respective roles of the
two bodies.
Where the FSA does have a responsibility is
in ensuring that in carrying out its own regulatory functions,
for example in making rules, it does not create any unnecessary
barriers to competition. During the passage of the Financial Services
and Markets Act through Parliament, the Government strengthened
the safeguards against this possibility. So Section 2(3) of the
Act now provides that in discharging its general functions, the
FSA must have regard not only to the need to minimise the adverse
effect on competition of the actions it takes, but also to the
desirability of facilitating competition between those who are
subject to FSA regulation.
It is, of course, still possible that the FSA
may, on occasion, get the balance between the needs of competition
and of regulation wrong. So the Act provides a further safeguard
in the form of a competition scrutiny mechanism, which will enable
the OFT to consider whether any rules, guidance or practices of
either the FSA as regulator, or as the Competent Authority for
listing securities, or of recognised investment exchanges, or
recognised clearing houses, have a significantly adverse effect
on competition. If the OFT believes that this is the case, it
must report the matter to the Competition Commission. And if,
after an investigation, the Commission agrees with the OFT's conclusion,
then the Treasury will be able to take action to correct the problem.
The Committee will also be aware of the Government's
response to the Cruickshank report on competition in UK banking
which was published in August. In accepting the report, the Government
announced a number of measures to improve competition in the UK
banking market and deliver benefits to consumers.
We stress the importance of ensuring that financial
crime is combated effectively; this requires close co-operation
between the agencies involved, both in the United Kingdom and
internationally. Although the FSA's new civil powers will be useful,
we believe that criminal prosecutions should be set in train whenever
the evidence is strong enough.
The Government fully shares the view of the
Committee that close co-operation is required between the agencies
in the UK, and internationally, to fight financial crime effectively.
We are committed to improving co-operation at home and overseas.
The Financial Services and Markets Act includes provisions that
will allow the maximum flow of information, consistent with European
law, from the Financial Services Authority to the other agencies
fighting financial crime both domestically and internationally.
We continue to support the valuable work of the Financial Fraud
Information Network (FFIN) which plays a key role in domestic
co-operation by bringing together regulators, law enforcers and
investigators at the earliest stage of an inquiry. FFIN provides
a framework within which information from different elements of
an inquiry can be shared and investigation co-ordinated.
Following the full implementation of the FSMA,
the FSA's new powers will take effect to enforce civil and criminal
sanctions against those engaged in financial crime or breaching
regulatory standards. Where the evidence and circumstances warrant
it, the Government excpects the FSA will make full use of its
powers to prosecute breaches of the criminal law.
FOURTH REPORT,
1998-99: THE 1999 BUDGET
The Committee commented on monitoring the effect
of the Budget measures designed to increase productivity and said
that it expected the results will be published.
The Departmental Report (Cm 4615), presented
to the House of Commons on 7 April 2000, outlined progress that
had been made towards the Treasury's PSA target to narrow the
productivity gap with US, France, Germany and Japan over the economic
cycle.
In order to meet the PSA target, the Government
has initiated a wide programme of reforms, which were detailed
in the Departmental Report. More details, including information
on progress alongside future measures, will be given in the Pre-Budget
Report that the Treasury will publish later this year.
Future Departmental Reports will provide updated
figures on progress towards meeting the PSA target.
The fairness of the tax and national insurance
system as between companies and unincorporated businesses should
be reviewed.
The Government explained in its response to
the Committee's Report all areas of the tax system are subject
to ongoing review to ensure fairness and simplicity and to make
sure that no sector or individual bears an unfair burden or enjoys
an unfair benefit.
SIXTH REPORT,
1998-99: INLAND REVENUE
The Inland Revenue and HM Customs and Excise
have each provided memoranda by way of follow-up to the Sixth
Report and officials will be giving oral evidence to the Sub-Committee
on 1 November 2000.
EIGHTH REPORT,
1998-99: THE MONETARY
POLICY COMMITTEE—TWO
YEARS ON
We formally request the Government and Parliament
to put confirmation hearings for new members of the MPC and for
the re-appointment of existing members on to a statutory basis.
The Government welcomes the role the Treasury
Committee plays in ensuring that the Monetary Policy Committee
is held properly to account, including through non-binding hearings
on MPC appointments and reappointments. However, the Government
sees substantial difficulties with the Treasury Committee's suggestion
that it should hold statutory confirmation hearings for new members
of the MPC and for the reappointment of existing members. This
proposal raises important constitutional issues which go far wider
than MPC appointments. It would therefore be more appropriate
for the House to consider first the issue of official appointments
and the role of Select Committees in general rather than to legislate
for confirmatory hearings for the MPC in isolation.
The Government is committed to appointing top
calibre candidates, with appropriate expertise and independence.
TENTH REPORT,
1998-99: VALUATION OFFICE
AGENCY
We recommend that the valuation quality indicator
is reviewed in the course of the forthcoming Next Steps review
with the assistance of valuation experts from outside the VOA
to ensure that the Agency's performance measures pay due weight
to those valuations which do not go to appeal. We further recommend
that the Inland Revenue and DETR publish an assessment of the
quality of the VOA's valuations drawing on other information such
as the assumptions about yield and losses on appeal which underpin
the rating formula set by the DETR and the VOA's own quality control
data. This assessment should consider whether there is any evidence
that the existing indicator introduces distortions into the VOA's
valuations.
A review of the Agency's quality assurance systems
has just been completed. As part of the review process, members
of the private sector both inside and outside the surveying profession
were consulted. The report of the review contains recommendations
for further development of the valuation accuracy indicator to
reflect valuations which do not go to appeal. We shall publish
plans for a new indicator in the light of this review in our business
plan for the next financial year.
We welcome the establishment and continuing development
of the Specialist Rating Units, and would encourage their further
development, with appropriate resources, to the benefit of the
VOA and its customers and clients.
The Specialist Rating Units (SRUs) have been
confirmed as part of the Valuation Office Agency's (VOA's) organisation,
following an internal post-implementation review of its new structure.
The present arrangement of seven such units each covering either
three or four of the Agency's generalist Groups continues. The
types of property to be dealt with by the SRUs is kept under regular
review.
The process of undertaking the rating Revaluation,
which came into effect on 1 April 2000, ensured that a clear and
comprehensive division of responsibility between the SRUs and
the Groups was put into place, with corresponding clear indentifiers
on the computer systems. This has helped considerably in facilitating
communications between the SRUs and the Groups.
Further improvements are being effected by appointing
an individual in each Group to be in charge of the day to day
process of measuring properties on behalf of the SRUs, ensuring
their needs are recognised and met and that service standards
to customers and clients continue to be enhanced.
We recommend that as part of the VOA's review
of its new organisational arrangements the Agency seeks structured
feedback from its staff and from bodies which deal with its staff
day to day.
The Agency undertook extensive consultation
with staff as part of the internal post-implementation review
of its new organisational structure. It sent structured questionnaires
to groups of staff, making use of the Whitley machinery, and also
collected the views of individual staff. The Agency has also recently
undertaken a second staff attitude survey, following the first
in 1998. This second survey was completed by nearly 80 per cent.
of staff. It included questions on communication and management,
as well as joh satisfaction and training. In addition the five
yearly Review of the Agency, led by the Inland Revenue, invited
representations from a wide range of external bodies on organisational
and other issues. These views and representations have informed
the Agency's conclusion that its new organisational structure
has largely been successful, and should therefore continue.
We also recommend that the VOA's review specifically
addresses the question of what further measures might need to
be taken to safeguard valuers' local knowledge in the long term.
Steps taken to safeguard local knowledge include
a sophisticated IT-based recording system to capture and retrieve
market information, and more generally the internal review referred
to above has confirmed no present reason to withdraw from the
85 locations throughout Great Britain where valuer staff are currently
based. The Agency's five year strategic plan, drawn up in the
light of the Agency Review, will strengthen the collection and
management of both data and knowledge.
Any further cutbacks of staff and resources should
ensure the highest possible quality of staff are retained and
give greater consideration to recruiting, retaining, developing
and motivating the VOA's staff.
The Agency's plans to recruit and develop its
staff were made known to staff last February through its Civil
Service Reform Action Plan. It has secured £400,000 from
the Government's "Invest to Modernise" fund to take
forward, in particular, recruitment and training of graduates,
a management development scheme, and additional training for team
leaders. Following the outcome of the five yearly Agency Review,
the VOA is also producing a more comprehensive human resources
strategy, which will incorporate the work already in hand in these
areas. The results of the staff survey (see above) show a pleasing
advance, though there is still further to go.
The VOA was asked to provide data on recruitment
and retirement. It is worth noting that over the next five years
only about 5 per cent of staff currently working for the VOA will
reach retirement age. Turnover rates have been low—at around
4 per cent—for several years, as the following figures demonstrate:
| Period | Recruitment
| Retirement | Resignation
|
| 01.04.98-31.03.99 | 136
| 58 | 138
|
| 01.04.99-31.03.00 | 166
| 54 | 122
|
| 31.04.00 to date | 122
| 26 | 98
|
We welcome the VOA's progress towards achieving the financial
efficiency and productivity targets although we note that a declining
workload may have assisted in this task. In the light of the evidence
we have received about the steps taken to achieve the targets
we do not believe it would be appropriate for further significant
efficiency savings to be required following the next quinquennial
review unless this goes hand in hand with a major change to the
VOA's responsibilities or to the non-domestic rating system. Instead,
we think the emphasis should be on ensuring that the VOA is well
placed in the longer term to carry out its valuation work effectively
and competitively and on improving the way in which the non-domestic
rating system is operated.
The five-yearly Agency Review (published on 13 September
2000) has made a number of recommendations on how the operation
of the non-domestic rating system can be improved, reflecting
inter alia the outcome of the review of rating revaluations
led by the Department of the Environment, Transport and the Regions
(DETR). The Agency is preparing a five-year strategic plan in
the light of these recommendations, which are expected to lead
to major improvements in service for ratepayers, and savings in
costs through a reduction in the number of appeals against rating
assessments (excluding those relating to material changes of circumstances)
once the changes have been implemented.
We recommend that the full and accurate completion of "forms
of return", which is required of all non-domestic ratepayers
so requested, should be enforced more stringently and that the
fine payable on conviction of failure to comply be raised significantly.
The DETR-led review of revaluations, the findings from which
are set out at annex G to the Green Paper on Local Government
Finance published on 19 September 2000, considered means of improving
the rate of return of "Forms of Return" (FOR).
Two main suggestions were canvassed as part of the review;
the introduction of incentives to encourage submission, and the
replacement of a criminal sanction with a civil fixed penalty
system. These options were placed in the wider context of the
review, which was considering the means of achieving an improved
dialogue and exchange of information between ratepayers and valuation
officers, as part of the revaluation process.
The review discounted the use of incentives, finding it hard
to see what would induce a commercial ratepayer or their professional
rating agent to return a form when they did not do so already.
The current sanction of a criminal prosecution was seen by the
review as being heavy handed and impractical to pursue. Whereas
the alternative of a civil penalty was seen as more practical
and effective, such a system already being effectively used in
respect of income tax returns.
The conclusion of the review was that a move to civil penalties
for non completion of FORs should be adopted, but should be seen
as a mechanism of last resort, placed in the context of improved
information flows between ratepayers and valuation officers as
part of the valuation process. Work is now being undertaken within
the Agency to achieve this improved information flow. The proposals
in the Green Paper are out for consultation with responses invited
by 8 December 2000.
We welcome the VOA's proactive move towards improving communications
with ratepayers to ensure valuations are correct first time.
Building on this support by the Committee was a major theme
of the Agency Review and the Green Paper, and will be a key objective
of the Agency's strategic plan for the next five years. The process
of consulting with organisations representing business interests
about the detail of setting up ratepayer panels is underway; first
national panels then local panels will follow. An early subject
for the panels to consider will be the options for the presentation
of valuation summaries to ratepayers as part of the revaluation
process. The panels will also be involved in the process of developing
and improving information seeking arrangements to ensure that
they are fully business friendly and that the same information
is only collected once. In the latter stages of the 2005 revaluation,
before the publication of the draft rating lists, we expect the
local panels to be a conduit for information about emerging value
levels to be communicated to ratepayers, and for their representations.
We believe that the closer involvement of ratepayers, and the
provision of information about valuations and the underlying valuation
schemes will justify increased ratepayer confidence in accepting
valuations as right first time.
We note that appeals lodged in 1995 have yet to be resolved,
and we recommend that the VOA should clear all appeals made against
the original 1995 rating list (as distinct from maintenance cases)
or any prior list before the new 2000 rating list is introduced
in order to improve the quality of the new list.
The new rating lists came into effect on 1 April 2000 in
accordance with the provisions of the Local Government Finance
Act 1988. However the Agency has given priority to the clearance
of 1995 and earlier list appeals during the current year. Thus
a key target is to clear 80 per cent of 1995 list appeals outstanding
as at 31 March 2000 by 31 December 2000.
Whilst the valuation date for the 2005 revaluation is unlikely
to be before 1 April 2003, early work is planned to improve the
way in which information about the rents etc, which will underpin
the valuations, is progressively gathered and held. This work,
and work to make the valuation process more visible and understandable,
is vital to achieving the change from the present appeals culture,
to acceptable first time, and will be undertaken in parallel with
the resolution of the outstanding 2000 list appeals.
We welcome the DETR proposal to improve the timeliness of appeals
and the efficiency of the appeal process. We are concerned that
without them the resources of the VOA and its clients will be
wasted in unnecessary appeals, the primary purpose of which is
to kickstart negotiations. We recommend that consideration be
given to making the appellant pay a proportion of the VOA's costs
if the appellant loses—and vice versa—at the discretion
of the Valuation Tribunal. This would give ratepayers an additional
incentive to provide the information necessary to arrive at a
fair valuation and the VOA an incentive to negotiate at an early
stage. We further recommend that DETR undertakes now to provide
the resources necessary to ensure that, at an agreed cost per
appeal, appeals against the initial 2000 list and any previous
rating lists can all be concluded before the 2005 rating list
is introduced and that the VOA makes sure the cases are indeed
settled.
The issue of introducing a power to award costs in valuation
tribunal cases is currently under review by the Review of Tribunals
(The Leggatt Review).
We recommend that the 1920 minute is reviewed as part of the
2000 Next Steps Review. If it is found to be a source of ambiguity
as to the scope of the VOA's activities within the public sector
a new formulation of the remit should be published following the
review. If any proposal to extend the VOA's remit is considered
a consultation document setting out the Government's rationale
for the proposal, its assessment of the impact on private sector
competitors of the VOA and addressing the aspirations of private
sector companies to compete for existing VOA work should be published
in advance of a final decision.
The five yearly Review consulted business and the profession
on whether the remit should be extended and whether private firms
had aspirations to compete for existing VOA work. On the VOA's
existing work, it found that there was no evidence of active interest
in bidding for the Agency's business as a whole; and fragmentation
of the business would raise significant concerns about consistency
of standards and would be unlikely to deliver efficiencies. Privatisation
would raise significant concerns about the potential for conflicts
of interest. So it recommended that the VOA should not contract
out the whole of its core valuation services but keep under active
review the option of the occasional contracting out of some of
its core valuation work to help manage peaks and troughs. On the
remit it noted that legislation would be necessary for extension.
It recommended that consideration be given to this after the VOA
has developed its marketing strategy and the new land services
business stream. The VOA has now introduced a new strategy for
this work and has started an internal review of the best way to
organise the business stream. Consideration will be given to legislation
to allow sales into wider markets where there is a public interest
in valuations after the success of the new strategy has been evaluated.
We recommend that consideration be given to staggering the
revaluation of properties according to their classification (eg
shops, factories) in order to smooth the workload of the VOA.
The issue of staggering the Revaluation by classes was considered
by DETR in the recent review of revaluation and its conclusions
are set out at annex G of the Green Paper on Modernising Local
Government Finance published on 19 September 2000. After consideration
of this issue under the heading of "Rolling Revaluation"
it was concluded that such a system would be more complex and
less transparent than the existing five-yearly cycle on the current
basis.
We do not believe that the DETR would be the most appropriate
sponsor department for the VOA.
The five-yearly Review has concluded, and Ministers have
agreed, that the Valuation Office should continue as an Agency
of the Inland Revenue: but a new Advisory Board is being set up
with representation from DETR and the National Assembly of Wales
to ensure more integrated oversight of the Agency's funding, strategies
and service delivery.
The Sub-committee would also like to be informed on measures
taken to address the computer software problems which hampered
the updating of the Rating List and when these problems are expected
to be overcome, and the reasons why timeliness in 1999-2000, on
the original indicator, only improved to 79 per cent.
The results of the new timeliness indicator have been published
in the Agency's Annual Report for 1999-2000 alongside the result
of the original timeliness indicator (see Annual Report page 36).
The indicator calculated by the original formula shows a marginal
improvement from 77 per cent to 79 per cent. This still reflected
the problem of updating the Rating List which was rectified with
effect from 1 April 2000. It is now possible to run the batch
process for updating rating lists as often as required, rather
than solely at predetermined intervals. The result compares with
91 per cent under the new indicator which covers a wider range
of transactions with the public.
THIRD REPORT,
1999-2000: THE INTERNATIONAL
MONETARY FUND
The issues raised in the Third Report will be covered in
the second Annual Report to Parliament on the UK Operations at
the IMF, which will be published shortly.
FOURTH REPORT,
1999-2000: THE PRIVATE
FINANCE INITIATIVE
The Government undertook:
— to consider how to improve the clarity of treatment
of risks and benefits in the constructions of the PSC and the
assessment of vfm.
The Treasury is reviewing its general guidance on Appraisal
and Evaluation in Central Government (the Green Book), not least
with a view to making it more user-friendly. The guidance on constructing
public sector comparators will then be reviewed in line with the
Green Book.
— to consider with PUK cost-effective ways ensuring
that lessons from on-going projects are passed back to departments
considering new projects.
OGC has already asked PUK to review and where appropriate
update guidance on contract standardisation following experience
since it was published last year, and to undertake work on identifying
successful PFI examples of the development of long term strategic
partnerships in IT procurement.
— to work with departments to access how staff
relations in PFI projects develop over time.
OGC will take work forward in the context of a wider on-going
evaluation of the effectiveness of PFI projects in delivering
improved public services throughout their lives.
— to put in place arrangements to ensure that
the OGC can continue to access the experience and skills available
in PUK.
A framework agreement will be drawn up to ensure that OGC
can continue to access PUK's experience and skills.
FIFTH REPORT,
1999-2000: THE 2000 BUDGET
The Committee requested that the Treasury monitor, as information
becomes available, the burden on employers of paying tax credits.
The Inland Revenue has put in place a comprehensive programme
to monitor and evaluate the Working Families' Tax Credit and the
Disabled Person's Tax credit. As part of this evaluation, Inland
Revenue is carrying out some research with employers which will,
amongst other things, seek to identify and quantify the extent
of any additional costs faced by employers in paying these tax
credits. The findings of this research will need to be seen in
the context of the wider package of measures that the Government
has introduced, such as the reform of employer National Insurance
Contributions.
We would like to see in future Red Books information on the
effect of the Budget measures as a whole, including direct and
indirect tax measures on (a) households grouped by income decile
and (b) different types of household.
As the Government made clear in its response to the Committee's
report, it is committed to continue producing a range of meaningful
statistics that show the impact of the Budget on different types
of household.
October 2000
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