APPENDIX 2
INFORMATION REQUESTED BY THE TREASURY COMMITTEE
AT HEARINGS ON 23 & 24 MARCH 2004
1) A note on the AME margin and the golden rule
(see Qq 173 & 339 of HC 479-II)
Budget 2004 reset the AME margin in accordance with
usual practice. The effect of resetting the AME margin on Total
Managed Expenditure (TME) is shown in Table C11 of Budget 2004
and the effect on public sector net borrowing is shown in Tables
2.3 and 2.4. This is consistent with the approach taken in previous
Budgets and means the projections for the public finances fully
reflect all Budget decisions.
The AME margin acts as a buffer should outturns for
AME programmes exceed projections. There is, however, no presumption
that the AME margin will be spent. For most years since 1999-2000
(the first year for which AME forecasts were made) AME outturn
has been lower than originally forecast on a like for like basis
(i.e. after allowing for definitional changes, reclassifications
and policy measures announced subsequent to the forecast), usually
by a greater extent than allowed for in the AME margin. If the
AME margin is unspent the outturn for AME and TME will, other
things being equal, be lower than projected in Budget 2004.
The margin against the golden rule is the amount
by which the public finance projections can change while the Government
remains on track to meet the golden rule. Including the AME margin
provides a full and fair reflection of the margin against the
golden rule as the decision to reset the AME margin maintained
the same overall caution in the projections as a whole.
The golden rule has been consistently defined. It
is measured by the average annual surplus on the current budget
as a ratio to GDP over the economic cycle. Page 10 of Budget 1997
sets out figures for the current budget as a ratio of GDP from
1985-86 to 1996-97. Page 47 of the Economic and Fiscal Strategy
Report 1998 outlines progress against the golden rule from 1997-98
to 2003-04. Since then, the Government has continued to present
performance against the golden rule on the basis of ratios to
GDP.
Improving knowledge of the fiscal framework is important
to building a credible fiscal policy, and while being methodologically
sound, the concept of an average annual ratio expressed as a ratio
to GDP can be difficult to grasp. Presenting figures in terms
of billions of pounds is designed to help people understand the
scale of the margin against unexpected events.
The margin against the golden rule expressed in billions
of pounds was first used in the 2003 Pre-Budget Report. At that
time, the AME margin set in Budget 2003 had been fully used and
its inclusion or exclusion from the calculation of the margin
against the golden rule would have made no difference.
2) Details of successes from the devolving
business links pilots (see Q 285)
The 2002 Spending Review launched a pilot program
of devolved RDA-led Business Link services in the North West (NWDA),
East Midlands (EMDA) and West Midlands (AWM). Devolving decision
making 2—meeting the regional economic challenge: increasing
regional and local flexibility, published alongside Budget
2004, announced that the Government will devolve regional and
local Business Link services to the RDAs, with a framework for
selling national standards and services to be developed with the
Small Business Service, RDAs and other Government departments
funding business support and seamlessly integrated, from the customer's
perspective, with nationwide services such as www.businesslink.gov.uk'.
From April 2005, all RDAs will be granted responsibility for flexibly
managing the Business Link services in their areas so as best
to meet the needs of their region.
This note details examples of successes from the
Business Link pilot program and non-pilot regions.
The potential benefits of devolving the Business
Link network to RDAs, identified when establishing the pilots,
include better targeting of local barriers to enterprise, better
design and delivery of policies to address these barriers, and
better overall management of the Business Link network informed
by RDAs' greater local knowledge.
These anticipated benefits are now beginning to emerge.
The RDAs have been able to tailor regional and sub-regional delivery
within a national framework to reflect regional circumstances,
the priorities identified in their Regional Economic Strategies,
and where appropriate, combining the delivery of Business Link
services with other forms of business support, including support
for innovation and skills. The pilots are part of a process of
ongoing development, in which successes can be measured not only
in terms of outcomes but also through examples of good practice
that can inform future direction. The emerging findings of an
independent assessment of early progress in the pilots provides
some of the examples of success requested by the Committee.
The pilots have challenged the RDAs to bring together
the delivery of business support products available in a region.
By providing a single access point through the Business Link brand
there has been an improvement in the accessibility to business
support products for businesses. Integrating supply routes for
business support products has allowed the RDAs to take a more
strategic view of the products needed to stimulate enterprise
within the pilot regions. The independent assessors draft interim
report[6] states:
"The East Midlands pilot has focused on reviewing
Business Link delivery arrangements as part of a wider 'developmental
journey'... 'Business Services East Midlands' (BSEM), a new body
charged with the operation and on-going development of business
support in the region, will be operational from April 2004. It
will implement a new brokerage model, quality assurance protocol
and seek to align funding streams."
And in the North West:
"The pilot achieved early alignment of strategic
planning documents and a joint (regional) agenda through the ASP
Strategic Plan... Regional activity is focusing on the development
of a product catalogue as a means to reducing duplication and
inefficiencies. This is due to be produced by December 2004 and
will form the centrepiece of simplified routes to market. This
will also involve the separation of brokerage and delivery roles
for Business Links and the inclusion of the wider business support
network. There are proposals for institutional streamlining through
the merger of BLO areas and closer working in relation to European
funding."
This is expected to result in regional added value
in the North West region:
"Regional added value is primarily seen in
terms of tools, mechanisms and bringing about cultural change
in the 'back office'".
The pilots have also encouraged RDAs to look towards
maximising the long-term spillovers between enterprise and related
policy areas. This requires new ways of working and new relationships
to be formed between regional partners. Although this is necessarily
a measure of success that will be better measured over the long-term,
there is some evidence to suggest that the pilots have begun to
facilitate cross-regional partnership working and encouraged the
RDAs to focus on building sub-regional relationships with key
stakeholders:
"The North West Alliance for Skills and Productivity
(ASP) joint pilot covers the skills and business support agendas.
The pilot has invested significant time and resources gaining
buy-in through a number of iterations of its strategy".
In addition, the difficulties that the pilot regions
have faced provide valuable lessons which will inform best practice
in the devolution of the Business Link network as a whole. Specifically,
the pilots have highlighted the importance of effectively managing
contractual and administrative arrangements:
"The West Midlands pilot has focused on the
simplification of contractual arrangements, development of an
Enterprise Framework and the appointment of an Enterprise Board.
These are seen as developmental activities in the run up to transfer
of the SBS contract to Advantage West Midlands from April 2004.
This will add to the £40 million of AWM and Structural Fund
activity already delivered through Business Links and the pilot
will seek to build on strong joint working relations which already
exist in the region as a result of this".
The independent assessment also identified non pilots
regions that are making significant progress in improving services
for small businesses (Yorkshire and Humber through 'Customer First'
accreditation process) and increased coordination and cohesion
(North East's 'Area Brokerage Partnerships'). The pilots have
introduced a greater focus at the regional level on how the delivery,
impact and accessibility of services to both start-ups and established
businesses can be improved. The pilot program has succeeded in
focusing minds throughout the RDAs on the future of business support
in their regions. A number of the RDAs have examined the services
delivered in their own regions to consider whether their delivery,
impact and accessibility to both start-ups and established businesses
can be improved:
"The process of change in the North East
has been initiated with a series of regional summits which agreed
the need to develop a more effective and efficient service for
customers. Proposals now involve a new independent business-led
Network Board with licensing powers overseeing sub regional 'Area
Brokerage Partnerships'. Business Link is the preferred brokerage
brand, supported by a series of 'back office' developments including
new funding mechanisms, regional QA, mentoring and marketing initiatives.
Implementation will commence in April 2004, with one of the key
achievements to date seen as the role of the Network Board in
controlling the proliferation of new business support initiatives".
"Historically, the South East has enjoyed
good links between Business Links and SEEDA. In November 2003,
SEEDA made a commitment to endorse Business link as its preferred
delivery vehicle and also signalled its intention to take over
the regional SBS contract from March 2005. Partners in the region
are currently in the process of developing a model to reposition
Business Links in the customer relationship, with Implementation
Plans to be produced by Autumn 2004".
"Yorkshire and Humber is of particular interest
as it was identified in the Stage One (Baseline) report as the
nearest neighbour comparator in socio-economic terms for the pilots.
The region has been progressing developments as part of a Better
Deal for Business which builds on the 'Customer First' quality
assurance model in the region and a review of business support
in 2003. Customer First has been in development since 2000 and
now gives the region a mechanism to control the quality and consistency
of business support provision and referrals across the region.
'Better Deal for Business' will be implemented from April 2004
through three demonstration projects which will aim to prove the
effectiveness of a Business Link branded single gateway to signpost
provision, including workforce development."
However, although there are many positive signs of
progress in improving the co-ordination and coherence of business
support, including the management of Business Link Operators,
the independent research organisation which was commissioned to
produce the early qualitative assessment does conclude that the
early development stage has taken longer than expected in all
three pilot regions and that it will take some time for the full
benefits to be felt. For example, some of the envisaged benefits
of new contracting arrangements have yet to be realised and in
some instances achieving partner buy-in has taken longer than
anticipated. The clear message emerging from the assessment is
therefore that while the regions are potentially best placed strategically
to manage local delivery of business support, the RDAs will need
time and support to develop their capacity and capability to deliver.
The full findings from the independent assessment
of the Business Link pilots will be published by the Small Business
Service in the Spring.
3) Examples of the publicity that Inland Revenue
will use to encourage people to meet their tax obligations (see
Q 369)
The compliance package announced in Budget 2004 will
enable the Inland Revenue to identify and address areas of significant
non-compliance risk.
Additional specialist resources will be provided
to address high-risk issues involving large businesses and individuals
with substantial and complex tax affairs. Additional investment
will also improve detection of workers not registered for tax,
targeted at high risk areas including labour providers. Better
management and analysis of data will improve the deployment of
new and existing resources.
A further key feature of the package is the provision
of better information to taxpayers in areas of significant non-compliance
risk. This includes publicity to raise awareness of tax obligations,
the assistance the Inland Revenue can provide to help its customers
meet their obligations, and the implications of non-compliance.
Examples of this publicity include:
- Small Business and Business
Expenses—publicity
will be delivered through the established 'Working Together' arrangements.
The arrangements, bringing together the Inland Revenue and professional
tax and accountancy institutes (CIOT and ICAEW) receive widespread
coverage in tax publications, with information aimed mainly at
small and middle-sized accounting firms. The Inland Revenue will
write to small businesses, reminding them of their tax obligations,
offering support and advice and addressing frequently-asked questions.
- Employer Compliance Construction Industry—the
main publicity will be delivered through working with Industry
Representatives and through Trade Journals.
- Tips and Troncs—the
Inland Revenue recently published the guidance booklet 'e24'.
This is available through the Revenue Website and on a CD-ROM,
and was sent to all employers during March. The Compliance package
funding will also enable the Revenue to run workshops, offering
advice and guidance to employers.
- Share Fishermen—plans
in this area involve a varied campaign comprising posters, press
and radio advertising and direct mailing. This will be supported
by workshops. This campaign will encourage a widespread use of
the voluntary tax saving scheme through which share fishermen
will be able to pay regular amounts towards their tax liability.
The additional yield generated from the measures
in the compliance package has been audited by the Comptroller
and Auditor General and is included in the public finances forecast.
4) Outcome of discussions between HMT and
Citizens Advice Bureaux on financial advice (see Q 320)
The Department of Trade and Industry (DTI) published
the White Paper, Fair, Clear and Competitive, The Consumer
Credit Market in the 21st Century, in December
2003. This sets out the Government's objectives to "minimise
the number of consumers who become over-indebted, and; improve
the support and processes for those who have fallen into debt"
(paragraph 5.21). Proposals in the White Paper cover financial
literacy and debt advice.
Advice can play a part in helping consumers in two
separate ways. First, if consumers are to make sensible choices
they need information and understanding. Financial advice, education
and awareness are designed to help consumers make sense of their
finances. As set out below, part of the review of the Financial
Services and Markets Act 2000 explores whether greater regulatory
certainty might help Citizens Advice Bureaux and other voluntary
and community groups play a fuller part in offering this sort
of help.
Second, consumers who become over-indebted can also
benefit from specific debt advice. In the Report on Transparency
of Credit Card Charges, published in December 2003, the Treasury
Select Committee drew attention to the excellent work of the voluntary
sector: "We commend the work of the Citizens Advice Bureaux
and other free money advice services. We welcome financial support
from the industry for these organisations and, given the rising
prevalence of credit card debts, we expect this support to increase"
(paragraph 51). The DTI White Paper builds on this achievement,
sets out a vision for 'Joined-up Debt Advice', and contains an
undertaking to report on progress to secure a longer-term commitment
from interested parties to support this work.
The White Paper recognises that the current level
of face-to-face debt advice is not sufficient, and that the Government
will work with others to address this shortfall. The White Paper
explains that:
"Face-to-face advice is best provided at
a local level. Local authorities and the voluntary and community
sector are best placed to target specific geographical areas of
need and are able to operate economies of provision. Clearly,
co-ordination of needs analyses and funding at a local level is
the most effective way of addressing local shortages. For example,
in the case of debt advice provided through the New Deal, DWP
will be working through Jobcentre Plus districts to consider local
analyses of need" (paragraph 5.43)
The Treasury is closely involved in work being led
by the Financial Services Authority (FSA) to develop a national
strategy for financial capability. The Financial Secretary to
the Treasury is a member of the Financial Capability Steering
Group that gives direction to this work. As part of this work,
which brings together government, industry and the voluntary sector,
issues of borrowing and debt, and access to generic financial
advice are being addressed. As the White Paper sets out, the FSA
propose to publish further, more detailed proposals, shortly.
Finally, in February 2004 the Government published
proposals, in the review of the Financial Services and Markets
Act 2000, to review the regulation of financial advice provided
by community and voluntary advice agencies. This includes consultation
on whether more can be done to reduce the impact of regulation
on advice centres, such as Citizens Advice Bureaux.
5) Outcome of December 2003 Saving Gateway
evaluation (see Q 401)
The Saving Gateway pilot final evaluation is due
in early 2005. No substantial conclusions can be drawn until the
full research findings are received, however indications so far
are good. The latest interim evaluation report showed that 1,478
accounts had been opened (the target was 1,500), and the participants
were mostly drawn from young families with children. By the end
of January 2004, a total of £300,000 had been deposited,
with £28,000 withdrawn since the start of the pilot, leaving
a total balance of around £272,000. There was little evidence
that people had transferred money from existing savings accounts
or borrowed to save. This report is available on the HM Treasury
website. The Government looks forward to further evaluation evidence
to assess the effectiveness of matching as a tool to incentivise
saving.
6) Note regarding prosecution of retailers
selling illicit spirits (see Q 406)
In 2002-03, HM Customs and Excise brought 21 successful
prosecutions for the evasion of duty on spirits, and a further
34 for offences concerning mixed excise (which could include spirits).
Prosecution is only one of a number of sanctions
Customs have at their disposal to disrupt the supply of illicit
spirits. Customs normally reserve prosecution for those cases
where maximum impact can be achieved, most notably against the
'guiding minds' behind a major criminal organisation responsible
for the bulk supply of non-duty paid product.
Customs will also prosecute where other sanctions
are seen not to be effective (such as for repeat offenders), and
in other extreme circumstances. The London exercise mentioned
at the Budget 2004 Treasury Select Committee hearing was targeted
at the low-level supply of illicit spirits. Customs do not currently
intend to prosecute any of those found to be selling non-duty
paid product, for a number of reasons:
- in the absence of a tax stamp,
most of the time it is not possible to establish 'guilty knowledge'—in
which case attempted prosecution is futile;
- even in those instances in which Customs may
have sufficient evidence to prosecute, civil alternatives are
equally effective and more proportionate. The seizure and non-restoration
of non-duty paid stock is itself a significant financial penalty
— especially in the cases where Customs effectively cleared
the retailer's shelves. In some cases Customs also seized vans
and lorries that were clearly being used to transport illicit
products. Moreover, local licensing officers routinely accompanied
Customs on these visits and are currently considering whether
or not to renew the liquor licenses of some of the 143 offending
retailers; and
- Customs wanted to maximise the number of retailers
they could check during the course of the exercise. Prosecution,
including the process of establishing 'guilty knowledge', is currently
very resource-intensive and would have taken officers away from
the frontline. Customs judged that the additional benefits of
pursuing prosecutions against the retailers involved in this operation
against which a case might successfully be made were not proportionate
to the additional costs and risks.
Tax stamps applied to spirits will make both the
identification and, where appropriate, prosecution of those selling
non-duty paid product far more straightforward.
HM Treasury
28 May 2004
6 Regional Business Support Pilots Evaluation, Stage
Two, Draft Interim Report to the Small Business Service-ECOTEC
Research and Consulting Limited. Back
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