Select Committee on Treasury Written Evidence

Supplementary memorandum submitted by HM Treasury


  The UK Government has made significant progress in 2005 in the fight against poverty. The Gleneagles summit agreed on an ambitious multilateral debt deal that will cancel up to $55 billion of debts owed to the IMF, World Bank and the African Development Bank. Many countries have made commitments to substantially increase their aid levels. DFID has committed £1.1 billion in bilateral assistance to Africa for 2005-06, and has committed almost twice that amount in aid though multilateral institutions, a significant proportion of which will help Africa to meet the MDGs. We are working hard to make a success of the Doha round, the success of which is essential if millions of people are to have a chance to escape poverty.

  The 20 October Paris Club debt deal was done at the request of the Nigerian Government, based on and in support of its own economic reforms and development strategy. The UK worked very hard to help deliver this fair solution to Nigeria's debt problems. Paris Club creditors will write off about 60% of Nigeria's debt. The UK alone will cancel £2.8 billion. In return Nigeria will use part of its oil windfall to pay off the remaining debt.

  This represents the largest debt relief package ever in sub-Saharan Africa. DFID has been working hard with the Nigerian authorities to ensure that all the savings from the debt cancellation are effectively targeted on reducing poverty. The deal will free up at least an additional $1 billion a year for Nigeria to spend on poverty reduction, helping to employ an extra 120,000 teachers and put 3.5 million children into school. In addition to the £2.8 billion debt cancellation, DFID is in the process of doubling its assistance to Nigeria to £100 million.

  If the UK were now to return the money being repaid by Nigeria back to Nigeria it would require DFID to finance it from its development budget. This would mean reallocating DFID's budget at the expense of other poor countries. Nigeria is not a HIPC, and given its relative financial position and oil resources, for the UK to go further and provide one hundred per cent debt cancellation for Nigeria would not be an appropriate allocation of our aid resources.

  The President of Nigeria and his Finance Minister have both welcomed the Paris Club debt deal. The UK Government believes it is important to support the ownership, sovereign right and accountability of the elected Nigerian Government.

What counts as efficiency gains in local authorities?

  The Local Government Efficiency Technical Note sets out the criteria. It is available at:

  In concurrence with the Gershon Review, the Local Government ETN states:

    Efficiency is not about cuts, but about raising productivity and enhancing value for money. Efficiency gains accrue when projects achieve one or more of the following:

      —  (E1) reducing inputs (money, people, assets, etc) for the same outputs;

      —  (E2) reducing prices (procurement, labour costs, etc) for the same outputs;

      —  (E3) getting greater outputs or improved quality (extra service, productivity, etc) for the same inputs; or

      —  (E4) getting more outputs or improved quality in return for an increase in resources that is proportionately less than the increase in output or quality.

    Certain types of activity are not acceptable as efficiency gains:

      —  Re-labeling of activity (eg reclassifying inspection as advice);

      —  Cuts that result in poorer services for the public; or

      —  Increased income purely from higher prices in fees and charges to the public.


  The net additional costs of operations in Iraq, as recorded in the Ministry of Defence's Annual Reports and Accounts (voted against Request for Resources 2) total £3,068 million as follows:

Financial Year
£ million


  The costs of operations in Iraq in 2005-06 will depend on force levels and operational tempo.


  The provision for the Security and Intelligence Agencies is subject to the same scrutiny and accountability as for other Government departments. However for security reasons these figures are presented as a single allocation known as the Single Intelligence Account. The 2004 Spending Review White Paper (cm 6237) shows their budgets as:

£ million

Single Intelligence Account

  In addition Parliament votes the Estimates for the Security and Intelligence Agencies at the aggregate level. The Winter Supplementary Estimate currently before Parliament seeks authority for spending in 2005-06 to rise to £1,306 million through the draw down of End of Year Funding. We expect this to rise further during this year by £23m following the Chancellor's announcement in the 2005 Pre Budget Report of an additional £85 million.


  The Barker Review's final report set out three illustrative scenarios for future house building rates, taking as a baseline gross house building levels in 2002-03.[4] However, it is important to recognise that the Review's first scenario of an additional 20,000 homes per annum represented existing Government plans—in the form of the Sustainable Communities Plan commitment to deliver an additional 200,000 homes by 2016. The Review's two other scenarios of an additional 70,000 homes pa and an additional 120,000 homes p.a. are therefore equivalent to an additional 50,000 and an additional 100,000 homes pa on top of existing Government plans.

  The modelling which informed the Barker Review scenarios, and which was subsequently commissioned by ODPM to inform the Government's response,[5] considered the impact on affordability of building additional owner-occupied houses (a gross house building figure). However, within the planning system, the number of additional houses is expressed in terms of net additions to the total stock—ie new build less demolitions plus gains in dwelling numbers from conversions, which subdivide properties, minus losses in dwelling numbers from conversions which combine existing properties (or undo previous subdivisions). The ambition set out in the Government's response is therefore a net additions figure.

  Achieving the Government's aim to improve affordability and help future generations of homebuyers to get a foot on the housing ladder will require housing supply to become much more responsive to demand. The Government's response to the Barker Review drew on current ODPM projections which suggest that if Government is to meet its aim to improve affordability, new housing supply in England will need to increase over the next decade from 150,000 to 200,000 net additions per year—within the range of house building exemplified by Kate Barker, and exceeding the projected average household formation rate of at least 190,000 per year up until 2021.[6]

  The speed at which this increase can be achieved, and thus the precise timescale over which affordability benefits will be realised, will depend on the provision of investment in the infrastructure necessary to support housing growth, reform to the mechanisms by which new housing and infrastructure are delivered, and a positive response from the house building industry. Detailed plans will be set out in the 2007 Comprehensive Spending Review, taking into account progress on the wider proposals set out in the Government's overall response.


  Full departmental spending allocations will be available through the publication of the Main Supply Estimates, which take place in due course.

12 January 2006

4   See pp 20-23 of the Barker Review final report. Back

5   See Government Response to Kate Barker's Review of Housing Supply: The Supporting Analysis; and Affordability Targets: Implications for Housing Supply, ODPM, December 2005. Back

6   ODPM Interim 2002-based household projections, based on 2002-based population projections. Back

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