Examination of Witnesses (Questions 380-400)
RT HON
GORDON BROWN,
MR JON
CUNLIFFE, MR
NICHOLAS MACPHERSON,
MR JONATHAN
STEPHENS, MR
MICHAEL ELLAM
AND MR
DAVE RAMSDEN
16 DECEMBER 2004
Q380 Mr Beard: There have been comments
on the Gershon savings to the effect that they are sort of fairy
gold, they are heard about, but no one sees them. Would it not
help if there was a statement in either of the Pre-Budget Reports
or the Budget saying what the progress was towards achieving the
£20 billion?
Mr Brown: Well, I thought that
I had included some information even after a few months about
how progress is being made in jobs, in procurement and in some
other areas. I am told that £2 billion has been saved in
procurement and then the use of e-options has made quite a difference.
I also know that the MoD is on track to deliver £400 million
in savings through improved defence logistics, the Department
for Transport £140 million on the Highway Agency measures
that they have announced, and a better use of IT in the Home Office.
The workforce numbers lead us to announce that nearly 10,000 jobs
by the end of the year have already been reduced since the Gershon
Report was announced in April, so we are on track to get the numbers
between now and 2008 that we talked about, but I am very happy
to say that we will provide more updated information in the Budget.
Q381 Mr Beard: The Gershon criteria are
very clear and they were set out in the Gershon Report, but there
are 3 particular cases: the MoD, for instance, reducing 2 submarines
as part of the Gershon exercise; the Department for Transport
including fines for infringements covering driving hours for HGVs
and PSVs; and then the Department for Education and Skills is
bringing in raising the retirement age for teachers. None of those
things appears to be within the criteria of the Gershon Report
which were to do with inputs and getting similar things out for
lesser inputs. These seem to be more policy matters.
Mr Brown: I think I can answer
specifically some of these points. The plan to reduce the submarines
is part of a wider package of measures to achieve the genuine
efficiencies that you are talking about. As far as the fees by
the Department for Transport are concerned, it is responsible
for collecting vehicle excise duty, as you know, but it is now
known that 4.5% of VED was not being collected and, therefore,
it is an efficiency saving to get that money collected. I will
write to you separately on the Department for Education and Skills[3],
but I do say to you, and this is why the departments are now responsible,
that the savings have been built into the Spending Round allocations
so that if these savings are not achieved, then the departments
will have to find another way of maintaining the services or not
be able to maintain all the services that they agreed to in the
2006 Spending Round. We have built the savings into the figures
for the Spending Round, so we believe that even with a lower rate
of spending growth as a result of the decisions made in the Spending
Round, with the efficiency savings the actual rate of growth of
expenditure on front-line services would be as high as in the
previous round, so departments are not only responsible and accountable,
but if they can get these efficiency savings, they will be held
to account because it will affect the delivery of other services.
Q382 Mr Beard: I appreciate that. It
would answer the question if those savings were made more explicit,
as you have suggested, in the Pre-Budget Report.
Mr Brown: Well, we will keep,
in the Budget process, people in touch with what is happening,
but of course individual departments are available to answer questions
on what they are actually doing if you were to put them down.
Q383 Mr Cousins: I have a question about
this teachers' pension scheme. It is not just a point of detail;
it is a point of principle. One of the component features of the
changes in the teachers' pension scheme is to raise the build-up
rate of entitlement to pension from 80ths to 60ths. Now, the effect
of that of course is to make people who are in teaching for shorter
periods build up a bigger entitlement to pension. Regardless of
its merits or demerits, do you think that is a legitimate thing
to include in efficiency savings?
Mr Brown: I do not know the detail
of this. This is not a matter essentially for me or the Treasury.
Q384 Mr Cousins: But you will have to
take a view about whether it is properly an efficiency saving.
Mr Brown: No, that is not for
me to take a view on it. That is for the Department to work out
how it is going to move forward to achieve its efficiency savings,
but, as you know, there is a wider debate about pensions taking
place and if people are working in one job for less years, but
working at a high standard of achievement, can you make sure that
the retirement provision is adequate. These are issues that the
Turner Commission is looking at.
Q385 Mr Mudie: I have three quick questions
really. I was delighted to hear your remarks about the Savings
Gateway which I think is an excellent scheme, but the result of
the pilots is supposed to report in February this coming year.
That was applicable to the poorest households. Now, you have made
a suggestion which is included in the Report that you are going
to start another pilot to wider groups. Now, I am looking with
anxious eyes to see if this first pilot is successful, and you
have indicated that you think it will be, and you used the words
"going well" and "very successful". I was
looking forward to my poorest constituents taking part in a national
scheme after February at an appropriate time Budget-wise, but
you are now suggesting another pilot for a wider group. Is there
room for taking a decision, where this will help the lowest-income
households, say, for taking a decision to run with that nationally?
Mr Brown: Our experience of a
number of pilots we have done is that we extend them from one
area to another before we make a final decision to go nationwide.
The participants either receiving out of work qualifying benefits
or individual earnings below £11,000 were in the first pilot.
It was piloted in Tower Hamlets, Cambridgeshire, Cumbria, Gordon
and Hull.
Q386 Mr Mudie: It has been very successful.
Mr Brown: The interim evaluation
says mostly it has been new saving and sustainable saving, in
other words it continues. The full evaluation comes in February
2005.
Q387 Mr Mudie: Chancellor, the question
is will you give some thought if the final report in two months'
time confirms your view it was very successful not to run with
another pilot, a wider pilot that keeps it to a minority but to
consider extending it?
Mr Brown: I am saying, if I may
put it this way, there is a middle way to this, like the national
employer training pilots which started in a number of local areas,
then were extended to a third of the country and have now been
extended nationwide. It is possible to widen the pilots before
you make a final decision that you can afford to go nationwide
or it is right to go nationwide.
Q388 Mr Mudie: I would be happy if you
widen this pilot but you are suggesting a different pilot scheme
starting.
Mr Brown: What we are testing
are alternative match rates not just 50:50, we are looking at
it as how it would affect a wider range of income groups and,
therefore, there will be a larger set of pilots.
Q389 Mr Mudie: Now on affordable credit,
one proposal you have got in your document that has caused distress
to all the bodies dealing with constituents with problems getting
affordable credit, is a proposal to allow lenders to apply for
a deduction from benefit. I just really want to say can there
be some fresh thinking on this because you are poor in your own
benefit and to be put on a list as a condition for extending affordable
credit is not acceptable out in the country.
Mr Brown: There are two views
on this but I do say what we are doing on financial inclusion
is wider than what you are referring to.
Q390 Mr Mudie: I know.
Mr Brown: There is £120 million
over three years. It is to help citizen advice bureaux, it is
to help other possible lenders from the charity and community
sector, it is perhaps to extend the community investment tax relief
which helps these agencies like credit unions.
Q391 Mr Mudie: All wonderful things.
You are a wonderful Chancellor but are you willing to listen because
there is quite an upset over this proposal?
Mr Brown: We are willing to listen,
obviously.
Q392 Mr Mudie: Well done!
Mr Brown: For claimants it suits
them that this should happen because it gives a continuity to
the commitments they have to make.
Q393 Mr Mudie: I am sorry because I know
you have got questions so I am racing with these. I am not trying
to cut you off because they are all very good measures. Two measures
which are wonderful: social fund reforms, when somebody borrows
it is 15% repayment, you are suggesting cutting it to 12% which
is a very good first step, and then the capital limit for benefit
which you are raising from £3,000 to £6,000 which will
affect a tremendous number of people throughout the country. The
trouble is both reforms you are suggesting from the year 2006.
If they are as good as they are, why are you not suggesting doing
them sooner?
Mr Brown: Because of the changes
we are making in a whole series of areas affecting that department
it is right that we do it with the proper procedures so that it
is implemented in a way that the resources are there to do so.
I think it is to give the department time to adjust to this change
and make provision for it.
Q394 Mr Mudie: Chancellor, to adjust
to repayment from 15 to 12 takes 5 minutes on a computer.
Mr Brown: No, as you said yourself,
there will be a wider group of prospective claimants for these
benefits.
Q395 Mr Mudie: That is the second one,
not the first one.
Mr Brown: You have to have the
resources for that second one. You have to have the resources
to enable you to do it.
Q396 Mr Mudie: I am delighted with the
fact that you have appointed, as Mr Holgate told me on Tuesday,
the Chairman of the task force on basic bank accounts. I am surprised
where he comes from. He has not been one of the people who has
been regularly at this Committee on financial inclusion et cetera,
but that is your choice. When is he going to be joined? When are
you going to set this up? It does not seem a major thing to set
up, it is important. Can you make sure he is joined by people
from areas that have expressed an interest in less well off people?
Mr Brown: Yes. The membership
of the group will be drawn from the financial services sector.
It will include the voluntary sector and the community sector
and people who have an expertise in academic university and colleges
on these issues as well. It will be a widely drawn task force.
This will be published shortly. I know Mr Pomeroy has been highly
recommended to us.
Q397 Mr Mudie: By whom?
Mr Brown: He is the former Chairman
of the National Lottery Commission.
Mr Mudie: There you are, it might make
sense to somebody.
Q398 Chairman: Chancellor, lastly, you
mentioned with the Treasury that those excluded from mainstream
credit could be faced with ". . . a lack of low cost options,
a lack of transparency, pressure to take on more debt . . . "
et cetera.
Mr Brown: Yes.
Q399 Chairman: You said, also, you would
be encouraging the third sector. What discussions have taken place
with potential providers of increased "third sector"
areas on affordable credit, for example credit unions? Does the
potential capacity exist to support the kind of expansion you
have in mind? What targets do you have in mind?
Mr Brown: That is right. We want
to extend the institutions which are offering affordable credit.
I think the best thing to say to you is I will write[4]
to you about the specifics of that but there is £120 million
provided for this financial inclusion credit.
Q400 Chairman: Thank you for your appearance
this morning, Chancellor, and particularly your officials. I think
it is a record that none of them has opened their mouth this morning.
Thank you for coming.
Mr Brown: Thank you very much.
Happy Christmas!
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