Select Committee on Treasury Minutes of Evidence


Examination of Witnesses (Questions 140-159)

14 JULY 2004

MR NICHOLAS MACPHERSON, MR JONATHAN STEPHENS AND MR CHRIS MARTIN

  Q140 Mr Cousins: How?

  Mr Macpherson: In a number of ways. First, we had an extensive consultation with the regions through the spending review to find out from the RDAs, amongst others, what their priorities were. Secondly, through the target which the Treasury shares with ODPM and DTI on improving the balance of the regional growth target, we have been looking at the number of policy changes which can help promote regional activity, be it devolving responsibility for business links to the RDAs or the pooling of budgets and skills and so on. The RDAs themselves have had—

  Q141 Mr Cousins: Mr Macpherson, you do realise that the allocation of resources for business links is based on the existing stock of enterprises, so the money you are transferring to the regions has a built-in factor which preserves regional inequalities and does not address them.

  Mr Macpherson: The RDAs have had a generous settlement. Not only have they—

  Q142 Mr Cousins: I am sorry, Mr Macpherson, but I am asking you a specific question: You do realise that the allocation of money for business links is based on the existing stock of businesses, so that the regions which have a lower stock of businesses get the lower allocation under the business links.

  Mr Macpherson: I do not know the answer to the point you are making, but if you look at the RDAs as a whole, clearly the RDA, say, in the North-East gets a substantially bigger sum of money per head than the RDA in the South-East, but we more generally—

  Q143 Mr Cousins: That is an entirely unsurprising figure, is it not?

  Mr Macpherson: It is unsurprising, but it is right if you are concerned with getting better balance in regional economic activity.

  Q144 Mr Cousins: Personally, Mr Macpherson, I would rather that the North-East was like the South-East and we were busily discussing improvements in resources to the South-East to compensate the South-East for its disadvantages. I would prefer it that way round.

  Mr Macpherson: Certainly I would prefer a narrowing of differentials. One can focus on the RDAs—and I think they do make a big difference—but it is also worth stepping back and thinking about how money is distributed more generally through the big public services. Here, in recent years, there have been changes, both to the local authority formula and to the health formula, which, on balance, have taken income, inequalities and deprivation more into account, so I think it is fair to say that the North-East, say, has benefited from those changes. We have been doing increasing work on understanding the transmission of the expenditure to the regions. This Committee has recently done an inquiry on that. We commissioned Professor Maclean to do a study to ensure that we were improving our own statistics, so that on the basis of those statistics we could improve expenditure planning.

  Q145 Mr Cousins: The Regional Development Agency for the North-East, for example, has told this Committee that the spending review does not take account of low spending on things like scientific activity, against the base in which the North-East has the lowest stock per head of small enterprises in countries, the lowest government research spend in the country, and the lowest MOD/civilian employment spend in the country. The allocations to RDAs in regions like the North-East cannot possibly compensate for those historic inequalities.

  Mr Macpherson: I think there are quite a lot of positive announcements in the spending review. Page 51 of the document refers to the Northern Way growth strategy and certainly in terms of innovation and science—

  Q146 Mr Cousins: The Northern Way is extremely helpful. It is nice to have extra sums of money so you can pull houses down because we do not have the people to live in them, but I do not think you could truthfully say that that addressed the historic causes of regional inequality.

  Mr Macpherson: We can get into a long debate on the historical causes of regional inequality, but what I would highlight is that one of the proposals in the Spending Review is responding to the Lambert Review in terms of the Government giving RDAs new responsibilities for promoting business/university collaboration, and I think giving that collaboration a greater regional focus can only be a good thing in terms of regional growth.

  Q147 Mr Cousins: Finally, under-spendings. We have not yet got the under-spending figures across the departments—the outturn figures for last year. Will they be bigger than the year before or not?

  Mr Macpherson: I could not say. I think we are publishing—

  Q148 Mr Cousins: Not being able to tell the Committee that, at this stage, when we are discussing the Comprehensive Spending Review, is a pretty poor show.

  Mr Macpherson: We are publishing the outturn White Paper next week, are we not?

  Mr Martin: I think it is being published on Monday.

  Q149 Mr Cousins: If it is being published on Monday surely you can tell the Committee whether the figure is going to be bigger or smaller?

  Mr Martin: The difficulty, and the reason it is being published later than it has been in previous spending reviews, is due to the new statistics framework. They are now published as national statistics, so I do not know the figures myself, and even if I did I would not be able to use them until they have been published on Monday.

  Q150 Chairman: So the new statistics framework will cause a week's delay?

  Mr Martin: It did not cause a week's delay but it meant that you needed to give 14 days' notice for publication, and we were only able to give 14 days' notice, as I understand, from the point at which the numbers have been finalised; so we gave notice to the department and publicly on the Treasury website, I think it was, on 6 July, and so it will be published on Monday.

  Q151 Chairman: This highlights the inadequacy we have mentioned before about the Spending Review. If it is not out until next week and then you read the outturn—it is important for us to see the whole picture not just part of the picture—it is pretty inadequate. The Chancellor has helped us before and we need it again, so if you take it back this morning that would be very helpful to us.

  Q152 Mr Fallon: Just a couple of final questions. On the Child Poverty Reduction target, could you help with us Table A1 on page 182? Is the increase in Child Tax Credits after 2005 up-rated in line with earnings growth? Is that factored in?

  Mr Macpherson: I think the Government's policy was to announce an increase in line with earnings for this Parliament. As far as that is concerned, this Parliament runs to 2005-06. Obviously, no decision has been taken on up-rating in the next Parliament and will, no doubt, be announced in the usual way.

  Q153 Mr Fallon: So there is no up-rating by earnings for the years 2006-07 and 07-08?

  Mr Macpherson: That is correct.

  Q154 Mr Fallon: Finally, can I ask you about the Department of Culture target that for those over the age of 16, the number engaged in 30 minutes' of moderate intensity level of sport three times a week must be increased by 3%? Does that not strike you as a touch Soviet? Why 3%? Why not 2%? Why not 4%?

  Mr Macpherson: No doubt the number reflects the evidence. It does not seem very Soviet to me.

  Q155 Mr Cousins: I do not know, Comrade Stakanov seems to play a part in your—

  Mr Macpherson: I think sport and leisure activities like that are generally thought to be a good thing.

  Q156 Chairman: Why 3%?

  Mr Macpherson: My guess is that it is based on an analysis of the trend and what is achievable.

  Q157 Chairman: What does 3% mean? Take it down to an individual level. Say you do half-an-hour's workout. Speaking as a former teacher, I can imagine some wise boys saying "We have done 30 minutes' exercise this week, sir. I have done 31 minutes and I've achieved the 3% target", and we are all hunky-dory.

  Mr Macpherson: It is still an improvement.

  Q158 Chairman: OK. I will move on to targets and departmental programmes. How have the departments' performances against PSA targets set out in the 2000 and the 2002 Spending Reviews affected spending calculations in the 2004 Spending Review?

  Mr Macpherson: Clearly, they have informed allocations. The key consideration in deciding how much money to allocate to the department is the capacity of the department to deliver. So you take capacity into account, but clearly there is not some great scientific linkage here. Sometimes you have to put more money into an area because, actually, a department is failing against a target. Performance against targets informs how senior officials' pay is determined, so they do have an important effect.

  Q159 Chairman: Given the comments that have been made about linking resources to measured outcomes, why does the Treasury not publish alongside the Spending Review a document outlining how many and which targets have been met, and, maybe, have that properly validated by an independent body like the NAO?

  Mr Macpherson: We did publish, I think, some final figures on the 1998 set of targets, and I think the final number was that 85% of the targets were achieved for the 1998 Comprehensive Spending Review. Moving forward, part of the problem is that there are lags in the process and even now we are still waiting for data in relation to the targets for SR 2000. I think the approach we have adopted is that departments report progress twice a year—in their autumn reports and in their annual reports, in the spring—and we have a website which is updated as new data comes out which actually provides a lot of information, and all sorts of people can draw their own conclusions and make their own analyses of that.


 
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