Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 220-239)

15 JULY 2004


  Q220 Mr Fallon: How would you enforce the reduction in head count on a local government that you do not control?

  Mr Brown: Presumably you would not want me to do that, and presumably your philosophy would suggest that what we should do is say to local government, here is the money that is available and there is going to be no more, but if you do not make these changes then there is no more money to bail you out for having these salaries. That is how you would do it and that is how we will do it.

  Q221 Mr Fallon: So you are going to enforce the 15,000 job cuts on local government?

  Mr Brown: It is the other way round. What I am saying to you is there is a limited amount of money available and local authorities will get no more money. They are expected to make 2.5% efficiency savings a year. Sir Jeremy Beecham, the Chair of the Local Government Association, said, when I announced these changes, "We will join in a drive with the Chancellor to step up the efficiency drive. Maximum flexibility paves the way to maximum efficiency." So there is no doubt about the willingness on the part of local government to enter into this process; in fact in the Gershon Report there is quite a lot of information about what can be achieved. If you take back office services, for example, in your own area, it is possible for housing benefit to imagine a situation where one council links up with another, and another, and another, through computerisation and therefore the rationalisation of the task, they can have shared back office services for some of these areas; and that is something that is already happening; I think it will continue. My point to you is that local government makes its own decisions on numbers, but we will not provide any money to local authorities in addition to what they have got if they do not make these 2.5% efficiency savings. That is why we expect there to be 20,000 in total.

  Q222 Mr Fallon: Of the hundreds of local authorities, why did only twelve respond to the Gershon consultation process?

  Mr Brown: That is a matter for the local authorities, but I think there is going to be a new interest in it following the Budget announcement about what money is available to local authorities. I think local authorities—there are some people here who have been great councillors involved in local authorities in the past—do respond when central government starts talking about money, hard cash.

  Q223 Mr Fallon: Finally, Chancellor, why have the Efficiency Technical Notes been delayed until October? Why have you got the departments to agree to targets without publishing the measures by which we assess them?

  Mr Brown: That is for very good reasons that I think you would support. We were discussing it with the National Audit Office, and it is right to do so. We have the Gershon Report. We have reached our conclusion on it. These technical notes should be published after a period of scrutiny, but, if I may say so, involves not only the National Audit Office but another name, the Audit Commission; so it is right to go through that process. This is the sort of independent advice that you as a Committee have urged us to have, so I think your Committee should support us for doing it in this way.

  Q224 Mr Cousins: Chancellor, do you accept the manner and style of the announcement about job cuts in the Civil Service does damage to confidence to the Civil Service in the Government and its ability do deliver for the Government?

  Mr Brown: There always ought to be consultation with workforces where they are affected by decisions that are made, but we have also a responsibility to Parliament, and if I had gone out and announced these changes to a meeting outside Parliament and not to Parliament, I think you as a committee would have been the first to tell me I should have announced these changes first and foremost to Parliament. As it happened, on the day of the announcement we had in each department, simultaneously with the announcement, meetings with our union colleagues. The Friday before the announcement we made it clear in a statement to all departments that was given to the trades unions that there would be announcements on Monday affecting the results of the Gershon Report. There was a preliminary period where people were told that the full and detailed information would come simultaneous with the statement . . . If I am right, I think the consultation with the unions started half an hour before the Parliamentary statement, but on the basis of privacy at that stage. But, again, you have got to take a balanced judgment on this. Surely in a Parliamentary democracy where we are announcing changes in public spending, you would expect Parliament to be informed first and foremost and the arrangements for consultation with the unions and the workforces should be part of that and simultaneous—in this case it was a few minutes earlier with a warning that something was to happen the Friday before—but Parliament must be the first to know.

  Q225 Mr Cousins: Do you accept that a government that believes in foundation hospital schemes, foundation schools should at least recognise that there can be foundation jobs in the community too. They may not be very glamorous jobs, high-flying jobs, but steady jobs with a pension that can float three generations of family through a whole lifetime; and it is pretty rough stuff if people do not feel that the Government acknowledges the significance of those foundation jobs in a community?

  Mr Brown: If your suggestion is that I or my colleagues did not acknowledge the importance of the work that civil servants were doing, and public service, not only in the Civil Service, that is wrong. In my statement on Monday, as in previous announcements, I have paid tribute to the work of civil servants and the work of people who, at the front-line or in the back offices in our public services, do a tremendous job on behalf of the whole community; but what I think should be appreciated is that we cannot guarantee that the same job in the same way will be done by a member of the same family for every generation—that would be a mistake—because the reason why we are making these changes is that we put in £6 billion of new investment, public money, money that has been raised to make these investments. As a result of these investments, you can see that you do not need the same number of people to do electronic tasks that you had to have to do manual tasks: because of computerisation you can see how you can link up the work of different offices with less staff yet to achieve probably better results. It is the technological investment that has been made as a result of public funds that means that if we are to show people that our public services work well, then we will be right, therefore, to move ahead now, and, having made the investment, make the job changes as well; but, as I said at the beginning, the process of help and retraining and advice about new jobs, the 600,000 vacancies in the economy, many of which are available to people moving between jobs, that has all been set in it place and I think you will find that instead of a view that would leave people isolated and unable to cope with change overall and just left as if they were being ignored, that is not the way we are going about it. We are wanting to help people and be on the site as they make changes, but we are arranging to re-train, re-equip people for the future if that is the decision that they make.

  Q226 Mr Cousins: Chancellor, do you accept that there could be some profound regional effects produced by the changes in employment in the Civil Service, because the departments that are the most dispersed already are the departments which are producing almost all the headline count cuts?

  Mr Brown: But I think, simultaneous with the changes that we are making, we are moving jobs to the regions and to your region and to other regions, and the Lyon's Report led to there being 20,000 jobs to be relocated out of London and the south-east and to the establishment of an important principle that where new jobs have been created in the civil and public services the presumption would been favour of going outside London and the south-east. That is a principle that is now accepted by the Government. I think you can go through the different areas where there are going to be job relocations, and although there are changes, I think I have mentioned the offices that are closing already for pension centres in the Work and Pensions Department, there are already announcements about relocations. I think we have announced Cardiff—no, we have announced South Wales or Bristol for one set of relocations, East Kilbride for another and Yorkshire for another, but that is only a small number of the 20,000 that are being relocated, and I know your own local authority areas have been looking at how they can bid for these jobs.

  Q227 Mr Cousins: The three departments that are the most dispersed already are your own through the Inland Revenue and Customs, the Ministry of Defence and the Department of Work and Pensions. They are the most dispersed already in terms of the pattern of employment, and they are producing 72,000 of the 84,000 headcount cuts and they have also got to find 13,000 of the 20,000 relocations. Do you not accept that there can be some profound regional consequences as a result of all of this for which the Government has provided no spending programme by way of compensation?

  Mr Brown: The second is not correct. What we are doing is helping with relocation and there is this fund I mentioned at the beginning to help departments with relocations; so the money is there for these transitional stages to be worked through. Secondly, I think the overall effect of this will be to help your region and the regions in the north and the north-west, Yorkshire—I think they will be beneficiaries of this because I think much of the relocation will be to your and other regions in the north, north-west, Yorkshire and into the Midlands.

  Q228 Mr Cousins: Can you provide this Committee, if not now then later, with a paper setting out what the regional effects will be?

  Mr Brown: What I can not do is tell departments that they must move to one particular town and one particular city, but what I think departments will bear in mind is that where there are opportunities for them to move, and, of course, there are a number of reports already done about the attractiveness of particular areas, they will want to go to the areas where there are people looking for jobs, where there are people who can be retrained, where there are sites that are available already. I think the beneficial effects of this for the regions that you are talking about will be in favour of the regions, and I do not think they will be against the regions. In addition to that, you said what are we doing about the regions? Our regional policy is being improved because the Northern Way strategy which the Deputy Prime Minister has launched, which is helping your region and other regions, because of the funding we are giving to the Development Agencies, is actually being enhanced, and therefore the opportunity to do more in your area is there from the refinancing of the Regional Development Agencies for the next three years.

  Q229 Mr Cousins: Spending money on the consequences of decline is fine. We are talking here about a programme that will produce more decline. The regions, which have already experienced the greatest industrial changes and transitions in industry and services are the regions which will also be bearing the brunt of your changes in the Civil Service.

  Mr Brown: There has been massive change taking in place in every economy of the world, because there is a global reshaping of industry and services that is going on that means that the balance of work and employment and industry between Asia and Britain is changing—everyone is affected by that—but as far as employment opportunities are concerned, you are giving the impression that unemployment has risen in the north-east in the last seven years. Unemployment has fallen, the number of jobs being created has risen, there are more jobs in the north-east than before, there is more help for the low-paid in the north-east than before through the tax credit system and there is certainly more spending on education and health in the light of public services in the north-east; and I think, despite all the difficulties that this region has faced to make the transition from essentially some of the older industries into a wider variety of industries, despite the difficulties, there have been more jobs and there is more spending power and there is more prosperity in your region than there was seven years ago.

  Q230 Mr Cousins: Chancellor, you have referred to regions of low-pay, but in the Spending Review you are setting out an agenda that could compound that by inviting departments to negotiate pay down in Civil Service employment and public sector employment in precisely those regions by advocating local-pay flexibility.

  Mr Brown: We have had this debate before. The national framework that exists is a minimum wage, there is a national minimum wage paid in every part of the United Kingdom and therefore there is a floor beyond which people could not go. Equally, the tax credit system means that not only is there a minimum wage but there is a minimum family income that has boosted the income of people in the north-east in particular faster than in the other areas of the country: because we have been tackling low-pay at work, low-pay and low-income for households, and therefore I think it is quite wrong to say that we have not done much to help them. They are in a far better position than they were in 1997, but, of course, in the calculation of wages and salaries what the unions, whose case in a sense you are representing here today on this question of regional and local pay, at one and the same time they come to us and say, "We must have national pay rates", and then they come to us and say, "But we must have southern differentials." So there are two policies being promulgated at one and the same time. What I am saying is that we have to recognise that in some areas of the country at the moment, for example, housing costs are quite different, and they are quite different in some areas of the country, particularly in the south-east, from the rest of the country, but as far as there being a minimum wage below which nobody should fall, the National Minimum Wage is one thing but the tax credit system is putting resources into the north-east far beyond, proportionally, those that are going to other regions.

  Q231 Mr Mudie: Can I ask a question following on from Mr Cousins. Chancellor, what is more important: money or the number? Can I take the four lads you have got at the top table. Their salaries are such that, if you cut them, you would save a hell of a number of low-paid people?

  Chairman: I do not think he is advocating that, are you, George!

  Q232 Mr Mudie: The point I am trying to make is that in my experience as a trade union official and as a council leader when national government demands cuts and they are implemented they are implemented at the poorest, the lowest, grades. So I am asking you what the starting point was: was it numbers, because you have said 70,000 that equates to. If we cleared out of a certain level, we could end up with 20,000 less jobs but maybe the same amount of money. The households that Jim and I are most concerned about would be delighted at that, because we fear that you are after the manual workers?

  Mr Brown: I think that is wrong. First of all, the proposals for 84,000 are not based on some arbitrary distinction that we have decided on X number of manual workers and X number of non-manual. It is based on looking at each department, department by department, what they need for the future, but particularly because new investment has been possible to do things electronically that used to be done manually, and every company is doing this, every country is doing this, and we have got to do it as well and it is right to do it.

  Q233 Mr Mudie: I do not disagree with you.

  Mr Brown: You then ask, what will be the eventual balance, having made these decisions, between manual and non-manual, administrative, clerical.

  Q234 Mr Mudie: Have you agreed that with the Department? Could you supply us with data that shows that the cuts are going to be evenly spread between grades?

  Mr Brown: No, I could not give you the information at the moment. I think in the next few months that information will become available, and perhaps you should ask me the next time I come before the Committee, but what I do tell you is that there are major savings in administrative posts as well as in clerical posts?

  Q235 Mr Mudie: The whole level?

  Mr Brown: The Treasury, for example, is losing administrative posts. Equally, if you look at the people that you are talking about, relatively low-paid civil servants operating some of the major services that we provide for the public, one, you agree with me that where new investment makes it possible to reduce numbers, that is necessary because it is a better use of public money in the end, but, secondly, we are helping the people who are losing their jobs to find jobs; and I do say to you, in past recoveries the vacancies were primarily in one or two regions of the country. In this economic cycle the vacancies exist in every area of the country. If you go round the United Kingdom at the moment, particularly the cities of the United Kingdom, people are talking about how they can find people to do certain jobs, not the other way round, and I do not deny there is an underlying problem about getting people back to work in certain areas because there are real pockets of unemployment, but there are vacancies in every area and it is our task, as we make this change in the Civil Service, to help people get the jobs that are in fact available, and they are available your city at the moment.

  Q236 Mr Mudie: I am just putting a marker down that from Reagan, Thatcher, all the studies show that these cuts are easy to declare at national level, but it is the poorest in the land who bear the brunt, and I would be very sad if you were going to start off the same exercise. I would love to see the numbers being cut, as you have suggested, because of the background, but as long as it is not the furthest away from the centre takes the brunt, and that is what has happened every time in the past.

  Mr Brown: I do not accept that that is the basis on which we are proceeding at the moment. I gave a speech last week on child poverty. Our record in tackling poverty in the households that you are talking about is that we have not only provided more job opportunities and more pay and income for people in relatively low-paid jobs, but equally we have done more for the children of these families by raising Child Benefit, the Child Tax Credit and other things.

  Q237 Mr Mudie: I want to come on to that later.

  Mr Brown: I think it would be wrong for the Committee to start off with the assumption that somehow the people who are going to suffer most as a result of this are people who are low paid. I think the record of this Government speaks for itself, but, equally, you can see that there are vacancies in the economy for people to fill.

  Q238 Chairman: It is a good market for jobs in general that you are putting down, Chancellor, because our experience has been in the past with, for example, the education cuts, that the ones that get cut are the road traffic lollipop men and women and the canteen staff; and if any senior staff are losing their work, there are very detailed negotiations so that they leave with large financial cushions for the rest of their lives. That is the anecdotal evidence we have heard in the past.

  Mr Brown: This may help the Committee. The headquarters staff are mainly administrative staff in London: in the DfES the redundancies out of 1,960 are 1,460 of headquarters staff; for ODPM, out of the 400 they have declared in this document, 250 are headquarters staff, which are mainly administrative staff.

  Q239 Mr Mudie: That could be the cleaner as well.

  Mr Brown: It is unlikely to be.

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