Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 420 - 432)



  Q420  Mr Ruffley: No. It relates to the question that my colleague Mr Fallon asked about the deal that Alan Johnson struck on public sector pay. If I may, I just want a very simple clarification, and I am just going to read out the relevant sentence. "The principle underlying this agreement"—ie the February agreement which you have referred to before—"is that existing scheme members will have the right to suffer no detriment in terms of their normal pension age and will retain their existing pension provision." If I can just stop there, that is widely interpreted as saying that 60 will stay as the retirement age for public sector workers. The next sentence is the one I want clarification on. "Unless individual or collective agreements within sector-specific negotiations are reached which allow changes to those provisions." The question is this: does that wording, "Unless individual or collective agreements within sector-specific negotiations are reached which allow changes to those provisions", mean that there could be a sector-specific agreement that forces public sector workers to work beyond 60?

  Mr Brown: It means what it says. Just read out what it says, and what it says is what it means, and there are now sector by sector discussions on this very point. You have actually just made my point for me.

  Q421  Mr Ruffley: No, I am seeking clarification. Does it mean that some public sector workers could in principle, as a result of the wording you have just agreed to and acknowledged, have to work over 60?

  Mr Brown: It means what it says.

  Q422  Mr Ruffley: Is that a yes or a no?

  Mr Brown: It means what it says, that the framework agreement is now leading on to sector by sector negotiations and, if I may say so, Chairman, if Mr Ruffley had been kind enough to read out the agreement, that is exactly what I was saying to the Committee. There is no change in position. It is exactly the terms of the agreement that there are now sector by sector negotiations. That is actually what is happening.

  Q423  Mr Ruffley: You will not answer it, will you?

  Mr Brown: I think Mr Ruffley helped the Committee by reading out the agreement, because that is exactly what I was saying, that the agreement is there and there are now sector by sector discussions.

  Q424  Susan Kramer: I think most of us would see now that the Golden Rule is somewhat tarnished.

  Mr Brown: It is not at all.

  Q425  Susan Kramer: Whether rightly or not, whether or not Treasury has measured the cycle correctly, the fact that it is not measured by an independent body—

  Mr Brown: This is completely untrue, if I may say so. The cycle is measured by the National Audit Office. When the cycle was to begin, 1997, is what the National Audit Office have just prepared a report on, and they have said it is reasonable to assume that the cycle began in 1997, so your question is based on a misunderstanding.

  Q426  Susan Kramer: I am not going to re-dig the ground. There have certainly been sufficient comments with words like "uncertainty" in them to create a sense that there is no absolute agreement over the cycle.

  Mr Brown: I am sorry, Mr Chairman. This is a complete misunderstanding of the point by the Member, because what we have said is we believe—and I submitted the evidence round the Committee—that because growth was over 3% in 1997-98-99, it is not possible to argue that there was a separate cycle from 1997-99. The National Audit Office was actually asked to give us an independent assessment as to whether the beginning of the cycle was 1997 or 1999, as had previously been thought. The National Audit Office have said in each of these paragraphs this is the reasonable assumption that should be made, and therefore there has been an independent assessment made about the starting date of the cycle. It is wrong for you to say there is not.

  Q427  Susan Kramer: Can I just say that an area where there is much less contention is your other rule, the sustainable investment rule, where we are looking at net debt exceeding 40% of GDP. Do you see any prospect of breaking the sustainable investment rule?

  Mr Brown: You have the figures. I published them in the Pre-Budget Report and you have them before you.

  Q428  Susan Kramer: Do you think however that that rule should be looked at again and adapted to include other kinds of liabilities which in a sense are much more recent types of liability? I know there is a PFI liability and certainly public sector pension. I am not saying you should not adjust the measure but those have now become such major items that they ought to be included in some way within a measure—

  Mr Brown: We are subject on what is the definition of what is on the balance sheet to decisions that are made by the Office of National Statistics, so it is not, in a sense, an independent judgment that we make; we are subject to decisions that they make. We publish the figures. They are based on exactly the same procedures that were adopted for PFI and other public sector liabilities under the previous Government. There has been absolutely no change in that position during this Government but we have got to await the independent judgments that are made by the statistical authorities. So again, I think it is very unfair to suggest that somehow there has been some change in the way the Government has had a policy towards this. We have set forward our policy but we rely on independent assessments made by the statistical authorities.

  Q429  Damian Green: I would like to ask you about Gershon. The PPR claims a flat figure of £4.7 billion of efficiency gains reported by the end of September of this year. It is pretty astonishing that in a two-foot high bundle of documents there is no table that gets you to £4.7 billion. That figure is not justified Department by Department anywhere in the bundle of documents associated with this.

  Mr Brown: Let me help you. The Department of Health has made £1.7 billion efficiency gains. The Home Office has made equivalents of £834 million. The local authorities have delivered £750 million. So that helps towards your figure. I am sure by the time we get to the Budget we will be able to give you more detailed information. Actually, I am told, because this is a departmental matter, the breakdown will be reported in departmental annual reports that are due shortly. Maybe you could find that information then.

  Q430  Damian Green: Given that the £4.7 billion must come from a disaggregated figure, not to have the disaggregated figures now might incline one to suspicion as to how real that figure is. You mentioned the Department of Health. Let me move on to that specifically. We have got their annual performance report, and under the Gershon efficiency targets section the central budgets is one of the six things they are trying to save money on: reducing or eliminating centrally managed budgets where they do not provide value for money, releasing to front-line NHS organisations. Admirable! You look at the table and in 2004-05 under the line "central budgets" they succeeded in saving nothing, and in 2005-06 they are planning to save nothing again. Can I just confirm therefore that every penny spent by the Department of Health on central budgets is being efficiently spent and could not be released for front-line budgets?

  Mr Brown: I think the Department of Health will publish in a report due shortly the efficiency gains that it has achieved.

  Q431  Damian Green: They just have.

  Mr Brown: I am very happy to write to the Committee on this but this is the information that I have been given. I think the figures will be up to September 2005.[3]

  Q432  Chairman: Chancellor, could I just refer to the 2003 Pre-Budget Report, and it is on SIPPS. My colleague, Mr Mudie, at question 380 made the statement "`It is hard to reconcile the Chancellor's stated ambition of controlling the housing market's disproportionate influence on the economy with a proposal that will allow billions of pounds of pension fund money to wash into the housing market.' The question arising from this is, does this move not risk reigniting house price inflation?" to which your reply, Chancellor, very firmly, was "I think that is wrong actually." Were you not slow to realise in your Department the impact that the measures had? I hear a "mea culpa" coming on.

  Mr Brown: What we said was we would look at it and we have looked at it, and the nearest statement that I have made to the House since all these matters have been raised is the statement I made in December, so we have acted.

  Chairman: Chancellor, thank you and your team for coming along.

3   See supplementary memorandum dated 16 January 2006. Back

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