Examination of Witnesses (Questions 100-113)
MR COLIN
MOWL, MR
ROBIN LYNCH
AND MR
MARTIN KELLAWAY
4 MARCH 2008
Q100 Chairman: It is the Treasury,
presumably.
Mr Mowl: I would assume it is
but I don't know because it is not my responsibility.
Q101 Mr Dunne: I note that in advance
of the administration of Metronet the ONS provided some advice
on classification. Given that the potential nationalisation was
in the offing for some months before it actually occurred, did
you have discussions directly with the Treasury on how you might
treat this in the event that nationalisation went ahead?
Mr Mowl: Are you talking about
Metronet?
Q102 Mr Dunne: No. I am just using
it as an example in the context of Northern Rock.
Mr Mowl: In the context of Northern
Rock the process we follow involves the Treasury giving us the
factual information we need to come to a determination. So the
Treasury knew that we were looking at Northern Rock from the point
of view of coming to a view on its appropriate classification.
So the Treasury provided us with information and when we had taken
a decision we communicated that to them in the normal way.
Q103 Mr Dunne: A large part of the
securitisation issues were conducted through Jersey, and I think
you touched on that earlier, and the impact of the Rest of the
World categorisation. I presume there are no balance of payments
issues arising out of this? There is no change in classification
just because it has gone from private to public sector?
Mr Mowl: I will invite Mr Kellaway
to explain briefly how Jersey is treated in the balance of payments.
Mr Kellaway: You are right, the
securitisation programme includes offshore vehicles which is a
common feature of most securitisation, and hence a problem for
measurement in the balance of payments. The reclassification from
private to public sector of these vehicles does not have any implication
for balance of payments beyond measurement issues which were already
present.
Mr Dunne: Thank you.
Q104 Chairman: Why has it taken so
long for the Bank of England to be reclassified, since it appears
to have been agreed in 2003? Will you be backdating that?
Mr Mowl: We will be backdating
it. The short answer is we had other priorities at the time and
the effect on the debt figures was relatively small so it was
largely a question of priorities. There were a number of issues
we needed to follow up that were identified in 2003 including,
in particular, whether by bringing the Bank within the scope of
the figures we would be disclosing any confidential information
about the Bank's position. But basically it was a question of
having other priorities. It was unfinished business but it obviously
made sense, once we were reclassifying Northern Rock, to make
the Bank change at the same time to give a true picture.
Q105 Nick Ainger: The Housing Bill
proposes that the Government should have greater powers over the
Housing Associations. They currently have £35 billion of
borrowing. Have you done any work on possibly reclassifying Housing
Associations as part of the Public Sector Net Debt?
Mr Mowl: The short answer is no,
we would not look at that normally unless we were invited to do
so by the policy department through the Treasury until the legislation
was passed. Once the legislation is passed we would look at the
classification, but we have not done so.
Q106 Nick Ainger: So you have not
been asked at all?
Mr Mowl: No.
Q107 Nick Ainger: In theory, could
I put the question to you, if the Government is seen to have taken
far more powers now over Housing Associations, would you in those
circumstances think that they should be on the Government books
rather than, as they are, quite separate and able to borrow on
the private market?
Mr Mowl: The existence of any
Government powers to control the general corporate policy of the
Housing Associations would be relevant to classification decision,
so that is the aspect of any changes in the arrangements we would
need to look at.
Q108 Nick Ainger: I am surprised
that you have to wait for instruction --
Mr Mowl: No.
Q109 Nick Ainger: Well, perhaps Mr
Kellaway could comment on this because I am surprised that we
wait for a piece of legislation to be passed and a decision is
then taken, "Oh, by the way, these should now be considered
as part of the Public Sector Net Debt". We have heard about
the £90 billion which is going to be added and whether that
affects the wider government policy and we have another £35
billion here. Is it not the case that somebody should have done
some work before the actual legislation was even laid before Parliament,
never mind about waiting for it to be enacted?
Mr Mowl: The process we have is
that it allows us to look at any aspect of classification which
we deem is necessary to look at. Normally we would record arrangements
that are already in place. Our process, which is now codified
in the National Statistics Protocol, does permit the Treasury
on behalf of itself or other policy departments to invite us to
consider a policy proposal, but we have not been asked to look
at this particular proposal.
Q110 Nick Ainger: Any comments, Mr
Kellaway? This is not a criticism of the ONS but perhaps a criticism
of the Treasury or DCLG that there is a possibility that, if this
Bill is enacted in its present form, Housing Association borrowing
would form part of the Public Sector Net Debt. That is the theoretical
position. But if it is true then it has wider implications, certainly
affecting the Treasury, but you have had no communication on this
issue from the Treasury or DCLG?
Mr Mowl: I am not aware of it.
I will just check if Mr Kellaway needs to add anything to that.
Mr Kellaway: What we would do
is analyse the situation according to our standard classification
process and make a judgment based on any powers that are in place.
There are two types of classification issue we look at: first,
there is something that has happened in the economy, for example
the passing of legislation giving new powers, and we keep a watching
brief on what is going on so at that stage we would look. The
other type of classification we would look at is if there is a
policy proposal where we are relying on the Treasury or the department
involved to go via the Treasury and ask us questions on that.
For the Housing Bill we have not had any policy proposals.
Q111 Nick Ainger: On the first route,
now you have been alerted to this, are you going to go away and
have a look at it?
Mr Mowl: This would be a question
of priority. We could look at it but normally we would not look
at it until the legislation was passed; it is only at that point
that you know definitively what the arrangements are. Unless we
had been invited to give advice on a policy proposal, and our
process allows for that, we would not normally look at a legislative
proposal until the legislation was passed.
Q112 Nick Ainger: Obviously this
legislation is currently going through the House, and part of
your role is to provide information to inform and assist in public
debate and major issues. This is potentially a very major issue.
Do you not think you should at least be putting out some form
of note about what the possibilities are, that if the Bill does
go through this would be the consequence?
Mr Mowl: We have not had that
role hitherto and it could be an issue for the new Statistics
Board to decide whether we should have that role. The role we
have at the moment is the one we describe where we do recognise
that it is legitimate for policy departments to have our advice
on the effect of their proposals on Public Sector Finances so
they can take that into account in drawing up those proposals.
So we have an arm's length process by which we give that advice
without being drawn into the policy advisory process, but at the
moment we have not seen it as our role to comment as a matter
of course on the implications of every legislative proposal going
forward. It would be an option for the future subject to resources
being available, but it is just a question of whether that would
be a good use of our limited resources.
Q113 Chairman: Mr Mowl, thank you
for your attendance this morning. You mentioned the phrase "unfinished
business"; no doubt Northern Rock and other issues will be
unfinished business for us and we will see you back here.
Mr Mowl: I will look forward to
it. Thank you very much.
|