Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 170-179)

15 JULY 2004


  Q170 Chairman: Chancellor, good morning. Welcome to you and your clerks. Could you introduce your colleagues for the Gurney's shorthand writer, please?

  Mr Brown: I can introduce Nick Macpherson, who has been in charge of this process, Chris Martin, who has been working on the public expenditure White Paper, Mike Ellam, who is a Director of Policy and Planning and Jonathan Stephens.

  Q171 Chairman: Chancellor, can I bring up the issue of the timing of the Spending Review. We are aware that planning for the Spending Review began back in 2003 and the announcement date was Tuesday, 29 June, with the statement being last Monday, 12 July, and the debate being yesterday. The Committee is of the opinion that we do not have the full information in front of us for this debate. It is a very shortened timescale for the debate and it would help scrutiny, transparency and full debate if we could have that information so that we have a report for the guidance of the House of Commons when it comes to debate?

  Mr Brown: Can I say that I think this is a unique set of circumstances that probably will not arise again, and if the Committee has been deprived, and the nation, by the excitement of the Spending Review for a few weeks longer than necessary, I do apologise. What has happened is that we were in Purdah, because of the European elections, right through until 11 June. Whereas previously local elections would be at the beginning of May, all elections were until 11 June, so nothing could happen until then. Then we had the sequence that had happened as a result of the previous allocations already being made to health and to education, so the five-year plans for health and education followed from the budget and followed from the previous budget announcements on health and education, and then the natural next stage was to have the Spending Review announcement. That is why since 11 June there has been the health and the education papers and now the Spending Review a bit later than normal, but in any usual spending round period it is unlikely that we would have the coincidence of these things.

  Q172 Chairman: We just ask for you and your officials to keep that in mind.

  Mr Brown: So far as helping the Committee with its work, obviously if you wish to put detailed questions subsequent to this hearing, we would be very happy to answer them. I do understand your point about the debate in the House of Commons. Because of the timing of debates—there is a debate next week, I think, on the Butler Report—the public expenditure debate had to be brought forward. If there has been inconvenience to the Committee, I do apologise; some of these events are outside my control.

  Q173 Chairman: Let us move on. The issue of the Gershon Review and the savings that have to be attained but, in addition, the number of jobs that have to be lost—over 80,000 jobs. Certainly from my point of view, Chancellor, a lot of the job losses that will take place I think will be individuals who have been working for the DWP maybe for 15, 20 years on a salary of between £15-£20,000. Generally speaking, they are low-paid jobs, and I think it is really important that there has to be a sensitive approach to this. Can you give me any idea how you expect to tackle this?

  Mr Brown: We do understand that this is a very substantial figure. It is completely wrong to suggest that this is an abstract set of numbers that we have brought forward. The Department of Work and Pensions has already announced pension centres that would close in York and Liverpool, they have already announced the transfer of pension centres . . . I can list them. So the process is moving ahead. The question is how can we help those people who may have to change their jobs and how can we also have a process of discussion with the workforce during that period. I think, as far as consultation is concerned, that is proceeding. There were meetings taking place on Monday when we had the Spending Review announcement, and although no Chancellor has ever announced 84,000 job reductions before and it has never been, I think, in the history of the British Civil Service that level of change in numbers taking place, we are putting in place measures to help the individual civil servants that you refer to, particularly, obviously, low-paid members of the Civil Service, who will want to have the assurance that they will get all the help that is necessary to find jobs in a situation where there are 600,000 vacancies round the country and where, unlike any previous recovery, there are vacancies in every region of the country, in Scotland, Wales and Northern Ireland as well. What we will include, if I can just tell the Committee, will be a new facility with information on front-line posts available, alerting staff to any front-line posts that become available in the region where civil servants work; there will be clear and comprehensive advice on the terms and conditions of service affecting relocation so that redeployment can be properly managed; there will be extra support from the £300 million Efficiency Challenge Fund that was announced in the Budget; there will be enhanced careers advice and support to prepare Civil Servants if they want to have a different career; and there will be retraining to help staff move from back office functions to the front-line jobs that are clearly are available. For example, I was in the Midlands yesterday and I met one of the community support officers, part of the 20,000 jobs that are being created for support officers for the police. They spend 90% of their time patrolling the streets and they are therefore vital in giving the public reassurance about law and order. These are 20,000 jobs that are going to be available in every region of the country over the next months and years, and, of course, civil servants who wish to consider these posts—you are talking about relatively junior posts—these are jobs that are going to be available. There are more jobs in the Health Service, obviously, because we are expanding staff in the Health Service, and, of course, we are expanding staff in our schools as they develop the facilities for the future. So in my view there will be major opportunities, and these are the measures that we are putting in place to help Civil Servants both to get jobs and retrain for the vacancies that are available in the economy.

  Q174 Chairman: Could I refer you to the £30 billion asset sales that you mentioned in your statement in the period to 2010, and could you indicate the likely composition of this figure, because I note that in the 2004 budget £24 billion of asset sales were already indicated over the next five years. Is the £30 billion figure intended to represent any increase over existing plans?

  Mr Brown: It certainly is an increase over existing plans. Obviously the figures for previous years, 4.1, 4.1, 4.6, these are the figures annually that have been raised through asset sales, so roughly about £4.5 billion a year. This is raising the amount that we expect to £30 billion by 2010. To make this easier and possible, and obviously when you are having this big reduction in Civil Service posts then properties become available, land becomes available. We are also updating the Government's National Asset Register, and that is designed to improve transparency and give departments greater incentives to manage their assets, and we will be publishing an updated National Assets Register so that it will provide the necessary information from which departments can both examine the assets held across government and we can have far better coordination in the use of assets in the future; what some people called, when it was originally published, "the Doomsday Book", but what it is is an assets register, and it will be updated and published soon.

  Q175 Chairman: Lastly, before I move on to colleagues, PSA targets and departmental allocations, as you know, we have had a number of lively exchanges with you on that over the past year, but could you indicate to me what evidence there is to show how departments' performances against PSA targets set in earlier Spending Reviews have affected the spending allocations in this one?

  Mr Brown: In the vast majority of departments, of course, the vast majority of targets have been met, and therefore that is the basis on which you can move forward in giving a department resources for the future. Where departments have not done as well in certain areas, of course we will reallocate resources to make sure that there is far greater efficiency within the departments as they try to meet the targets, but if I can just give you an example. The targets that have been met, including halving the time from arrest to sentence for young offenders, we met the nursery provision target for three-year olds 6 months earlier than planned, we have placed 250,000 young people into work, we have met our inflation target and our fiscal rules, we have met our fuel poverty target, we delivered—a billion of savings has been targeted for government procurement, and we may come to that later, and, of course, the achievements through the targets include the number of young children who have greater literacy and numeracy or are leaving school with greater qualifications, and even in the Health Service, which has been a disputed area, I do not think anybody now doubts that the numbers of deaths and the percentage for cancer and for heart disease; the percentages have been falling and therefore progress is being made. So in the original group of targets—and this is the big change—we had input targets as well as process targets and output targets. That has gone, it is simply a lower number of targets for the future. Therefore we have not only learned the lessons of targets met and sometimes targets difficult to meet, we have managed, as a result of that, to get rid of this idea that you have an input target and X number of people have to be appointed. What we are looking at is results, and the whole emphasis of this Spending Review is on getting results—the money is allocated to get results—and we will be judging departments throughout the period by how much they have achieved on results.

  Q176 Chairman: I asked your official yesterday, Mr Macpherson, if the UK Government can support 110 top priority targets. Do you not think there is room for a bit of pruning there?

  Mr Brown: We spend about £400 billion, so small, large, medium sized companies have targets for the expenditure or the raising of a few million pounds. This is £400 billion across government and, I think, across 20 or more departments, and it is an average, I suppose, of a target of £3 billion or £4 billion. I do not think that is an unreasonable thing. There are less targets, obviously, and that is one of the changes that we have made, and certainly we have got rid of the input targets that essentially were: can you create 50,000 nurses by a certain date? It is now: can the results of creating 50,000 nurses and 20,000 doctors employed in the Health Service be a lowering of the death rate from cancer, the lowering of the death rate from heart disease? So that is the emphasis now.

  Q177 Chairman: But do you think—I just want some reassurance—we are not into target mania?

  Mr Brown: I think it is the other way round; I think the movement is all towards the front-line. If you go to New York and look at policing in New York, what is happening now is every week on the Internet and on the information available to the public they are telling people what has happened during the course of that week, and the public have what is called in New York, with their own phrases, "Real time local accountability", and so people can see at a local level whether the police have delivered the number of arrests and cautions, what is the rate of crime in a particular neighbourhood; and increasingly national targets will give way to this sense locally that you can find out what is happening, put pressure on the local police to get the action that is necessary and expose a fair area of management wherever it has happened; so it is all linked towards a more local and more flexible system where local priorities become more important, and I think all of us on this Committee, no matter what political party we represent, would support that.

  Q178 Mr Beard: Chancellor, the Spending Review has taken place against the background of increased deficits in public finances. How much margin for error against the golden rule do you have if public finances turn out worse than expected?

  Mr Brown: I think I reported in the Budget it was something of the order of £11 billion. I can send the Committee the exact figure, but, of course, the cycle that this refers to where we have got to meet our rules over the cycle, will finish about 2006; so we are well within the golden rule. Of course, as far as the other fiscal rule, debt to GDP, is concerned, we are, I think, within £50 billion, we are meeting this rule with £50 billion to spare because debt as a proportion of GDP at the moment is something of the order of 34%; it would be less than, I think, 36.5% even at the end of the spending round, and therefore, the first rule, the golden rule, is being met. The second rule, what you might call the sustainable investment rule, what level of investment can you afford because your debt is relatively low as a proportion of your national income, that we have met very comfortably and actually we have reduced debt as a share of national income by 44% to 34%. There is a lot of discussion about these fiscal rules. It is important, first of all, that there are fiscal rules and therefore that there is discipline, and one of the reasons, of course, that the stability pact in Europe has had such difficulties over recent years is that there is a debate about whether their fiscal rules are good ones, but the second thing, and this is another problem with the stability pact but not for us, is you have got to meet your rules; and we are meeting our rules and will continue to meet our rules. I said on Monday that all the figures that we produced in the spending round were based on us not only meeting our rules but continuing to meet our rules in future.

  Q179 Mr Beard: Do you agree with the Governor of the Bank of England that if the golden rule were to be broken then the credibility of monetary and fiscal frameworks would be severely damaged?

  Mr Brown: It does not arise, because we are meeting our fiscal rules, and we will continue to meet our fiscal rules. I think what the Governor of the Bank of England, when I was with him at the Mansion House and he said what he said, was referring to what you might call the automatic stabilisers—that is, in a period of a world downturn, the amount of growth and therefore the amount of tax revenues is less and the amount of spending on social security tends to be higher, therefore there will be more borrowing in a period of a downturn, but, of course, we are coming out of that downturn and there is growth in the economy, and I think he was referring to that historical situation, and, indeed, I think he has applauded us for the way we are meeting our fiscal rules.

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