GOVERNMENT RESPONSE TO THE THIRD REPORT OF
THE TREASURY COMMITTEE, SESSION 2000-01 (HC 73)
(a) We recommend that the Treasury review its
staffing level, particularly the number of staff devoted to the
control and monitoring of public expenditure (paragraph 6).
The staffing of the Treasury is regularly reviewed
in the light of the demands on the Department.
(f) We recommend that, at the strategic level,
the Treasury gives greater attention to ensuring that it gets
the balance right in its co-operative workings with other departments
(r) We recommend that the Government publishes
a formal statement of the relationships between the Treasury and
other departments, particularly in relation to public expenditure
control and micro-economic policy (paragraph 48).
The objectives of the Treasury and other Departments
are set out in the Public Service Agreements (Spending Review
2000: Public Service Agreements 2001-2004, Cm 4808). The relationship
between the Treasury and other Departments is set out in A Guide
to the Centre of Government, (see paragraph 8 below). The formal
division of responsibilities for expenditure is set out in Government
Accounting and the Resource Accounting Manual.
The Treasury has promoted joint working between departments
with fifteen cross-departmental reviews organised as part of the
2000 Spending Review. Separate PSAs were published for five areas
of cross-departmental work and a number of other targets are shared
by more than one department. In the 2002 Spending Review, this
work will be built on in two ways: first, the Government is reviewing
the fifteen reviews done last year to assess progress and to identify
areas for further work or changes; second, an additional seven
reviews were selected, to be completed in early 2002, that will
provide solutions for more efficient use of resources and more
effective provision of service. The reviews will be reflected
by departments in their individual spending plans, pooled budgets
(where appropriate), and Public Service Agreement targets.
(h) We recommend that the Government should be
clearer about the incentives and sanctions associated with the
PSA system (paragraph 31).
A department's performance against its PSA targets
is one of a number of factors taken into consideration during
a Spending Review. PSAs form a cornerstone of performance management
systems throughout Government. Better performance management is
a theme of Civil Service reform. Each PSA includes a section setting
out who is responsible for delivery of each target stating where
certain targets are the joint responsibility of more than one
Minister. Within a department responsibility is delegated by the
accountable Minister through a cascaded structure of targets for
each business unit, sub-unit and individual.
(j) We remain strongly of the opinion that the
assessments of departments' performance against their PSA targets
should be the subject of external review, by a body accountable
to Parliament, such as the National Audit Office, the Audit Commission,
or another body, rather than the Government. We recommend that,
if the Government appoints an external auditor of its PSA targets
as we suggest, the auditor should publish a concise annual report
showing the progress made against targets by every department
and making recommendations for improvements (paragraph 33).
(k) We recommend that, even if the Government
decides against appointing an external auditor for the whole PSA
system, the measurements of performance against the Treasury's
own targets should be externally validated (paragraph 34).
As was noted in evidence, the auditing of PSA performance
has been considered by Lord Sharman's review of Accountability
and Audit in Central Government. The Government is committed to
ensuring that PSA targets provide high quality, reliable information.
The Technical Notes, which have been published for each PSA setting
out how each target will be measured and assessed, contribute
to this aim. In its evidence to Lord Sharman the Government said
that the introduction of some form of independent validation would
help provide assurance on the quality and integrity of the PSA
data. A Treasury-led working group, including representatives
from the National Audit Office and the Audit Commission, will
be developing details on how external validation of the data systems
underlying PSA targets might be implemented.
Progress against PSA targets is already reported
in departments' annual reports.
(m) We are concerned that the Treasury's role
within Government in respect of the monitoring of PSAs is too
powerful (paragraph 36). We recommend
that the Public Services and Public Expenditure Cabinet Committee
be reconstituted so that its dominance by Treasury Ministers is
reduced (paragraph 38).
Reports of performance against PSA targets are published
in annual departmental reports. It is therefore open to anyone,
including Parliament and the public, to assess whether departments
are achieving their objectives. At the centre the Treasury works
with the Cabinet Office to monitor performance against PSA targets
and form a joint secretariat for PSX. PSX and the Treasury also
work closely with the Prime Minister's Delivery Unit, which focuses
on the key areas of education, health, crime and asylum, and transport.
The membership of Cabinet Committees is a matter for the Prime
(o) The capacity of other departments to help
the Government set strategic priorities and to monitor the performance
of departments should be strengthened (paragraph 42).
The Prime Minister's office and the Cabinet Office,
including its Performance and Innovation Unit, have important
roles to play in the setting of the Government's strategic agenda.
As described in paragraph 5, the Prime Minister's Delivery Unit
plays an important role in monitoring performance in key areas.
A description of the respective functions of the three departmentsA
Guide to the Centre of Governmentwas published in January
2001 and is available at http://www.cabinet-office.gov.uk/roleofcentre/.
This document is being revised to reflect the new organizational
structure of the Prime Minister's office.
(p) There may be good reasons for the revenue
departments to retain significant expertise in tax policy, but
we are convinced of the need for the Treasury to build up its
own capacity to analyse detailed tax issues and to take a more
strategic view of the tax system and of the impact of taxes on
the economy than hitherto. We recommend that, in response to this
Report, the Treasury informs us of what action it intends to take
in response to the peer review of the Inland Revenue's policy-making
capacity (paragraph 45).
(q) We firmly believe that in the area of tax
policy the Treasury could do better. We recommend that the Treasury
give more attention to this area in order to ensure that the tax
system is "fair and efficient", one of the Treasury's
PSA objectives (paragraph 46).
(t) We recommend that the Government clarify the
relationships between Treasury officials and the officials who
staff the Chancellor's other departments (paragraph 51).
Inland Revenue and Customs and Excise are separate
Government departments, reporting to the Chancellor of the Exchequer
and Treasury Ministers. They have lead responsibility for advice
to Ministers on policy in respect of the taxes they administer.
The Treasury works closely with the responsible departments but
does not seek to duplicate their expertise. Its role is to co-ordinate,
to take an overview of tax policy, and to ensure consistency with
other areas of Government policy. Greater intervention by the
Treasury in the details of the Revenue Departments' policies would
be inconsistent with the more strategic role for the Treasury
which both the Government and the Committee support. The peer
review of Inland Revenue policy-making relates to the detailed
delivery of that department's responsibilities. Responsibility
for responding to it will therefore fall to the Inland Revenue,
not to the Treasury.
(s) It is our view that departmental Select Committees
would benefit from relevant evidence from the Treasury on its
relationships with other departments. We hope that, in the next
Parliament, arrangements will be made defining how and when the
Treasury should give such evidence. We can see that Treasury Ministers
and officials could be overwhelmed by too many such requests for
evidence, but there needs to be a recognition that the Treasury
shall give evidence on appropriate occasions. A protocol should
be devised by the Liaison Committee to set out the ground rules
While Treasury Ministers and officials have given
evidence, both orally and in writing, to several select committees
of both Houses in the last Parliament and in the present Parliament,
the Treasury would not expect to give evidence on issues for which
Ministers in other departments are answerable to Parliament.
(u) The Treasury has a duty to Parliament to provide
helpful, timely answers to questions tabled by Members. We recommend
that the Treasury reviews its policy on answering parliamentary
written questions, with a view to improving its performance (paragraph
The Treasury's performance in answering Parliamentary
questions on time has improved considerably since the 1998-99
session and the department is meeting its PSA targets in this
area. In 1999-2000, 59 per cent of named day written questions
were answered on the nominated day and 72 per cent of ordinary
written questions were answered on time, as were 89 per cent of
House of Lords written questions. The figures for 2000-01 were,
63 per cent, 77 per cent and 91 per cent and those for the present
session to date are 72 per cent, 81 per cent and 94 per cent,
(v) We have given our suggestions for improving
the scrutiny of PSAs. We believe that the new procedure for dealing
with resource accounting and budgeting also allows for improved
scrutiny if Select Committees make best use of it. We also support
the Liaison Committee's proposals for strengthening the Select
Committee system. We trust that proposals to make a reality of
these improvements in parliamentary scrutiny will be devised by
the Modernisation Committee and quickly brought before Parliament
(w) Parliament lacks the resources necessary to
hold the Treasury fully to account. Parts of the Treasury's work,
such as on the tax system, are inadequately scrutinised, while
other aspects, such as the Treasury's influence over other departments
in relation to public expenditure, are hidden from our view. We
strongly support the calls by the Liaison Committee and others
for the House to employ more permanent staff to help Parliament
better hold the Treasury to account (paragraph 57).
The Government has welcomed the contribution made
by the Treasury, Public Accounts and Liaison Committees to the
move to resource accounting and budgeting. It agrees with the
Committee's observations about the potential improvements in scrutiny
made possible by the change. The substance of these recommendations
is, however, a matter for Parliament.
(y) We can see that the appointment of Ms Margaret
Exley as a 'non-executive director' is an interesting experiment
in obtaining an outsider's view and advice on management issues.
We are not convinced that the title 'non-executive director' is
an accurate description of this role and indeed it may be confusing.
In any event, we recommend that the Treasury's annual report to
Parliament should include an account of the role and activities
of anyone who occupies this position in future (paragraph 59).
A brief statement about the Treasury's non-executive
Director was included in last year's Departmental Report.
(z) We recommend that the Treasury draws up an
action plan to improve the department's culture and working conditions
and to ensure that the targets set for the representation of women,
people with ethnic minorities and people with disabilities are
met. This action plan should have a Board level sponsor and an
update on progress should be published regularly; amongst other
benefits this would facilitate parliamentary scrutiny (paragraph
Treasury's Management Board is well aware of these
issues and has been pursuing them with commitment for some time.
A key step was the production, in December 2000, of a strategic
management plan called Change in the Treasury. It was underpinned
with further plans in specific areas, some of them of longer standing.
These include a Career Deal for Treasury staff; action plans on
issues such as diversity and stress in the workplace; and a PFI
deal for improving the Department's accommodation. Delivery against
these plans has been under way for some time, and they are already
having effect. A second edition of Change in the Treasury was
produced in July 2001.
A description of the Treasury's management is provided
to Parliament each year in the Departmental Report. Future editions
will pay particular regard to the issues raised by the Committee.
(aa) The Treasury told us that, in terms of construction
costs, the present deal for the refurbishment of the Treasury
building was cheaper than either the previous deal or the rejected
Scheme A and the discounted cost of the new deal is significantly
lower than the Public Sector Comparator (paragraph 72).
(bb) The Treasury had an excellent opportunity
in the refurbishment of its own building to set an example of
best practice in the development of PFI projects. We invite the
Treasury to take this opportunity to explain why it revived a
version of the original PFI deal with the original private sector
partner without a fresh tendering process and to report on the
progress of the project (paragraph 73).
Ministers suspended negotiations with Exchequer Partnership
Plc (EP) in July 1997, considering that the structure and scope
of EP's proposals needed further development. At Ministers' request,
officials then embarked on a review of the available options.
Following this review, Ministers concluded that a
resumption of the PFI project with EP offered the best way forward
in value for money terms. They therefore announced on 8th October
1998 that discussions with EP were being formally reopened to
explore whether a basis could be found for developing the earlier
PFI proposals. Ministers were satisfied that the scope of the
project remained consistent with the terms of the original competition
launched in June 1995, and that discussions with EP could therefore
continue without the need for a further competition. Details of
the contract were announced by the Chief Secretary on 5 May 2000
The NAO has recently produced a report on the separate
funding competition for the project. This found the Treasury had
achieved its objectives and the competition resulted in savings
of £13 million in npv terms over the life of the contract.
Work commenced on site in July 2000 and is progressing
well. EP is on track to complete the works by the contracted date
and the Treasury will move in next summer.