Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 260-279)


14 JUNE 2006

  Q260  Mr Gauke: Would you be concerned that the Treasury would be weakened if it lost control of statistics?

  John Healey: I do not think the Treasury would be weakened at all. The important question and the central question is this. Are the statistics that are being produced within and in some cases for, but not exclusively, government, soundly based? Are they meeting the sorts of needs that we have for that sort of data? That would be the most important factor.

  Q261  Mr Newmark: How is the Government's proposal that statisticians outside the statistics office remain within the formal line management of their departments, and therefore ministers, compatible with your stated intention of establishing a statistical system that is genuinely independent of government?

  John Healey: The first point in looking at this question is that we have, and we have had for a century or more, a highly devolved system of statistical production in this country.

  Q262  Mr Newmark: Yes, but that has led to the current lack of confidence there is in statistics, which is why we are having this debate.

  John Healey: No, on the contrary. There are some very important strengths in having a system where you have an important cadre of professional statisticians based in departments. In those circumstances, two things flow from that. First of all, it means that the operation and other officials in those departments have ready access and influence with those statisticians in the way that they go about their work. That is important. Secondly, from the statisticians' point of view it means that they are closer to the data sources. In some cases they are closer to the consumer. They are also closer to the policy imperatives for which statistical systems need often to be devised in order to be able to track.

  Q263  Mr Newmark: Yes, but they are also close to the ministers, and you cannot say that there is not some sense of relationship to influence which actually develops.

  John Healey: The appointment of any civil servant is not, and never is, a matter for ministers; but it is a matter for the department. In terms of their professional role as statisticians, it is quite right that they have—particularly the cadre of the professional statisticians' group within the GSS—that professional accountability and a reporting line directly to the Chief Statistician. They have that at the moment. They would have that in the arrangements that we propose. In terms of the standards to which they work, their professional integrity, and operations and status, it is important that they maintain that. What we have not proposed and do not propose to do—given the historical way that we have set up our statistical production in this country—is somehow to consolidate all statistical work and all those working on statistics within government in a single department, such as the ONS.

  Q264  Mr Newmark: We have touched on other issues relating to that at different points. Why is the scope and definition of the Retail Price Index the responsibility of the Chancellor?

  John Healey: I am aware that this is a matter that the Treasury Committee has looked at before. It is a responsibility of the Chancellor, and it is a unique arrangement within the range of statistics. Essentially, it is—

  Q265  Mr Newmark: How do you justify it? It seems to be the only thing he seems to be still controlling.

  John Healey: It has traditionally been the responsibility directly of the Chancellor, essentially because of its unique place and its unique role. It is used for policy, for legislative, for contractual purposes. It is used for up-rating pensions and benefits. It is used for indexing tax thresholds. It is used for calculating the level of the index—

  Q266  Mr Newmark: Therefore, all the more reason why there should be a greater level of independence for it.

  John Healey: Up to this point, there has been a very strong view that—particularly with its potential effect on gilts and the contractual responsibilities government has in relation to some gilts issued, particularly before 2001—the degree of government exposure from changes to the RPI made it appropriate to leave the ultimate say on any changes to the Chancellor. You may or may not be aware that there have been four changes to the RPI since 1997. In each case those have been formally agreed by the Chancellor, and they have very heavily been drawn on the professional and statistical advice of the Chief Statistician and others.

  Q267  Mr Newmark: The Statistics Users Forum basically says that this anomaly should end, and the Society of Business Economists has said, "Continuing to make an exception of the RPI is anomalous and should be rescinded". Other professional bodies have made similar comments. Therefore, my question to you is this. Will the Government now consider treating the RPI in the same way as other key macro-economic statistics, by transferring this responsibility to the National Statistician, or is the Chancellor still intent on keeping a hold on this?

  John Healey: I have explained why the situation is as at present—

  Q268  Mr Newmark: I heard your historical explanation.

  John Healey: Today is the end of the consultation period. We have undertaken to look carefully at the responses on any of the range of issues on which we have consulted that come in as part of the consultation process. We will do that and we will draw any conclusions for the future that seem appropriate.

  Q269  Mr Newmark: That is not answering my question. My question is this. Is the Chancellor likely to consider changing this anomaly?

  John Healey: I have said that today is the last day of the consultation that we have set out here. We have undertaken to treat very seriously the views that come in through that consultation. I have not read the responses to the consultation yet. I have explained that there are over 40 of them. We will do that in the coming weeks, and we will make any judgments that seem to us appropriate and right for the future, and report those to this Committee and to others.

  Q270  Peter Viggers: You have said that the Government proposes that the funding of the independent office should be outside the normal Spending Review. Who would make a bid for funds, and how would the decision-making process work—in a bit more detail, please?

  John Healey: Our proposal is that we would set the funding for the board and the ONS—the two main component parts of the system—periodically. We would set those, with increases according to a formula. We would do that outwith the regular Spending Review cycle. We have also said that, within that, where government places additional significant statistical demands on the system, then we would fund those.

  Q271  Peter Viggers: Bids are made to the Chief Secretary of the Treasury normally, I believe, and there are bilaterals between ministerial departments and the Chief Secretary. Who would be the ministerial champion of the offices?

  John Healey: In a sense, we have taken ministers out of this. There will be the Chief Secretary, and 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.

  Q272  Peter Viggers: If the people talking to the Chief Secretary are not happy, who do they appeal to?

  John Healey: I would hope that we would get to a situation where we would arrive at a settlement that allowed the new board and the statistical service to undertake the duties that we wanted them to undertake. However, just to be clear, this will not be a blank cheque for them; there will be the same sorts of imperatives on value for money and efficiency that you, as a Parliamentary Committee, would expect us to insist on.

  Q273  Peter Viggers: The Royal Statistical Society urged that there should be some kind of parliamentary input. Have you worked out how that might be made?

  John Healey: The short and honest answer is no. However, if proposals of that nature are put to us, either through the consultation process or through this Committee, then we would consider that. I have made it clear that in many ways the consultation document is an invitation to Parliament to work out how it wants perhaps to adjust and reform its own scrutiny processes, in order to exercise what will be a much more important and direct part in making sure that this new system meets the sorts of levels of efficiency, integrity and quality that we require of it.

  Q274  Mr Love: In case I am the only one who has not said it before, I certainly welcome the document, the consultation, and I am very pleased to hear that you will listen carefully to what this Committee has to say on the matter. Following up on the previous questions, may I press you a little bit? As I understand it, when the Government requires additional statistical information it will provide that through the budget for this organisation; but when the organisation or the board itself want to develop the statistics that they provide, they will need to find that within existing allocations. Have you given consideration to what scope that will leave them to develop their own programme and, effectively, their independence?

  John Healey: The short answer is no. I think that is a matter down the track, but it has to be right in principle that government accepts that, where we are putting significant new statistical responsibilities or burdens on the board and the ONS, we should be prepared to fund those. Equally, however, it is right that we cannot simply say, "Listen, anything that you come up with we will somehow underwrite the costs of". Therefore, where the board itself comes up with new statistical outputs or arrangements, then it is right to look to them to find the funding for that activity within the budgets that have already been agreed.

  Q275  Mr Love: There has been quite a lot of comment about what happens if they produce information that is, shall we say, somewhat critical, in particular of government initiatives or programmes. What guarantees are we giving that you will not use the opportunity to reduce budgets in order to curb this sort of independence of the organisation?

  John Healey: It is hard to see, given that there has to be a process of public money being allocated to this body, for there not to be some periodic process where those allocations are made. 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—and Mr Viggers has indicated this—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.

  Q276  Mr Love: There has been quite a lot of concern expressed about the Census. There have been many comments made that, because of the unique spending pattern of the Census which occurs round about April, and which of course is very focused and concentrated—and there is other spending both prior to and afterwards in terms of research and development—it has been suggested that to do it in the way you are suggesting would inhibit the proper development of the Census. How do you respond to that?

  John Healey: I would clearly be concerned if it was going to inhibit the preparation and delivery of the Census. I have not seen evidence that it will. I have heard people making those observations. Our difficulty is this. The cost of the 2001 Census was over £200 million. The current budget of the Office for National Statistics is £175 million. The spend for the Census is not only extremely large in terms of the ONS's spend; it is also very lumpy. It tends to come not in April, as you suggest, Mr Love, but particularly close to the run-up to any Census period in quite a concentrated timescale. In those circumstances, it is not very easy to see how you build that in sensibly, into what I think people would generally recognise as a sensible desire to see a degree of predictability and certainty in the funding for this system and the statistical office. That is why we are proposing to take it out of that Spending Review process and make it subject to its own periodic review, with a reliable formula that can set the year-to-year budgets within it.

  Q277  Mr Love: We will be looking carefully at the formula that you come up with.

  John Healey: You would not be the only ones!

  Q278  Mr Love: Could I ask one final question, related to the ONS being included in the comprehensive Spending Review and the announcement that the Chancellor made about the efficiency savings? As I understand it, there are significant efficiency savings being asked in relation to the Efficiency Review, and of course the Relocation Review of Sir Michael Lyons is also appropriate here. Are the proposals to go independent impacting on those negotiations or are those negotiations having an impact on your discussions about independence?

  John Healey: There are several things there. First of all, the Office for National Statistics is a part of the current Spending Review period. It had its settlement as part of the SR 2004. As part of its settlement, like every other department and agency, essentially it has signed up to certain deliverable efficiencies and indeed some relocations, as you say. The proposals that we are now making for the funding of the new system, depending on the timing of the legislation—if we can move to legislate as soon as possible—what we would be looking for and I would be looking for is a financial settlement for the Office for National Statistics in the new system that we could settle according to the plan that we have set, outwith the next Spending Review period. In relation to whether independence is affecting the relocation plans, the relocation targets or the efficiencies, in broad terms, no, it is not at the moment. The ONS has a responsibility to deliver the efficiencies and the relocation targets that it has signed up for, because that is a part of the overall settlement in the SR 2004.

  Q279  Mr Love: Can I be clear that, when it becomes independent, through the next Spending Review it will not be subject to any efficiency or relocation targets, as it has been in this particular review?

  John Healey: I have been very clear earlier on that, despite looking to put in place a special and separate arrangement for funding, we would still expect—and I think that this Committee and Parliament would expect—that we make sure there is a discipline on the sorts of efficiencies that we expect of departments and public agencies.

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