Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 260-279)

15 JULY 2004


  Q260 Mr Walter: Owned by the Government.

  Mr Brown: It is an independent company operating in the private sector not in the public sector.

  Q261 Mr Walter: But you are the shareholder.

  Mr Brown: Network Rail is partly financed obviously through money that is provided in the transport settlement, but the idea that Network Rail is not an independent company is wrong.

  Q262 Mr Walter: So you are not responsible at all for the activities of Network Rail?

  Mr Brown: What actually happens is that the transport settlement, which Alistair Darling, the Transport Secretary, will be talking about this morning, enables the Government to fulfil its commitment to meet Network Rail's funding requirements, so we are committed to meet its funding requirements. Its funding requirements were set out, as you know—you have just referred to it—in the Rail Regulator's conclusions of March 2004; but then Network Rail sets out its own borrowing plans, and did so at the time of the Regulator's conclusions. You have to understand the context in which we talk about Network Rail. Network Rail does its own borrowing, but there is money provided, obviously, for funding its requirements from government. The relationship is not that government is responsible for all the decisions of Network Rail.

  Q263 Mr Walter: But it is a nationalised industry.

  Mr Brown: I think you are trying to push me into a position that is not either the position of the Government nor certainly was the position of your party. If I may recall the history of this, your party privatised the rail industry. You set up the company that was called Railtrack. Railtrack had been run in such an inefficient and unsuccessful way that we had to make special arrangements to continue Network Rail in being; but Network Rail is an independent company. It does its own borrowing, but we provide—as we did for Railtrack—funding for that company. We provide funding for its requirements. That is the position. It arises from the situation that we inherited when we came into power in 1997, created by a decision to privatise the railway network.

  Q264 Mr Walter: But Network Rail is in public ownership, and therefore it is—

  Mr Brown: I think you are trying to leap to a conclusion that the borrowings that Network Rail undertake should be on the public borrowing requirement. That is what you want to get to, and I am not going to go down that road because that is not either the legal position nor the technical position.

  Q265 Mr Mudie: Chancellor, this is a historic meeting; this must be signalling a new era in British politics, where you say transport is a matter for the Transport Minister. Does this apply to every department?

  Mr Brown: Absolutely. We are mere technicians. We provide the finance.

  Q266 Mr Mudie: I have been at you before in terms of child poverty, but this document that you have produced almost makes you feel we have a Labour Party again. I do not know how you got it through the Cabinet. You state that all social housing will be brought up to decency standards by 2010. Is that true?

  Mr Brown: We have set down expenditure that we are giving to the Office of the Deputy Prime Minister essentially to increase by 50% the amount of social housing that is built by—

  Q267 Mr Mudie: No, this is not built, this is decency standards, Chancellor.

  Mr Brown: Sorry, I thought it was about building and improvement. We have also set out expenditures for the improvement of substandard accommodation. Again, there was an announcement made on Tuesday by the Deputy Prime Minister about the detail.

  Q268 Mr Mudie: Mr Macpherson, it is on page 43, the bottom paragraph, to save a bit of time!

  Mr Brown: We have set out expenditures both for building and for renovation of houses. If I am right, we fund the existing nine housing market renewal pathfinders, and we are providing more funding for areas in the north and Midlands, where there has been low demand and therefore—

  Q269 Mr Mudie: Especially in Leicester and Birmingham—very important!

  Mr Brown: There has been abandonment of homes, and our help to regenerate these areas; and the total amount of money is 450 million a year in 2007-08, and that compares to 150 million a year in 2005; and that is why I said on Monday that it was a trebling of the finance available.

  Q270 Mr Mudie: I am just delighted that you can assure this Committee that all social housing—because there is some dispute going on about the fact that, if tenants refuse to allow their housing to be handed over to outside bodies or ALMOs, they will not be covered by this decency pledge. Can we be assured that the decency pledge applies to all social housing regardless of the awkward tenants who might disagree with the Government?

  Mr Brown: I will just read out what we said, and this is the position. "The Spending Review confirms the Government's commitment to its target to make all social housing decent by 2010 . . . "

  Q271 Mr Mudie: Fine.

  Mr Brown: Then it says: "The number of non-decent social rented houses will be reduced by 1.6 million between the date we started in 1997 and 2008. Progress towards this will be assisted by the GAP funding scheme announced by the . . . ."

  Q272 Mr Mudie: I read that in bed last night, Chancellor. I am okay with that, as long as you are telling us that, because it is an enormous relief to a lot of tenants that they do not have to come out of local authority landlords to get this money.

  Mr Brown: My understanding is that a vote takes place, and that is what I understand the position to be. If I have got that wrong, I will write to you[3]

  Q273 Mr Mudie: Good. Moving to education—you can say something about education, can you not? The big word is "choice". As the Prime Minister keeps telling us, to give choice you need additional capacity. How do you tie that in, in secondary education, with efficiency?

  Mr Brown: I think what is being said is that, clearly, where there is limited capacity, parents are not getting the preferences that they state. We want to make it possible for the schools that are doing well to expand, and the schools that are doing well to link up with schools that could do better, and therefore there are arrangements for partnerships between existing schools, where one has got good management and is working to link up with others. That is one way that parents are more likely to get the preferences that they want.

  Q274 Mr Mudie: I am coming down to you as a technician now, and asking you: "Chancellor, you are asking local authorities to save brass. One of the things government is always at us at is, surplus places—close them down. I have schools being closed down in my constituency—surplus places, demographic trends." The Prime Minister says, "No, no, no; to give parents choice, you need capacity." Is this again a new policy? Are surplus places no longer a good thing?

  Mr Brown: I think you are raising the issue about whether schools that are popular, do well, and can expand—can we give the resources to enable them to expand? That is the issue. The answer is that there are more resources available for education than in the past.

  Q275 Mr Mudie: I understand that, Chancellor.

  Mr Brown: Then I moved on to the second issue. Maybe you should come back but the issue was then—

  Q276 Mr Mudie: No, let us stay on that one. I am in an inner city constituency, and the popular schools, as you can well imagine, are the leafy suburb schools; so you expand them; great—you give parents choice. That means there is more capacity in the inner city schools. Do you accept that we would keep those inner city schools open despite that capacity—

  Mr Brown: That is when I came to my second point. One of the proposals in the Education White Paper is that the school you are talking about and the school in the suburbs and in the inner cities—perhaps a link-up between the two is also possible. As you expand capacity, you are also making it possible for a good school to have an influence over the development of the school that has not been so good. That is one of the proposals in the Education White Paper.

  Q277 Mr Mudie: The business of capacity and surplus places: the discussions are taking place in secondary education, but do they apply to primary education?

  Mr Brown: That is an issue because the main gist of the Education White Paper was about specialist schools and the different types of school in secondary education.

  Q278 Mr Mudie: Mr Macpherson, let me read page 58, paragraph 546, the first sentence: "Academies, which are independent publicly-funded all-ability schools . . . "—it sounds like a comprehensive if it had not been for the word "independent"! "Academies have been created to replace chronically under-funded schools in disadvantaged areas." Why go to this business of building a new school, when you have diagnosed the problem as chronic under funding? Why do we not just deal with the chronic under-funding, which I see as a feature related to the performance of inner city secondary schools? What is the magic of not facing up to under-funding, labelling it a bad school, knocking it down and building a new school and funding it properly?

  Mr Brown: The advantage that the city academies have is that they are a fresh start in these areas where there has been a long cycle of decline.

  Q279 Mr Mudie: Under-funding.

  Mr Brown: I think it is a mixture of under-performance and perhaps under-funding; but there has been a long cycle of decline, where the view is taken that a fresh start is necessary. People come in to make that fresh start possible. Sometimes, it is an entirely new building, and that is how the city academies that have been successful. Basically, you decide that a completely fresh start is needed.

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