Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 380-399)


13 DECEMBER 2006

  Q380  Mr Newmark: Let us move on to another favourite of yours, Chancellor, PFI. Actually I will not go on to PFI, I will just wrap up with an assessment of your 10 years with some comments from your colleagues.

  Mr Brown: This dispassionate, objective Committee continues its work!

  Q381  Mr Newmark: The Rt Hon Member for Sheffield Brightside has said of your record, "The tax credit system is in a shambles", the Rt Hon Member for Birmingham Edgbaston has said, "We have had excessive spending, rising taxes and excessive micro-management", the Rt Hon Member for Birkenhead candidly notes that, when Labour came to office, we had one of the strongest pension provisions in Europe and now we probably have one of the weakest, and last, but not least, your friend, the Rt Hon Member for Darlington, admits that the inequality gap is stubbornly and persistently wide and that poverty has become more entrenched on your watch. Chancellor, whose judgment do you trust, theirs or your own?

  Mr Brown: The judgment of the facts, that two and a half million more people are in work, that more than a million children—

  Q382  Mr Newmark: So you do not trust their judgment?

  Mr Brown: a million children have been taken out of poverty, a million pensioners have been taken out of poverty, we have had the longest period of growth under a single government in the history of this country since the industrial revolution and we have moved from being seventh out of seven, and I hope that people will note this, in the G7 when your Government was in power in 1997, we were below Italy, we were below France, we were below Germany, we were below Japan and we were below Canada, to a situation where in the last two years we have been above Germany, above France, above Italy, above Japan and above Canada in terms of income per head. Now, that is progress for this country which I think most ordinary citizens would recognise and they would particularly recognise it when they know that interest rates are not at 15%, as they were under your Government, they are at 5% and they know that inflation is not at 10%, as it was for a long period under your Government, inflation, the CPI, is actually 2.6% and moving towards 2%.

  Mr Newmark: So all of your colleagues are wrong and you are right?

  Chairman: Chancellor, you probably thought you had more friends before you came in here!

  Q383  Jim Cousins: Chancellor, in your Pre-Budget Report statement, you specifically mentioned that, with public sector call centres, you were going to save £400 million which is a cut in costs of 25%. Can you tell the Committee how many jobs lost that might imply and whether that would involve any outsourcing either to the private sector or offshore?

  Mr Brown: It is basically co-ordinating the use of government call centres and avoiding any duplication. I think you would agree that that is a good thing to do. As far as the jobs are concerned, we have published our figures for Civil Service job reductions and there are 85,000 job reductions going to take place; 45,000 jobs have gone and another 40,000 jobs are still to go. Obviously, for the years after 2008 we will publish figures later.

  Q384  Jim Cousins: Sir David Varney's report tells us that there are 55,000 jobs in public sector call centres, so cutting costs by 25% would seem to, possibly, indicate a cut of 12-15,000 jobs. You cannot confirm that?

  Mr Brown: The job reduction figures within the Civil Service are 85,000 by 2008; we have already achieved 45,000, so 40,000 jobs are still to go.

  Q385  Jim Cousins: That is correct. In the present public expenditure planning cycle you have referred to the cut of 85,000 jobs—45,000 which have presently been achieved, 40,000 more to be achieved by the end of 2007-08—but in the Pre-Budget Report there are clearly flagged up future public spending cycle indicators for a number of government departments, including the Department for Constitutional Affairs, and quite a high rate of cost-saving in a number of high-employing government departments, like the Department of Work and Pensions and HMRC. What additional level of job cuts do those indicator savings represent?

  Mr Brown: There will be more jobs to go. I can assure you that in the next spending round, once we met the Gershon targets, we will have to reduce Civil Service numbers further.

  Q386  Jim Cousins: This Committee has already had an indication from the Head of HMRC of an additional 12,500 job cuts on top of the 12,500 that are built into the 85,000 that you have referred to. That indicates a level of public sector job cuts for the present and future public spending cycle of well over 100,000, does it not?

  Mr Brown: I can confirm that 84,500 was the jobs figure for Gershon and that another 12,500 jobs on top of that would be scheduled to go within the Inland Revenue in the next public spending period.

  Q387  Jim Cousins: The policy for public sector pay set out in the Pre-Budget Report clearly involves, in the immediate pay round, a cut in real take-home pay, does it not? Paragraphs 631 to 633 of the Pre-Budget Report.

  Mr Brown: We have submitted evidence to the pay review bodies suggesting that settlements should be based on the inflation target of 2%. I think that is both fair and right. If we are going to maintain our record as a low-inflation economy then there needs to be discipline in public sector pay settlements. Of course, the individual pay that any teacher, nurse or civil servant would receive depends not only on the settlement itself but on other contractual agreements, including increments for length of service.

  Q388  Jim Cousins: In addition to that, you have also set out a public sector pay policy in the Pre-Budget Report which points to a break-up of the national pay bargaining systems and the locking-in of low pay in the English regions to public sector pay, too. That is clearly set out in the Pre-Budget Report in the paragraphs I have referred to.

  Mr Brown: We have had this discussion before, but what we want to achieve is more local pay flexibility. The Civil Service remit guidance requires departments to consider local pay as part of the business case they submit to the Treasury every year. All groups covered by the review bodies have an obligation to consider local pay in their terms of reference. Now, I think that is the right thing to do and that will continue to be the policy of the Government; just as you take into account London Weighting you take into account local pay conditions. You are absolutely right, Mr Cousins: first of all, there will be a reduction in Civil Service numbers in the next spending review period, and that will be in thousands, not in hundreds; secondly, public sector pay will have to meet the inflation target and be founded on that, and thirdly we are committed to greater local and regional pay flexibility.

  Q389  Jim Cousins: Do you think, Chancellor, that you can achieve the higher levels of public sector productivity that, absolutely correctly, you are trying to achieve against a background of threatening the sack to large numbers of workers, squeezing their take-home pay and breaking up the national pay bargaining system?

  Mr Brown: The issue for the public services is getting value for money. There is and will continue to be an increase in the numbers of nurses and doctors and people working in the health service, and in schools through teaching assistants and teachers, and if we can save money through administrative, clerical and what you might call back-office jobs being replaced as a result of new technology and get more resources to the front line, I think every one of your constituents will want to support that rather than criticise that. That is the best way that we can deliver better and high-productivity public services.

  Q390  Jim Cousins: The economic base of the city I represent is in the public sector, and I represent a very large number of low-paid, public sector workers. To be honest with you, Chancellor, I am fearful of their reaction to the package of proposals you are setting out.

  Mr Brown: Newcastle, as you know as well, is a fast-changing city; it is an education centre with large numbers of people attending university; it is a big research centre, with stem cell research based in Newcastle; it is a big entertainment and leisure centre—and that is not public sector work, that is private sector work—it is a financial and retail centre for the region, and actually known throughout the United Kingdom for that. All these things are contributing to the success of your city, and that is why the growth rate of a city like Newcastle has been very high in recent years and, I believe, focused on all these different sectors that are doing well, will continue to be high, but what we are not going to do is to shirk from the big decisions that are needed to make the public sector more efficient in future years and ready to get resources to the front line, including to nurses and nursing in your hospitals and including to better teaching and better support for teachers within your schools.

  Q391  Jim Cousins: However, if the threat of redundancy and the squeeze on pay produces a crisis of confidence and performance in the leadership and management of the public sector, both at a political level and at an official level, is that not going to make it very difficult to achieve the productivity gains you are seeking?

  Mr Brown: I have always found that the people you are talking about, the nurses, the teachers and the public sector professionals and, indeed, the ancillary workers—the home helps and carers—know themselves what needs to be done. People know that where technology is changing and other companies and other organisations are replacing, if you like, administrative and clerical jobs and getting more resources to their front line, so too must the public services do this. So we must not shirk from the change that is necessary to secure value for money in our public services and to get resources to the front line, which I think will be welcomed in your constituency, particularly when it is getting resources to policing, nursing and medical services and to education.

  Q392  Mr Gauke: Chancellor, can I ask what new capital spending commitments with regard to schools were made in the Pre-Budget Report?

  Mr Brown: Considerable. What we announced was public spending for schools right through to 2010-11. We have never announced before both the figures for the overall resources for education and the overall resources for schools. I do not know whether you want me to give you the exact figures, but we gave a figure, for the first time, for 2008-09, 2009-10 and then we gave a figure for the whole of education expenditure for 2008-09, 2009-10 and 2010-11. These were new figures. In addition, of course, I put more money into individual schools' budgets for this year so that, on average, the typical primary and secondary school pupil will have £200 per head. So all these were new announcements that meet our commitments on education in a way that I think can be summed up as the biggest capital investment programme in our schools and education in the history of our country.

  Q393  Mr Gauke: Let us take those two areas in turn. First of all, capital spending. According to the evidence given to us by the Institute of Fiscal Studies, there is only £0.1 billion, in 2006-07 terms, in respect of capital investment that had not previously been announced before the Pre-Budget Report.

  Mr Brown: That is not correct. The overall effect of the education announcements in 2006-07 are these: about £170 million set aside for education; £120—

  Q394  Mr Gauke: What was new?

  Mr Brown: That is new.

  Q395  Mr Gauke: That is not what the IFS said.

  Mr Brown: No. £170 million, on which there were Barnett implications, and I think £120 million or so went to English schools in addition to what had already been promised in the Budget to be a rise for next year. So that was totally in addition. We put more money into the Every Child a Reader programme, which is now going—

  Q396  Mr Gauke: Can we stick to capital, just for the moment?

  Mr Brown: You can talk about capital but I wanted to sum up all the new announcements. You will give me a chance to mention all of them later.

  Q397  Mr Gauke: I am sure I will. Yesterday I asked one of your officials, Ms Brivati, the question of what new capital expenditure was announced in the Pre-Budget Report that related to schools? The reason why I asked that—

  Mr Brown: 2006-07 or 2008-09 or 2009-10?

  Q398  Mr Gauke: Going ahead, what new announcements were made in respect of capital? The evidence we have had from the IFS is that there is only £0.1 billion, and that, they believe, relates to colleges, not to schools. Do you dispute that figure?

  Mr Brown: No, because I made an announcement for money going direct to schools for 2006-07—

  Q399  Mr Gauke: Let us stick to capital. The capital spending—

  Mr Brown: A lot of that is capital. Do you think it is capital or do you think it is not capital? A lot of it is capital.

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