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.
| 
