Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 120-139)

14 JULY 2004


  Q120 Chairman: Following on that point, I note that in Merseyside it says more than 300 civil servants are going to lose their jobs unless a new private employer can be found to take them on. This is at the pension centre in Breckfield which only opened in December 2002. 316 staff deal with inquiries and claims for state pension, pension credit and winter fuel allowance. That news comes just three months after the Lyons report recommended that extra civil servant jobs should be moved from London to Liverpool. Now we are told the search is on in Whitehall for a private company to take on both the site and the staff. Does this not indicate that the process is not as streamlined as we think? We could find ourselves tripping over situations like this as we look for these jobs to be cut. It does not augur well.

  Mr Macpherson: It underlines the need to coordinate some of these changes where you can. We have set up a special brokerage unit in the cabinet office whose function is going to be to ensure that, where one department is seeking to reduce jobs and another is seeking to increase them or move them, we can join this up.

  Q121 Chairman: I am pointing here to the fact that the DWP, which has the most ambitious target in terms of job losses, opens up a brand new centre in December 2002 and then we lose jobs. That does not augur well if this department is tripping over itself as much as it is at the moment.

  Mr Macpherson: It is incumbent on all public service managers and departments to try to manage this process as sensibly as possible and it is incumbent on the Treasury to create a medium-term framework against which they can plan.

  Q122 Norman Lamb: It is staggeringly incompetent to open a pension centre and close it two years later, is it not?

  Mr Macpherson: I do not—

  Q123 Chairman: You are not here to answer for that.

  Mr Macpherson: Exactly.

  Q124 Chairman: At the end of the day, that is the type of thing you do not want to read about and hear about in the future. Is that right?

  Mr Macpherson: Exactly. We want this to be sensibly managed and sensitively managed.

  Q125 Mr Walter: Mr Martin, you are head of the spending review team. How have your funding arrangements for Network Rail been accounted for?

  Mr Martin: They have been accounted for on the same basis as in the budget 2004 report and all previous reporting. The future plans for spending on transport and railways in detail are going to be announced in the House tomorrow by the Secretary of State for Transport who will set out his plans through to 2007-08. But if you are referring to the status of Network Rail in the national accounts, that continues to be judged by the ONS on the basis it was before. On the basis of that, the position has not changed.

  Q126 Mr Walter: The additional money that has been required by the regulator in 2004-05 and 2006-06 is a total of £3.14 billion. Has that been included in the Department of Transport's Departmental Expenditure Limit?

  Mr Martin: A total budget has been set for the Department of Transport for 2006-07 and 2007-08. In addition, we have made an allocation from the reserve in 2005-06. I do not have the figure here but I think that is £0.5 billion. Within that overall envelope, the DfT are responsible through the Strategic Rail Authority for paying the subsidy to Network Rail. But the answer in short is: Yes, it has been taken account of.

  Q127 Mr Walter: It is in their limit; you are not expecting them to have to borrow it.

  Mr Martin: I am sorry.

  Q128 Mr Walter: You are not expecting them to borrow it; the Department is going to provide this. You have just mentioned £0.5 billion and I was talking about just over £3 billion, how is the difference made up?

  Mr Martin: The addition has been made to the Department of Transport overall budget which covers a range of areas, including railways' finance. It will be for the Department to make its own decisions about allocations. If you are talking about the borrowing of Network Rail, that is a decision for that company (because it is a private sector company) and its governing body. In terms of spending for that period going forward, of 2006-07 and 2007-08, it is difficult to go much further now until the Secretary of State has made his announcement tomorrow lunchtime.

  Q129 Mr Walter: You are expecting Network Rail to borrow this money in those two intervening years. There is additional money in 2005-06, which of course is after the presumed end of the economic cycle, so we are into a different period, but I am talking about these intervening two years. How is that money going to be provided?

  Mr Martin: I did not say I was expecting Network Rail to borrow. I do not know what Network Rail's borrowing plans are at the moment or whether they will change. Actually, the economic cycle concludes at the end of 2005-06, so any spending in 2004-05 or 2005-06 which is contained and set out in the plans in this document is within this current economic cycle. For the purpose of measurement of a golden rule, if that is what you are getting at, the spending plans set out here are entirely reflected in the envelope that was set out in the budget.

  Q130 Mr Walter: The money provided is going to come after the economic cycle. We do not have provisions in this economic cycle. In this economic cycle, these two financial years we are talking about, you are expecting Network Rail to borrow this money rather than receive it.

  Mr Martin: No, I am not saying that. There have been additions to the Department of Transport budget both for 2005-06 (which is in this economic cycle) and for 2004-05.

  Q131 Mr Walter: But not specifically for this purpose.

  Mr Martin: There have been additions to the overall budget of the Department of Transport reflecting a range of pressures upon the Department of Transport, including the need to finance Network Rail through the Strategic Rail Authority.

  Q132 Mr Walter: Not specifically for what the Rail Regulator said in March he knew.

  Mr Martin: The position on funding Network Rail remains as set out in the Government's response to the Rail Regulator's interim report. The Government stands by its commitments to fund fully the Strategic Rail Authority.

  Q133 Mr Cousins: Do you have any idea at all about staff turnover in the public services?

  Mr Macpherson: I am afraid I do not have a figure to hand but I could let the Committee have a note on the subject[2]

  Q134 Mr Cousins: That would be very helpful. If I may turn to under-spending on benefits. One in three of the people entitled to pension credit, particularly the savings element of pension credit, do not claim it. Half the single women over the age of 75 do not claim council tax benefit. What assumptions are you making about the continuation of under-claiming of state benefits?

  Mr Macpherson: My recollection of social security forecasting is that you do take a view on take-up and that is reflected in the forecasts. Certainly with benefits like pension credit it does take time to get people to take the benefit up and the DWP is committed to ensuring that the people who are entitled to it get it. My guess would be—and it is a guess—that the forecast will have a steadily rising take-up assumption.

  Q135 Mr Cousins: Could you let us know about that, perhaps in written form?

  Mr Martin: Yes.

  Q136 Mr Cousins: You can see the perversity of this: pension centre promoting pension credit up in Liverpool; target to drive up take-up harder to achieve, presumably; but all the money saved is not money spent and it all helps towards the golden rule. You have a set of contradictions there.

  Mr Macpherson: The Government is very committed to addressing pensioner poverty—as it is child poverty—and pension credit is a key part of that strategy.

  Q137 Mr Cousins: Yes, those are rather high level statements.

  Mr Macpherson: They are but actually making progress on take-up is very important. If you look at the PSA document, target 6 on page 38 is " . . . by 2008 be paying pension credit to at least 3.2 million pensioner households while maintaining a focus on the most disadvantaged by ensuring that at least 2.2 million of these households are in receipt of a guaranteed credit." Here is a very public, high-profile target, and if the DWP do not succeed in achieving it they need to be held to account.

  Q138 Mr Cousins: I do not want to be unduly tedious or labour the point but that means that if that target is achieved, half the people entitled to savings credit will not be getting it.

  Mr Macpherson: In a way pension credit is not the Treasury's responsibility. I would be happy to provide you with a note on what underlies that target and the ambitions contained therein. But I take your point that take-up is important. We have an interest in promoting it[3]

  Q139 Mr Cousins: To take the Chairman's example of the pension centre closing in Liverpool, is there any compensating factor in terms of regional spend to deal with the consequences of that pension centre closing? Is there any device like that?

  Mr Macpherson: I think there are a number of devices. First, I think regional considerations have informed this spending review even more than previous spending reviews.

2   Ev 56 Back

3   Ev 56 Back

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