Examination of Witnesses (Questions 60-79)|
11 DECEMBER 2006
Q60 Chairman: Welcome to you. John, can
you identify yourselves for the shorthand writer, please?
Mr Whiting: John Whiting, PricewaterhouseCoopers
and Chartered Institute of Taxation.
Professor Talbot: Colin Talbot,
Manchester Business School.
Mr Chote: Robert Chote, Institute
for Fiscal Studies.
Dr Weale: Martin Weale, National
Institute of Economic & Social Research.
Q61 Chairman: Stern, Eddington, Barker,
Leitch, Lyons and Gowers, a plethora of reports; what is the function
of these reports? Does it open up the discussion on public policy
options for the Government or does it delay difficult decisions?
Who wants to start on that? What about you, Colin?
Professor Talbot: I think probably
the first question to ask would be what is the purpose of Pre-Budget
Reports. I hate to sound like a broken record but it seems to
have become, I was going to say mini-Budget but judging by the
volume of documentation we have had this time round it is more
like a maxi-Budget. We are now in a situation where we will have
three announcements of public spending plans in the next seven
months: the Pre-Budget Report, the Budget and the Comprehensive
Spending Review next July. That, coupled with all of these policy
reviews attached to the PBR, presumably more coming out with the
Budget and even more coming out with the Comprehensive Spending
Review, does certainly muddy the waters a little bit to put it
Q62 Chairman: Does anybody else have
Mr Whiting: One comment from the
tax point of view. They can be very useful in surveying what is
possible but then the issue is often what happens after that,
are they carried through or are they just left to gather dust?
Q63 Chairman: What is your experience?
Have they been carried through in the past?
Mr Whiting: I think you can only
say they are mixed.
Q64 Chairman: Tell me one that has
been carried through and one that has not.
Mr Whiting: As one that is currently
being carried through one might point to the Planning Gain Supplement
and the discussions there, which have been quite constructive.
It is a wide-ranging review and it has been narrowed down. Where
it gets to rather depends what happens over the next year or two.
Q65 Mr Todd: It is certainly good
news for consultants in this particular field, is it not?
Mr Whiting: I could not possibly
Q66 Mr Todd: The review of the Gershon
savings. Earlier this year the NAO gave what in their terms was
a fairly critical analysis in which it suggested that without
proper baselines and with relatively little evidence it was hard
to verify the savings that have been made to date. Are we a little
nearer to hard knowledge in this hard?
Professor Talbot: I would say
no. In fact, we seem to have an interesting law operating here,
which is the higher the claimed savings the less information is
published about the detail of where these savings have actually
come from. It seems to me that the Government must have fairly
simple savings by department, given that they are targeted by
department, and in turn broken down by the six work streams that
were announced in the Gershon Review. All we have had so far in
terms of analysis of that information is four examples in the
PBR itself and three bits of data given by Mr Timms in a parliamentary
answer about the break down, but only on three out of the six
issues on work streams within the efficiency review, so we are
more or less in the dark about where this 13.3 billion has come
Dr Weale: Could I just add that
since we do not, and I think in some areas never will, have good
measures of public sector output inevitably we are not going to
do terribly well at trying to measure public sector efficiency.
Q67 Mr Todd: I was going to turn
to that. It will be difficult to know whether one is comparing
a like-for-like service delivery, for example. What we may be
seeing is reduced expenditure but actually a reduced level of
services. Certainly that has been argued by some Civil Service
unions. Is that reasonable to say?
Professor Talbot: I do not think
we can say a great deal either way at the moment. The only bits
of information we have got are, as I said, Mr Timms gave a parliamentary
answer in which he said of the 13.3 billion which is currently
being claimed, 5.5 billion must come from procurement, 2.4 billion
from productive time and 1.5 billion from policy funding and regulation
work stream. The other three around corporate services, transactions
and the other category, which is 11% of the total, there is no
information about. If you look at those figures carefully, in
terms of the target for savings from procurement, for example,
according to that we are running at about 70% of the target having
been met. On the productive work time area we are running at about
47% of the target having been met. On policy funding and regulation
we are running at 41% of the target having been met. I would be
really interested to hear why that is the case, what has happened
to the other three work streams and a break down by department
as to where that money has come from.
Q68 Mr Todd: The ONS has published
a consultation paper on the measurement of public service outputs
and productivity. Has that assisted in this matter?
Professor Talbot: The largest
area of work which both Atkinson and the ONS studies have looked
at are the two areas which are most important for particularly
the productive time work stream of the efficiency programme, which
is health and education. Between them, they are actually responsible,
on my calculations, for 88% of the productive work time savings,
just from those two departments, but they have been looking at
it at a very high level in terms of the overall economy and the
contribution of public sector activity to the economy in terms
of raising productivity. I do not think it goes down to a detailed
enough level to really apply adequately, if you take productive
time work stream as an example, to have really good measurement
of the quantity and quality of outputs against which we could
say those have remained constant or they have gone up as a result
of improved working practices and we have saved money as a result
of that. As far as I can see we do not have the measurement systems
for doing that, and I would agree with Martin on that.
Q69 Mr Todd: We seem to have roughly
the same problem on headcount reduction as well. Since Civil Service
headcounts, public sector headcounts, go up in some areas anyway,
working out a net position accurately is hard to do, is it not?
Dr Weale: The headcount target
is quite misplaced, I think. Increasing efficiency means saving
money but reducing headcounts and employing consultants to do
the same thing is unlikely to be in any sense a saving. Equally,
if people are de trop losing one person on 100,000 per
year it is better than losing two people on 30,000 a year. Headcounts
obscure all of that and I think are actually a distraction from
efficient running of the public sector.
Q70 Mr Todd: I think the OGC denied
that there was a basis for thinking that a load of consultants
had arrived in lieu of established posts, but you remain sceptical
of that, do you?
Dr Weale: It remains a risk, yes.
Professor Talbot: In the OGC's
own guidance to departments they warn against that as a risk,
so I do not think that they do not think it is a possibility.
I agree with Martin but I would add on the relocation issue, if
you remove staff to another part of the country at some considerable
cost presumably in terms of compensating staff purchasing new
buildings or whatever you have to do in order to relocate them,
and their salaries remain the same, because despite the Treasury
wanting to have regionalised salaries within the Civil Service
we do not yet, the net benefits of that are likely to be negative
in the sense that it has cost you money to relocate people and
you have made no efficiency savings at all, so why it is constantly
put into the efficiency agenda is beyond me.
Q71 Mr Todd: Presumably one of the
arguments was that over the long-term the establishment costs
of posts in less expensive parts of the country, disregarding
the salaries, just the cost of buildings and other services, would
be less, would it not?
Professor Talbot: Possibly.
Q72 Mr Todd: The Government has said
that it is on track to meet its target to relocate 20,000 civil
servants. Do you see any sign that it is helping recruitment and
retention issues because mainly they are transferring them to
less heated parts of the labour market?
Professor Talbot: I have not seen
any data on that. I would point out my calculation two years ago
was that the 20,000 target more or less brought us back to the
distribution of civil servants that we had in 1997, it was not
achieving any change, it was simply that the growth in the Civil
Service had been concentrated in London and the South East.
Q73 Mr Gauke: Can I just ask Mr Chote
to begin with on expenditure on education. You have made some
sceptical noises about the Chancellor's big announcements in the
PBR statement. If we could take them in turn. First of all, the
capital expenditure, the £36 billion over four years. You
said that is mostly old money, could you elaborate on that?
Mr Chote: Yes. Essentially these
amounts for schools had already been announced at the time of
the Budget, so the new announcement was effectively the capital
spending for colleges and universities and there it was effectively
new money amounting to about £0.1 billion in this year's
prices. That is roughly 2% a year real terms increase. If you
were to look at overall capital expenditure in education the numbers
now pencilled in for 2007-08 to 2010-11 would be 4.3% a year real
increase compared with 15.9% under the period from 1997-98 to
2007-08, the previous decade, so quite a step down from that.
That would divide between schools dropping from 16.3% to 4.9%
and other HE and FE from 14.5% to 2%. Certainly you can get a
nice big number by adding together the totals over the next four
years but in terms of the growth rate you are stepping that down.
To a degree one should point out that when Labour came in there
was initially a further fall in public sector investment and then
an increase. If you are saying you are moving from a very low
base, there would be a step adjustment and you would not be expending
expecting capital expenditure to increase at the sort of percentage
rates you saw during that catch-up.
Q74 Mr Gauke: Just to go back to
something you have said. As far as what was announced in the PBR
on capital spending, that relates more to colleges than to schools?
Mr Chote: That is right, yes.
This is opaque in the way it was presented but it looks like the
schools money is the same as it was before and the new announcement
is HE and FE.
Q75 Mr Gauke: So the capital spending
is no different, the PBR did not make any difference specifically
Mr Chote: No.
Q76 Mr Gauke: Just on the current
spending, the £200 per pupil going directly to the schools,
how much of that is new money?
Mr Chote: £20 per head. Budget
2006 had announced £60 and previous announcements and plans
have been £120, so that gets you to your figure of £200.
Q77 Mr Gauke: Twenty quid. What is
that in percentage terms? What are we talking about here?
Mr Chote: Here, of course, what
we do not have yet is the current spending for education for the
period of the Spending Review, which will be one of the key announcements
that we get next year. If we are looking at this famous aspiration
that the Chancellor set up to get towards the £8,000 per
head spent in the private sector in 2005-06, which is current
and capital, the gap before the Pre-Budget Report was about £2,350
and it has now fallen to £2,330, so obviously if you were
to continue to increase at the rate of 20 quid per announcement
we could be waiting quite some time.
Q78 Mr Gauke: We would be waiting
for about 200 years, would we not, if it was 20 quid?
Mr Chote: More relevantly perhaps,
when we met last time after the Budget I think we said that if
we were to increase the school spending per head by the rate of
the economy we would be talking about 17 years or so, but crucially
now this depends on what the Chancellor says on current spending
for education when we get to the CSR next year. That will tell
us realistically how long it will take to close this gap.
Q79 Mr Gauke: We will be none the
wiser until then. There was a report in the Financial Times,
I think this was relating to education capital, about a 4.1% increase.
Mr Chote: As I say, total education
spending looking forward rising 4.3% a year in real terms, down
from about 16% the previous decade.