Examination of Witnesses (Questions 420
THURSDAY 8 DECEMBER 2005
MP, MR JON
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
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 believeand I submitted
the evidence round the Committeethat 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
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
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
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.
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