Examination of Witnesses (Questions 260
- 279)
TUESDAY 23 APRIL 2002
MR GUS
O'DONNELL, MR
NICHOLAS MACPHERSON,
MR NICHOLAS
HOLGATE, MR
ALEX GIBBS
AND MR
JOHN KINGMAN
260. And how much value to the UK economy did
that review show that this relief would have?
(Mr Gibbs) I cannot put a number on it, I am afraid,
I do not remember it.
261. You came up with a number?
(Mr Gibbs) I cannot remember. What it did show is
that the relief had succeeded in many ways in meeting its original
objective. One year on we have got new evidence that it is also
supporting lots of TV programmes. I do not think there is any
inconsistency between that.
262. Through the Chairman, before I ask my last
question, could I ask whether we could have a note on that economic
evaluation because it seems to me it is extremely important that
we should know how much this tax has benefited the UK and how
much it has cost.
(Mr Gibbs) We would be happy to give you a note on
the effects of the film tax relief.
263. Turning to a last question on the reduced
rate of duty on small breweries?
(Mr Gibbs) Me again.
264. What economic evaluation have you carried
out into the benefit of reduced rate of duty on small breweries?
(Mr Gibbs) Customs & Excise have done a lot of
work. We have worked with them on this. We have had a lot of discussion
with the sectors of the brewing industry that would be most affected.
265. Have you carried out any economic evaluation
of the benefit of this measure?
(Mr Gibbs) I think it depends what you mean by an
"economic evaluation". What we have done is try to assess
the need for the measure in terms of the structure of the brewing
market
and—
266. What is the rationale for the measure?
(Mr Gibbs) The rationale is to help the smallest brewers
compete with larger brewers and so to promote diversity in the
brewing industry.
267. And this should be extended to many other
sectors, should it, whether small cheese manufacturers or—?
You favour the general principle that the tax burden should be
lighter on small producers than on large producers?
(Mr Gibbs) I do not think we have a general principle
in that area in one direction or the other but it is the case
that 20 years ago under the UK Presidency of the EU the then Financial
Secretary of the Treasury negotiated into EU law provision for
a small beer duty relief for small brewers on the basis that both
in the UK and overseas it is the case that small brewers face
particular problems in gaining access to the market, principally
because they find it hard, even though most consumers say they
produce a very good product, getting anybody to distribute it
and sell it.
268. Are you concerned that implementing these
types of measures leads to seven pages which are down on the Order
Paper, descriptions of small breweries, definitions of co-operative
breweries and so forth? Are you getting worried that this is leading
to further complications in the tax system and, who knows, maybe
even more loopholes that you will have to close in future years?
(Mr Gibbs) I think the relief, as I understand it,
has been very tightly defined.
Chairman
269. What percentage by volume of the beer sold
in this country will be subject to the low rate?
(Mr Gibbs) I think I have the number somewhere but
I am afraid it has slipped my mind[2].
270. Could you reflect on it and we will go
on to the next section and then come back.
(Mr Gibbs) From memory I think it is in the low single
figures of percentage. I will see if I can find it.
(Mr O'Donnell) We would hope for a behavioural effect
here, that it might increase.
271. It is a populist measure then, is it?
(Mr O'Donnell) It is a measure that we hope will be
responded to.
Chairman: Okay. We have got ten minutes
left, we will move on to health spending.
Dr Palmer
272. I was going to ask one more business question
but in view of your comments I will go straight on to health.
The Wanless report notes that in regard to health spending "the
range of uncertainty is large and grows rapidly the further ahead
one looks". How much confidence do you actually place in
the figures suggested by Wanless?
(Mr Macpherson) We think this is a good report. It
reflects extensive analysis. I think most people agree that it
has gone into greater detail in terms of making a long-term projection
of health spending than any attempt hitherto. It is also worth
bearing in mind in looking at the report in April that there was
also an extensive interim report last November. I think we attach
reasonable confidence to it. Having said that, of course we have
only set plans for the next five years. The Wanless review does
produce wider confidence intervals in terms of the various different
scenarios it sets out as you go into the future, so whereas for
the first five years the confidence margin is actually pretty
narrow, by the time you are getting up to 2022 quite rightly it
suggests a rather wider margin.
273. One aspect which has not had a great deal
of publicity is the fact that Wanless places, I think rightly,
great emphasis on public health education, on the behaviour of
individuals. One thing he does not do is actually predict which
of these three scenarios is likely to happen. Also he does not,
as far as I can see, set out ways in which the Government can
influence which scenario is going to happen. Which scenario do
you think will happen?
(Mr Macpherson) I think Wanless in a sense has laid
down a challenge for Government at various levels to actually
respond to this. It is quite clear, it came out in the consultation
period since November, that a lot of the experts think that this
is an area which can yield a pretty big return. It is one reason
why in terms of the various PSA targets which the Department of
Health have we attach quite considerable importance to health
inequalities. It is very striking that it is amongst lower socio-economic
groups that actually the greatest gap can be made up if we want
to come up the health outcome performance of comparable European
countries. If you look at Sweden, for example, which on the whole
is a more equal society than the United Kingdom, the health outcomes
are very much more impressive across the board.
274. Would you go as far as to say, in fact,
that because the Treasury is obviously anxious to get value for
money that one of the major points in discussing the increased
budget for the Department of Health would be that a significant
proportion of this new spending is spent on moving to the more
favourable scenario, in other words promoting public health?
(Mr Macpherson) I regard that as a very high priority.
If you look at—I cannot remember what it is called—the
fully engaged scenario, it is desirable on just about every front.
For a start it actually has better outcomes, people live longer
and they live more healthily, so that is pretty desirable, and
we make serious progress in terms of the anti-smoking strategy.
I think from the Treasury perspective you will be astonished to
hear that we are particularly attracted to the scenario on productivity
where you get far better productivity gains both in the first
ten years but, looking further forward with this engagement on
all fronts, even better results in the second decade. We are actively
engaging with the Department of Health and their Secretary of
State made a whole raft of announcements last Thursday with which
we fully concur. Reform is critical to this process. The more
we can make progress in terms of creating an even better managed,
even more dynamic National Health Service, the better return in
outcomes we will get for a given sum of money.
275. Just pressing you very slightly more, we
would all agree with that but would you actually say that this
is a specific objective which you are asking the Department of
Health to reach to maximise the chance of the fully engaged scenario?
(Mr Macpherson) What we are doing with the Department
of Health over the next two or three months is finalising the
Public Service Agreement which will be announced at the finish
of the Spending Review. Although I suspect we will not articulate
the fully engaged scenario as a specific target because it is
actually rather long-term, I hope that it will certainly inform
the sort of targets we agree with the Department.
Mr Beard
276. The Wanless report says "The Review
believes that its projections for UK real terms spending growth
of 7.1 to 7.3 per cent over the next five years are at the upper
end of what could sensibly be spent. Indeed, to be wisely spent,
they would represent a very considerable management challenge".
How are you going to ensure that these very big increases are
wisely spent? How are they going to be spent? How is it going
to be divided between salaries, replacement costs and new investment?
Especially, if I may add, as you have just had three years where
under spending has been a characteristic of the Department and
other public service departments.
(Mr Macpherson) I do not think that has been the case
with the Department of Health recently. Clearly this is a large
amount of money and the Treasury, as the representative of the
taxpayer, is extremely keen to get the best possible deal for
it. Over the next couple of months we are going to be agreeing
with the Department of Health its new Public Service Agreement
which will set out clear targets and we will also be agreeing
a Departmental Investment Strategy to ensure that the really very
big increases in capital spending get a decent return. In terms
of how precisely the money will be allocated, I think that will
be decided later in the year. I do not think that Alan Milburn
has yet made an allocation, but there are certain key principles
which are going to inform how money is allocated. The first is
that we are moving to a National Health Service where power over
delivery is increasingly devolved. Some people argue that the
old NHS was consistent with a Stalinist approach to life. Well,
we are moving away from that and a lot of money, something like
75 per of funding, is going to go through primary care trusts
at local level.
277. In that case although you have the PSAs
which will define where it should be going, are we likely to end
up this time next year looking at PSAs and saying "Whoops,
we have only half spent it." How are you going to ensure
that in the meantime you have got the management expertise and
systems in place where you are going to be spending consistently
and not just wringing your hands at the end of 12 months when
it has not been spent?
(Mr Macpherson) I think you are quite right to raise
that issue. The Health Service at a local level is going to be
increasingly incentivised to deliver those targets. It is striking
that in the year just finished it did hit its waiting times targets
in terms of a 15-month wait for an operation in the hospital,
but there is a lot more to be done. Through the reforms I think
we will make quite rapid progress because people will be increasingly
incentivised.
278. What does "incentivised" mean?
(Mr Macpherson) One example is greater freedoms which
are going to be given to high performing trusts (three star trusts)
which will have far more freedom in terms of allocating their
money. We are also moving to a more efficient system across the
Health Service in terms of money following the patient. There
are various pilot schemes to introduce greater choice within the
Health Service and, as part of that, money will follow the patient
to the most efficient and high-performing trusts.
279. These are all general principles. Who in
any particular district or hospital or primary care trust is going
to be accountable not just for making sure that nobody has got
their fingers in the till but for making sure that they have fulfilled
what the money was intended to do?
(Mr Macpherson) The new strategic health authorities
are going to have a key role in terms of holding local hospital
trusts and primary care trusts to account. They will be helped
by a new and strengthened independent Audit and Inspection Commission,
which I think will give the public far greater information in
terms of what is going on in their area. Ultimately it is going
to be the public that is going to hold a lot of these institutions
to account and one of the key planks of the reform process is
greater public engagement.
2 Note by witness: The Treasury estimate that
2 per cent by volume of beer sold in the UK will benefit from
the relief. Back
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