Select Committee on Treasury Tenth Report


5  Funding arrangements for the non-ministerial department

The Government's proposals

BUDGET SETTING

90. The Government's consultation paper specifies four key criteria with respect to funding the proposed new non-ministerial department. The Government hopes to combine "sufficient independence … transparency and … flexibility", with "adequate safeguards", as detailed in Box 7.[124] The Government proposes to meet these criteria by setting the new non-ministerial department's funding outside of the normal Spending Review process, although the funding arrangements for the census would still be set as part of the Spending Review process. The non-ministerial department's budget would be established by way of periodic review, with subsequent increases determined by formula.[125]

Box 7: Criteria underpinning proposed funding arrangements for the non-ministerial department
The Government believes there are a number of key criteria needed to underpin funding for the new arrangements:
  • sufficient independence in relation to government spending controls to avoid a perception that statistical independence could be compromised;

  • sufficient transparency in the funding mechanism to build public confidence in independence; and

  • sufficient flexibility to meet changing needs; combined with

  • adequate safeguards to encourage efficiency, secure value for money and control public spending.

Source: HM Treasury, Independence for statistics: A consultation document, March 2006, para 4.43

91. The RSS told us that it supported the broad principle of separating funding from the Spending Review, and provided suggestions about how this arrangement might work in practice:

The budget setting mechanism for ONS should be quite independent of the annual spending review and be for a longer time horizon. The budget must include current funding needs together with an allowance for infrastructure renewal costs as well as any additional recurrent costs associated with the creation of the proposed Board and its functions. The budget should be arrived at through a joint [HM Treasury]/Parliament proposal.[126]

92. Professor Roger Jowell of City University London similarly emphasised the importance of safeguarding Parliamentary involvement in the budget-setting process:

I think it is important that Parliament should have the primary say in the allocation of statistical resources. Otherwise potentially embarrassing statistical series might end up being starved of resources. Independence is much more likely to be sustained if it is protected by all-party governance [rather] than by the Executive alone.[127]

93. The Minister told us that the Government had not yet considered how Parliament might be involved in the funding process.[128] When we asked him who would be the ministerial 'champion' of the statistics office in the course of funding negotiations with the Treasury, he told us that the Government had "taken ministers out" of this function:

The Treasury ultimately will make decisions on funding, as we have to do. I would imagine that the board will produce the business plan, the business case, the proposals for the activity, and therefore the funding required—drawing very heavily on the Chief Statistician and her expertise there. That will be negotiated and settled directly with the Treasury.[129]

OUR CONCLUSIONS

94. It is important that the Government consider the detail of the process whereby the new statistics office's budget will be set, and the extent to which Parliament might be involved with this process. We look forward to the Government producing detailed proposals, and recommend that it outlines these proposals in its response to this report.

IMPACT OF FUNDING ON INDEPENDENCE

95. The Government proposes to safeguard flexibility in the statistical system by agreeing to provide additional resources if it were to place "significant new statistical demands" on the board during a funding period, though "new statistical outputs proposed by the board itself would need to be met from within its allocated funding".[130]

96. This proposed mechanism caused some witnesses to question the level of independence the board would enjoy in reality. The Chief Statistician of Canada told us that there was:

a sharp distinction between the government having the freedom to fund (or not to fund) the development of statistical information on certain priority issues and the possibility open to the Government of withdrawing funding if, for example, it does not like the results.[131]

97. The Statistics Commission suggested that, the fact that the level of funding provided for the ONS would depend on the Treasury's view of the appropriate scale of ONS activities, meant that there was "a real question" about the extent to which statistical plans and priorities could be separated from ministerial decisions.[132] The Commission told us that it did not want to see an environment in which a "highly independent ONS" was "sidelined", with new statistical work instead directed by ministers to other departments.[133]

98. When we asked the Minister whether the Government had considered what impact its proposed funding model might have on the independent board's ability to develop its own work programme, he told us that it had not. He said that this was a "matter down the track", and that at this stage it was more important for all sides to accept the principle of the Government's proposals.[134] The Minister told us that the funding model would not undermine the board's independence, because this would be guaranteed by the legislation and by the transparency of the process:

We are taking this process out of the normal Spending Review process. That gives it a degree of special treatment. I would expect that process to be pretty open and transparent. I would expect Parliament … to take an active interest in that process. In the end, the guarantee of operational and policy independence will be set out in the legislation that we propose to introduce in order to set up the board and the new system.[135]

OUR CONCLUSIONS

99. We welcome the Government's proposal to set the funding of the independent statistics office outside the Spending Review process. However, there is very little detail in the consultation paper about how these funding arrangements will work in practice, and, in oral evidence, the Government was unable to provide us with any further detail or clarification.

100. We share the concerns of the Statistics Commission and the Chief Statistician of Canada that the proposals, as they stand, could undermine the new independent statistics office's ability to determine its own work programme. However, we agree with the Government that some constraint must be placed on the funding of the new independent statistics office's work programme, in order to safeguard public spending. We have already recommended that the Government set out a detailed account of how it proposes that the funding arrangements for the new independent statistics office should work. On the question of the appropriate frequency of the periodic review of the new office's budget, we recommend that the Government adopt a minimum period of five years between reviews, in order to allow the statistics office to operate with reasonable certainty.

Funding arrangements for the census

101. The Government's consultation paper deals specifically with the funding arrangements for the census. The document describes the "significant expenditure" associated with the census as being of a cost and a profile which "are difficult to forecast in advance of detailed planning".[136] The Government therefore proposes funding the census separately from the new non-ministerial department, via "the usual Spending Review process".[137]

102. Several witnesses criticised the Government's proposed approach, with the RSS describing it as "unacceptable".[138] The Statistics Commission explained that the 2001 Census cost approximately £250 million and that the 2011 Census was likely to cost "substantially more".[139] The Commission argued that planning for this "huge, lumpy part of statistical activity in the UK" was a long-term project that could not be undertaken as part of the Spending Review process:[140]

Accommodating that one-off blip within standard funding arrangements is clearly not easy, not least because, whilst a census occurs every ten years, the preparations for it extend quite a long time beforehand and quite a long time thereafter. It seems … to be rather a difficult one to accommodate within, say, a three-year spending horizon, and it really has to be thought of as an enterprise from beginning to end rather than the first three years, middle three years or couple of years at the end.[141]

103. The ONS suggested that the Government needed to understand that funding for the census required a long-term commitment:

What we are very much working towards in the Spending Review process is acceptance by government … of the longer term costs, because we are estimating costs right up to 2013 now and what we need to get is an assurance that that proper census will be funded. Whatever way it happens, I do not think it really matters. What we need to know is that we are going to get that money.[142]

104. When we put these points to the Minister, he told us that he felt retaining the census within the Spending Review process would not "inhibit [its] preparation and delivery".[143]

OUR CONCLUSIONS

105. We share the concerns expressed by some of our witnesses, that the Government's proposal to retain the census within the Spending Review process may well limit the new independent statistics office's ability to undertake long-term planning for future censuses. We recommend that the Government re-examine the implications of this proposal, bearing in mind the importance of enabling proper long-term planning of the census to take place.

Interim planning

106. Under the 2004 Spending Review, the ONS is committed to achieving annual efficiency savings. The ONS achieved efficiency savings of £12.5 million in 2005-06, and is required to achieve efficiency savings of £25 million per annum by 2007-08. The ONS is also required to relocate 850 jobs from London and the South East by March 2010; 125 full time equivalent posts had been relocated as at 31 March 2006.[144]

107. The Minister explained to us that, as the Government intended to introduce the statistics legislation "as soon as possible", the ONS would not receive funding as part of the 2007 Comprehensive Spending Review. He said that the ONS nevertheless had a responsibility to deliver the efficiencies and the relocation targets that it had signed up for, because that was a "part of the overall settlement" in the 2004 Spending Review.[145] The Minister told us that the new independent statistics office would have no new efficiency or relocation targets, although the Government would "make sure there is a discipline on the sorts of efficiencies that we expect of departments and public agencies".[146]

OUR CONCLUSIONS

108. According to the Minister, the new non-ministerial department will have no new efficiency or relocation targets. However, it is not clear from the consultation paper whether or not the Government will require the proposed new independent statistical office to assume responsibility for the ONS's existing efficiency targets for 2007-08 and existing relocation targets for 2010. If the non-ministerial department is to be expected to meet the ONS's existing targets, it is not yet clear how the Government expects to hold the new non-ministerial department to account for these targets. We recommend that the Government clarify these points in its response to our report.


124   Independence for statistics: A consultation document, para 4.43 Back

125   Independence for statistics: A consultation document, para 4.44 Back

126   Ev 73 Back

127   Ev 63 Back

128   Q 273 Back

129   Q 271 Back

130   Independence for statistics: A consultation document, para 4.44 Back

131   Ev 84 Back

132   Ev 88 Back

133   Ev 88 Back

134   Q 274 Back

135   Q 275 Back

136   Independence for statistics: A consultation document, para 4.45 Back

137   Independence for statistics: A consultation document, para 4.45 Back

138   Ev 73 Back

139   Q 134 Back

140   Ibid. Back

141   Ibid. Back

142   Q 192 Back

143   Q 276 Back

144   Office for National Statistics, Departmental Report 2006, para 32 & para 41 Back

145   Q 278 Back

146   Q 279 Back


 
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Prepared 26 July 2006