Select Committee on Treasury Minutes of Evidence

Memorandum submitted by HM Treasury

  At the hearing of the Committee on 17 July, Treasury officials undertook to provide notes on: the composition of the £2.8 billion fall in the 2001-02 Public Sector Net Investment estimate between the Budget and the Spending Review; the 2001-02 underspend by the Department of Education and Skills; and audit and accountability arrangements for hospitals and Primary Care Trusts. These are enclosed.

  On 18 July, the Chancellor offered notes on historic trends in Council Tax rises, and on MP's pension arrangements. We will come back to you with these during the Recess.

  We also promised clarification on the arrangements under which the three White Papers relating to the Spending Review were published. New Public Spending Plans 2003-06 (Cm 5570), Public Service Agreements 2002-06 (Cm 5571) and Public Expenditure 2001-02, provisional Outturn (Cm 5574) were laid before both Houses shortly before the Chancellor completed his statement on 15 July. Cm 5570 and Cm 5571 were available to Members from the Vote Office at the conclusion of the Chancellor's speech. The Treasury intended CM 5574 to be available at the same time but unfortunately The Stationery office were not able deliver printed compies to the Vote Office until the following morning, due to the large quantity of material associated with the Spending Review.

  The Treasury very much regrets that all three White papers were not available on the afternoon of 15 July and appologies for any inconvenience caused to members. I should however explain that the figures for the aggregate provisional outturn for 2001-02 by department in Cm 5574 are exactly the same as in Table B4 of Cm 5570. There is therefore no new information on aggregate departmental underspends in CM 5574 which was not already in the public domain.

23 July 2002


  The estimate of public sector net investment (PSNI) outturn in 2001-01 published at the time of the Budget was £12.0 billion. At that point in time there was only limited information on investment in the first quarter of 2002, especially for local authorities and public corporations.

  ONS published the first full data for the public finances in 2001-02 in their quarterly Public Accounts first release on 28 June. This showed a substantially revised estimate of PSNI in 2001-02 of £9.2 billion— £2.8 billion below the first estimate.

  This £2.8 billion is made the first estimate.

    —  £0.8 billion increase in the ONS estimate of public sector depreciation; and

    —  a £2 billion reduction in public sector gross investment made up as follows:

—  £0.8 billion reduction in local authority capital expenditure and £0.4 billion reduction in public corporation capital expenditure—making a total of £1.2 billion. These estimates are still very provisional and may well be subject to further revision;

—  a £0.5 billion reduction in central Government capital expenditure, although the Treasury's estimate of capital DEL outturn fell by only £0.1 billion between the Budget and the Spending Review; and

the remaining £0.3 billion is accounted for by an ONS reclassification of surplus received from the National Coal Board pension scheme as a capital receipt, which offsets capital expenditure.

  Capital DEL published at the PBR was £24.9 billion. This fell to £24 billion by the time of the Budget and to £23.9 billion in the Spending Review.


  Figures in tables 1 and 1A of PEOWP published on 15 July show:

    —  DfES underspend during 2001-02 of £1.246 billion;

    —  of which £836 million is resource and £410 million capital;

    —  these figures are derived by subtracting the provisional outturn from final DEL in the tables.

  A figure for original DEL—as published in the March 2001 Budget—is aso shown in the tables. After the Election, various machinery of Government changes—including transfer of employment policy to DWP—mean that this "oringinal DEL" was cut. At the same time DfES drew down some of the previous years' underspend to increase their DEL to cater for prevailing budgetary needs. There were also other small changes. These were all given in PQ answers on 28 November, 14 February and 21 March.

  The "final DEL" figure—published in the PBR in November 2001—is the new, adjusted, sum against which the outturn can be compared to get the underspend. It is not meaningful to compare original DEL with the provisional outturn.

£ million(1)
to DEL
Final DEL
(2) + (1)
al outturn
(2) + (1)
Resource18,944¸1,553 17,39118,555836
Capital2,639+274 2,9132,503410
Total DfES DEL21,583¸1,279 20,30419,0581,246

  Note: a first provisional outturn was given in the Budget this April—a figure of £19.5 billion, which implied underspend of £800 million. The revised figure is £19.1 billion giving new estimate for the in-year underspend of £1.2 billion.


  The new single Commission for Healthcare Audit and Inspection will bring together the health value for money work of the Audit Commission, the work of the Commission for Health Improvement and the private healthcare role of the National Care Standards Commission. The new single Commission will have responsibility for inspecting both the public and private health care sectors. Its principal roles will include:

    —  inspecting all NHS hospitals;

    —  licensing private healthcare provision;

    —  conducting NHS value for money audits on a national basis;

    —  validating published performance assessment statistics on the NHS, including waiting list information;

    —  publishing star ratings for all NHS organisations with the ability to recommend special measures where there are persistant problems;

    —  publishing report on the performance of NHS organisations both individually and collectively;

    —  independent scrutiny of patient complaints; and

    —  publishing an annual report to Parliament on national progress on health care performance and how resources have been used.

  The Audit Commission will continue to be responsible for appointing external auditors to NHS bodies, to carry out annual financial audits. CHAI will work with partner organisations, including external auditors, to provide a system of regulation and improvment that is integrated, efficient and that commands the confidence and respect of patients and users of services and the organisations it inspects.

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Prepared 12 December 2002