Select Committee on Treasury Minutes of Evidence


Examination of Witnesses (Questions 220-239)

MR JON CUNLIFFE, MR DAVE RAMSDEN, MR MARK NEALE, MR JOHN KINGMAN AND MS MRIDUL BRIVATI

12 DECEMBER 2006

  Q220  Mr Todd: So he has both given a lower figure but, also, suggested that these have not actually been relocated but have merely been announced for relocation. Bearing in mind that relocation was partly, presumably, about delivering savings in establishment costs in lower-cost locations, has there been any evidence that that has actually happened? Or that it has been easier to recruit or retain people who have been relocated to those locations?

  Ms Brivati: The purposes of the relocation programme are many. As you say, it is partly to benefit from lower-cost locations, it is partly to do with enjoying the benefit of different labour market conditions in other parts of the country and partly to do with the possible benefit to local economies of locating significant government operations out of London. I do not have any information to hand about the benefits realisation on that.

  Q221  Mr Todd: Just finally, the headcount reductions area has been a chancy one right from the start. Have we got a clear picture of exactly how many headcount has been reduced in this programme?

  Ms Brivati: I think we have. There have been gross workforce reductions of 54,963 posts since the start of the programme against a target of 84,100—

  Q222  Mr Todd: That is the gross picture?

  Ms Brivati: Yes, that is a gross picture. Those are the terms in which the target was expressed when it was announced at the end of SR04.

  Q223  Angela Eagle: On the issue of delivery of high-quality public services, there are some eye-wateringly tight efficient targets announced here, are there not: the usual 3% per year in baseline savings for central and local government? Do you anticipate that it is just going to be 3% forever? Is the Treasury view that it is possible to achieve 3% efficiency savings every year in public administration forever, because that has been the assumption for the last few years and continues for the next three? There is also a 5% reduction in real terms in administration budgets across departments. That is a very demanding target. How do you see it being done without any pain in terms of service delivery?

  Ms Brivati: The efficiency ambition in the SR04 period was for 2.5% and, as you say, in the CSR07 period it will be for 3%. I cannot speak about forever because our planning horizon only extends over the CSR period. You also mentioned the 5% administration budget limit. It is a stretching target, but the reason why we believe it is achievable and necessary is that the Government wishes to continue prioritising resources for frontline services.

  Q224  Angela Eagle: I understand the argument and support the argument of prioritising frontline services, but have these figures just been plucked out of the air as a sort of: "That will be okay; we will do that this year", or has there been some research work to see whether they are achievable?

  Ms Brivati: The figures on efficiency, for example, have been thoroughly researched. In the context of our preparation for the CSR, departments have been conducting zero-based reviews of large and significant areas of their spend, and the progress that departments have made on that, the discussions we have had with them, the data and the evidence that they have gone over in order to work towards these ZBRs has informed the development of these targets.

  Q225  Angela Eagle: Why are they the same across all departments then? It is a bit like the bank charges are the same across all banks. Why is the 3% target the same across all departments and the 5% target the same across all departments if you have been researching with each department? It looks like a figure plucked out of the air to me.

  Ms Brivati: As I say, these numbers are based on highly researched zero-based reviews and we believe that this is the right number for the CSR period.

  Q226  Jim Cousins: In answer to an earlier question you said that one of the benefits of relocation (and I wrote it down) was "to enjoy the benefits of different labour market locations".

  Ms Brivati: Different labour market conditions.

  Q227  Jim Cousins: "Conditions". Thank you. Does that mean simply that you pay people less in Rochdale and the Rhondda?

  Ms Brivati: I have got no idea what we pay people in—

  Q228  Jim Cousins: What did you mean by that remark?

  Ms Brivati: What I mean is that like any employer the Government would need to deliver good value for money in the way it spends money.

  Q229  Jim Cousins: That remark meant that you were going to pay them less after you have moved them.

  Ms Brivati: No.

  Q230  Jim Cousins: You pay the post-holders less after you have moved them.

  Ms Brivati: No, that remark meant that, like any employer, the Government needs to get value for money out of its pay bill and take account of where it can do that.

  Mr Cunliffe: You can often solve recruitment and retention difficulties or get a better motivated and skilled workforce by relocating as well. Department decisions are not just about cost; it is also about the sort of workforce that is available.

  Q231  Jim Cousins: Is it the case that the Public Sector Pay Committee is committed to the introduction of regionally variable pay?

  Ms Brivati: It has been government policy to seek local variation in pay, and that has been policy for some time.

  Q232  Jim Cousins: So you are going to pay people less because they happen to live not in London but in the regions?

  Ms Brivati: It has been government policy to seek local variation in pay that reflects local labour market conditions and the requirements of different public sector employers in those areas.

  Mr Cunliffe: We already pay people less because they do not live in London and the South East, because we recognise the higher cost—

  Q233  Jim Cousins: You pay London Weighting because they live in London.

  Mr Cunliffe: People outside London may feel—

  Q234  Jim Cousins: Paying people London Weighting because they live in London is entirely a different project from breaking up national pay bargaining. So you pay people less because they live in the regions. That is an entirely different project.

  Mr Cunliffe: You pay people in line with the labour market. You pay what is necessary to recruit, retain and motivate.

  Q235  Mr Gauke: Public expenditure plans going forward. The IFS has stated that your forecasts imply that growth in the Government's total managed expenditure would be 1.9% between 2008 and 2012. Do you agree with that assessment?

  Mr Cunliffe: We have set out what the planning assumptions are, I think, in here, and therefore 2%, 1.9% and 1.9% for the CSR years.

  Q236  Mr Gauke: Broadly, you do not disagree with the IFS view?

  Mr Cunliffe: I think the IFS is just reading what is in the document.

  Q237  Mr Gauke: But it is not under dispute? I was not particularly expecting you to dispute it. That is correct?

  Mr Cunliffe: Yes.

  Q238  Mr Gauke: Within that, presumably, there will be variations within departments, and that is what the CSR will determine. If I can just focus for a moment on education spending, the Chancellor has an aspiration, which he announced at the last Budget, to get total spending on education per pupil up to the levels within the independent sector of 2005-06—ie approximately £8,000. Do we know yet at what point that aspiration is going to be met?

  Mr Cunliffe: I will ask Mridul to come in on the aspiration, but just on the spending assumption, it is set out on page 223 of the PBR. I did not catch exactly what the IFS said, but the assumptions are set out there.

  Ms Brivati: You asked about the Chancellor's aspiration set out for funding. There is no date on that; when the Chancellor announced that at the Budget he made clear it was a long-term ambition.

  Q239  Mr Gauke: Has the announcement in the Budget of extra spending, which the Chancellor made, taken us substantially closer to meeting that aspiration?

  Ms Brivati: Taking together the announcement in the Budget and in this PBR—


 
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