Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 260-279)


12 DECEMBER 2006

  Q260  Mr Mudie: Yes, but if they are below or above the programme target it is extremely important for you to know, is it not?

  Mr Cunliffe: At certain times we do know, we just do not have the figures—

  Q261  Mr Mudie: These figure here, in the financial years that we are fairly firm about, do they mean all the targets are being met in terms of the programme of rebuilding primary and secondary schools plus the academies?

  Mr Cunliffe: The safest way to do this is for us to come back to you.

  Q262  Mr Mudie: So you do not know.

  Mr Cunliffe: I do not have those figures.

  Q263  Mr Mudie: Do these figures in the overall Budget totals have built in the further aspiration the Prime Minister made in the last two weeks to build another 200 academies? In other words, another £5 billion expenditure. Was that just an aspiration, just a speech, just part of a legacy, or is it in the Budget book?

  Ms Brivati: Let me try to tell you what we do know about expenditure both on Building Schools for the Future and on academies. The point about what has been achieved so far is that we do not have information with us but it is known and knowable. The point about the future is that future expenditure on both Building Schools for the Future and academies will take place over the CSR period, for which allocations have not yet been made. So these are programmes and aspirations that will have to be met within the spending envelope for the CSR.

  Q264  Mr Mudie: I understand that, and I think we would welcome the figures, but if we put in a book that there is a 15-year programme we ought to know where on earth we are with the programme, how much the programme is going to cost and the individual costs. If we are to scrutinise public expenditure you are not helping us do it with Budget information like this. If the Prime Minister says: "I am just going to give a speech and commit ourselves to another £5 billion" I would like to know where it is in the Budget book. I will move on to less controversial information—child poverty. You missed your targets—surprise, surprise—on child poverty. You were supposed to get a quarter of them, you have only got 17% of them. What is in the Budget book that demonstrates you have learnt your lesson and that you are going to meet the next target?

  Mr Neale: Just to put the child poverty figures in context, we, in fact, reduced child poverty by 700,000 between 1998 and 2004—

  Q265  Mr Mudie: Mark, I wish you would not do that.

  Mr Neale: We have got reversed a circular trend in the other direction—

  Q266  Mr Mudie: That is a politician's answer. We will get that from the Chancellor tomorrow. That is a politician's answer. The other side of the coin is that because we missed the target, a target that was set by the Government, 400,000 children are still in poverty. You can explain it away by "700,000 are not" but 400,000 are that should not be because we missed the target. Mistakes happen, but what do we learn from it? What is in the PBR that will ensure we pick up this and also get to the next target?

  Mr Neale: The Government published a strategy for tackling child poverty in 2002 and that has a number of legs to it. One leg is round increasing participation in the labour market, and there are a number of announcements in the PBR that bear on that, including continuing with the Work Credit for lone parents in those areas where that is being tried out. Another leg of the strategy is around income transfers through Child Tax Credit, and the PBR confirms that the child element of the Child Tax Credit will be worth £80 more from April, reflecting the rise in line with earnings that the Chancellor announced in the Budget. The third leg is to do with tackling opportunities for children, and the Comprehensive Spending Review is looking at the programmes that bear on that.

  Q267  Mr Mudie: You are quite confident in the Treasury that you have costed all these, you have worked them out and that they will deliver the targets?

  Mr Neale: The Government remains committed to the 2010 target—

  Q268  Mr Mudie: I know they remain committed to a target. I asked you, first of all, what is in the PBR to ensure that we do meet this very, very important target. You have spelled things out and Government Ministers always spell things out—they are never lost for words—but will they do the job? Are you saying to this Committee that the Treasury are quite clear that these steps will be sufficient to meet the target?

  Mr Neale: I do not think we would ever say that the measures in any single PBR or Budget on their own will deliver a target, but there is a clear strategy for delivering that target. We will take stock of progress over time because progress is affected by movements in earnings and there will be measures in future PBRs and Budgets.

  Q269  Mr Mudie: How confident are you that tax credits are the most effective mechanism for dealing with child poverty? To be specific, what modelling have you done to satisfy yourselves that increasing tax credits is more effective than, say, increasing child benefit or personal tax allowances?

  Mr Neale: They are one mechanism among a number. We certainly have modelled the impact of increases in child benefit and in tax credits, and raising the child element of tax credits is a more cost-effective way of raising the incomes of low income families than increases in child benefit.

  Q270  Mr Mudie: So you have actually done some modelling?

  Mr Neale: There is a great deal of modelling that bears on this, yes.

  Q271  Mr Mudie: You have done modelling along the lines of and in the context of my question, comparing tax credits to child benefit? Have you done that?

  Mr Neale: We certainly have.

  Q272  Mr Mudie: Specifically?

  Mr Neale: Specifically.

  Q273  Mr Mudie: Can you provide us as a Committee with the information?

  Mr Neale: We can provide you with a note on the relative cost-effectiveness of increases in child benefit versus increases in tax credits, yes. [4]

  Q274 Mr Mudie: If that answers and says yes to what I asked, I am happy. Does it? He used different words to me and when a civil servant uses different words to me, I wonder if he is promising me something different to what I asked.

  Mr Neale: I am promising you what you asked.

  Q275  Mr Mudie: Good. In our Report on the 2006 Budget we recommended that you analysed the characteristics and income distributions of households facing marginal tax rates in the region of 60% to 70% and to the extent these tax rates discourage people from entering the workforce, et cetera. We also recommended that you published your findings at the time of the PBR. Where are you with our two recommendations? First of all, did you do the analysis?

  Mr Neale: Yes, we have a great deal of standing analysis of the impact of marginal deduction rates.

  Q276  Mr Mudie: I know you do a lot of analysis but this was a specific recommendation from us on a specific piece of evidence. Did you do the analysis as I have spelled out; yes or no?

  Mr Neale: I will have to check with my colleagues whether we have done the precise piece of analysis for which you asked and we will let you know the answer to that question. [5]

  Q277 Mr Mudie: Of course this really pushes you to say that you did not do it but if you did not do it, we would like to know why. Secondly, if you did, we asked you to publish it at the time of this PPR and we would like to know why you did not do that.

  Mr Neale: What we have published is a table on page 98 of the PBR document which sets out the impact of the Government's reforms on marginal deduction rates.

  Q278  Mr Mudie: Okay. Bombing on to tax credits, you were going to introduce a computer system that would change the system where people are having to pay money back.

  Mr Neale: Yes.

  Q279  Mr Mudie: You were going to have automatic limits on the rates of recovery and it was going to take effect in November. There is a statement made by the Paymaster General which if you read it carelessly suggests it is going to happen in April next year.

  Mr Neale: That is what the Paymaster General has asked HMRC to achieve.

4   Ev 83 Back

5   Ev 83-84 Back

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