Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 640 - 659)



  640. Of course one can understand that, one can see that the Treasury would want to meet the person or people from the tax and revenue raising department.
  (Sir Andrew Turnbull) Yes.

  641. It seems to me either there is some kind of chain of command, and that I can understand, and a proper system of accountability there or not. If there is not, is there a point in having duplication?
  (Sir Andrew Turnbull) If there is a formal chain of command it goes from Ministers to the Revenue but when the advice comes up on a particular tax proposal, it has to be technically sound, it has to be deliverable, it has to work but also it has to conform and generate the right economic incentives.

  642. Of course I understand that but the question really is where does the buck stop? Where does the final responsibility lie? It lies with the Chancellor.
  (Sir Andrew Turnbull) Yes.

  643. The Chancellor, his department is effectively the Treasury. Therefore, presumably—
  (Sir Andrew Turnbull) No. The Chancellor has six or seven departments, yes, they are his departments. That is what we call them. When we group the annual report you will see "This is the annual report of the Chancellor's Departments". Plural.

Mrs Blackman

  644. This Tax Policy Unit, is that responsible for making the analysis or giving advice on the interaction of a particular tax with other taxes that operate? Is it responsible also for giving advice on the effect that the politicians want to achieve on people or sectors of the population, the population at large? Is that what the Tax Policy Unit does? People like the Revenue give a more mechanistic view of whether it will work in terms of collection. I am not quite sure of the division of labour between the two.
  (Sir Andrew Turnbull) I think we will probably say that we have the superior economic analysis. On the other hand, at the end of the day what goes to the Chancellor is the joint product of what comes from the Revenue and what comes out of the tax policy team.

  645. I understand that but if you could just more clearly spell out the dividing line between the two?
  (Sir Andrew Turnbull) I thought that was what I did a couple of minutes ago.

  646. Could you just remind the Committee?
  (Sir Andrew Turnbull) They have basically the command of the tax law and they are the experts on that, also, they have the delivery mechanisms. Can this tax be delivered? Is it consistent with our international obligations which becomes increasingly important.

  647. We are talking here about the Tax Policy Unit at the moment, are we?
  (Sir Andrew Turnbull) No, we are talking about the departments, the revenue departments.

  648. We are talking about the revenue departments.
  (Sir Andrew Turnbull) If you want to look at what would the impact of this be on the economy as a whole, or the manufacturing sector, or the financial services sector, that is something where we think we have some additional expertise or, increasingly, in terms of the distribution where there is a big poverty agenda: what is the impact of the change we have made in National Insurance contributions, the Working Families Tax Credit? We have set up a team, Work Incentives and Poverty Analysis, specifically to look at the combined impact of everything the revenue departments are doing and also other things that are coming out of the Social Security system. We are able to link those two things together, not just what is happening in the revenue departments but what is happening elsewhere in Government as well.

  649. That is highly specialised work. In that unit, approximately how long do Treasury employees stay before they move on to other units? Is there a policy within the Treasury to give everybody some experience at different desks or units?
  (Sir Andrew Turnbull) Our graduate recruitment we move round quite rapidly in the sense of two or three years.

  650. They will move on to something entirely different?
  (Sir Andrew Turnbull) Yes.

  651. Do you think that is the most sensible approach given the complexity of the work that is required of the unit?
  (Sir Andrew Turnbull) Yes. If they were trying to duplicate the revenue departments' detailed knowledge of the tax system, no, it would not be, but that is not what we are asking them to do. We are asking them to bring perspective. The fact that some come into the tax policy team, have actually worked on the expenditure side of the Treasury, or have worked on the productivity agenda, is actually beneficial. That is the distinctive advantage that the team can bring. If you are purely trying to maximise the expertise you keep people there a long time, but that is what the revenue departments' people do and they do not move with the rapidity that people do in the Treasury because they want to be absolutely in command of the technical basis of the tax.
  (Mr Culpin) Can I just add one thing to this because this question of our expertise is quite serious. I run these teams. At the moment I have one person there on secondment from Arthur Andersen and I have three people there who have come to us through the Institute of Fiscal Studies. I have lost count but there are about four people from the Inland Revenue and Customs. I have some people who know the Treasury. We have divided the work up into three different streams. One is concerned with the international negotiation of the very, very biggest tax issues, of which the principal one has been the argument about the withholding tax leading to the Exchange of Information Agreement in Europe. One team is almost entirely concerned with the development of new taxes to meet the Government's environmental goals to help us shift from taxing goods to taxing bads. The other is concerned with the generality of the tax system. Although all of these groups are in the Treasury it would be quite misleading to you to describe them as if they are only staffed with Treasury lifers. The other way in which we make sure that we have people who know what they are doing is to bring in people on secondment from other bodies in both the public and the private sectors.


  652. Mrs Blackman has five minutes to get through two or three questions. If she does not get through them and there are one or two we want to come back on, maybe we can write to you.
  (Sir Andrew Turnbull) Yes.

  Mrs Blackman: Okay, I will leave that one.


  653. We have the Chancellor downstairs in a few minutes.
  (Sir Andrew Turnbull) Yes.

  Mrs Blackman: I might want to ask some questions on that issue afterwards.

  Chairman: Absolutely.

Mrs Blackman

  654. Sir Michael Partridge told this Committee that the Treasury has a general bias against National Insurance and is in favour of means tested benefits and that this has influenced recent policy changes. Would you say that is a particularly fair characterisation?
  (Sir Andrew Turnbull) I do not know if we have a bias against National Insurance because we have maintained this system for 50 years. There is still an important contributory element, the benefits you get depend on the contributions that you make and your contribution record. We see value in that. We have a requirement also to ensure that benefits get to those who need the most. This is a historic tension. We have tried to design systems which are targeted but do not suffer the two defects of means testing which are the process of means testing itself. Things like the Working Families Tax Credit and the Pensioner Credit will be designed in ways which try to keep this as a process that people are prepared to go through. We have got to try, also, to deal with the incentive effects, that if you withdraw benefit as people's other income grows, you create adverse incentive effects. We have done a lot of work to reduce the number of people who are affected by the most severe combined withdrawal rates. When Michael Partridge talked about means testing, he was implying that we are still doing it by the same methods as we were 20 or 30 years ago. The Working Families Tax Credit and the Pensioner Credit to come will not be means testing of the same kind, there will be different ways of doing it.

  655. Okay. The Cabinet Report Wiring It Up made the recommendation that some kind of statement be made between the Treasury, the Cabinet Office and the Prime Minister's Office to set out how the three offices relate and interact. Where are we with that?
  (Mr Gieve) We are hoping to publish it before Christmas.

  Mrs Blackman: It is imminent.

  Chairman: Before Christmas.

Mrs Blackman

  656. It is at the publishers?
  (Mr Gieve) It is not quite at the publishers but we hope to put it out on the web before Christmas, whether we actually get a printed version out—


  657. Stick to your first answer.
  (Mr Gieve) That counts as publication, putting it on our web. We will send you a copy.

Mrs Blackman

  658. Thank you. In the meantime perhaps you can paraphrase what it says?
  (Mr Gieve) No. It is quite long.

  659. Are there any major conclusions?
  (Mr Gieve) It attempts, as a matter of fact, to set out what the different departments do and as far as the Treasury is concerned, it will not I hope have any surprises for you and will reflect the evidence we have given you.

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