Appendix 1: Government response
THE 2007 COMPREHENSIVE SPENDING REVIEW
Efficiency and value for money
1. We recommend that,
in its response to this Report, the Government provide a definitive
answer to the issue we posed in June 2007, namely whether standard
accounting conventions will be used for identifying and distributing
implementation costs under the new efficiency programme. We further
recommend that the Government confirm in its response whether
the presumed methodology for calculating savings in monetary terms
set out in paragraph 17 of this Report is correct and, if not,
clarify the methodology to be used. (Paragraph 21)
The Government has already stated
that in scoring VfM savings towards the £30bn target it will
only consider savings that are net of all costs, and has issued
guidance to departments to this effect. Departments are responsible
for putting in place VfM savings measurement systems that identify
and distribute upfront and ongoing costs.
The VfM target for each department
is generated from their respective 2007/08 near-cash resource
DEL plus capital DEL baselines, minus depreciation and minus any
grants to local government, with minor other adjustments in some
cases. Building on the example the Committee referred to, the
07/08 VfM baseline for MoJ is £9,227m rather than the £9,465m
suggested. Their 3% VfM savings target is calculated by ((9227
x 1.033)-9227). This gives a figure of £856m.
MoJ have committed to delivering net cash-releasing VfM savings
of £1,025m by 2010/11, thereby exceeding the 3% target.
2. The efficiency targets that
have been set for the period from 2008-09 to 2010-11 are stretching
and highly ambitious. In view of the unresolved issues concerning
the effects of the current Gershon efficiency programme on service
delivery, it is important that there is parliamentary and public
confidence in claims about the effects of the efficiency programme
for the period from 2008-09 to 2010-11 on service delivery. We
recommend that the Government state explicitly that financial
savings during that period will only be recorded as efficiency
savings if there is sufficient evidence that service standards
have at least been maintained. We further recommend that such
evidence be the subject of regular external audit by the National
Audit Office. We expect that this Committee and other select committees
will wish to examine departmental value for money Delivery Agreements
to ensure that clear baseline standards are established against
which contentions about the impact of efficiency savings on service
standards can be tested. (Paragraph 25)
The Government does not accept
that there are unresolved issues concerning the effects of the
current Efficiency Programme on service delivery. All efficiency
initiatives in the SR04 Programme have associated balancing quality
measures to monitor service output and no efficiency gain will
be scored as 'final' until maintenance of service quality is evidenced.
The February 2007 NAO report into the Efficiency Programme found
no conclusive evidence that service quality was being harmed as
a result of the Programme, and highlighted instances where service
quality had actually improved.
The Government has articulated
clearly its public service priorities in the form of the revised
Public Service Agreements (PSA) and supporting Departmental Strategic
Objectives. Departments will be held to account for delivery
against these ambitions, and overall the government expects the
increase in real terms spending and the rising ambition of the
value for money programme to be matched by improvements in public
service delivery over the CSR period. Much of the £30bn
VfM saving target will come from real terms reductions in departmental
administration budgets and by rolling forward efficiencies in
the Gershon model, focusing on improvements in corporate services,
transactions, productive time, procurement and policy, funding
and regulation reform.
However, in light of the long-term
challenges set out in the Comprehensive Spending Review, it is
right that periodically departments consider the best use of their
resources across the piece. To do this, departments have undertaken
zero-based reviews of parts of their expenditure. In some circumstances
the results of these reviews will mean rebalancing the pattern
of government expenditure away from lower value programmes and
towards higher value activity, with a commensurate positive impact
on the government's ability to meet its key public service delivery
priorities.
Departmental Value for Money Delivery
Agreements have now almost all been published. They set out in
broad terms how departments expect to deliver their VfM savings.
Departments are currently working up the detail of their measurement
systems—including baselines—in preparation for the
beginning of the CSR period. Departments must audit these systems
in the first year of the programme and we are working with the
NAO to ensure that their involvement in the programme builds in
additional levels of assurance.
3. We welcome the decision of the Government not
to impose new explicit targets for reduction in Civil Service
numbers for the period from 1 April 2008. We will monitor the
implementation of reductions in departmental administration budgets,
including classification issues and the effect of such reductions
on the Civil Service workforce. (Paragraph 27)
THE NEW PERFORMANCE MANAGEMENT FRAMEWORK
4. It is not possible to draw definite conclusions
about the new performance measurement framework on the basis
of the information published alongside the outcome of the 2007
Comprehensive Spending Review. In particular, the nature of Departmental
Strategic Objectives, and the extent to which they have become
different in kind from Public Service Agreements, will not be
evident until the outcome indicators associated with those Objectives
have been published. The decision to distinguish between Departmental
Strategic Objectives and Public Service Agreements which are cross-departmental
in nature is in principle a welcome one. We also welcome the clear
assignment of a lead department in respect of each Public Service
Agreement. However, the cross-departmental nature of all new Public
Service Agreements poses a challenge for a system of accountability
currently based on departmental reporting and the work of departmental
select committees. We recommend that performance against outcome
indicators in new Public Service Agreements
be reported on in new cross-departmental publications on a bi-annual
basis in relation to each such Agreement, separate from departmental
annual reports and autumn performance reports. These new publications
could encourage more effective cross-cutting scrutiny of Public
Service Agreements between select committees concerned. (Paragraph
37)
We welcome the TSC's endorsement of the principle
in the new performance management framework of cross-cutting PSAs
and departmentally-focused Departmental Strategic Objectives.
The Government is committed to full and transparent public reporting
of performance against both PSAs and DSOs, and notes the committee's
views about the future public reporting on PSAs.
CHILD POVERTY
5. We accept the value of an additional target
relating to child poverty including a measure of material deprivation,
not least in highlighting that poverty is not just about income.
However, there is a risk that consideration of material deprivation
will move focus away from the most pressing cases of child poverty
and, in that context, we are disappointed that the Delivery
Agreement does not respond to the recommendations of this Committee
for a fuller analysis of the particular issues surrounding child
poverty in the very poorest households. It is important that efforts
to meet targets do not lead to an insufficient concentration upon
the worst forms of child poverty in the very poorest households.
We recommend that, in its response to this Report, the Government
set out the role played in its strategy by measures concerned
in particular with the very poorest households. (Paragraph 47)
The Government is committed to tackling poverty
for all families, including those who are at risk of greatest
disadvantage. It will use three indicators, which are the result
of extensive consultation, published in Measuring Child Poverty,[1]
to best target action over the 2007 Comprehensive Spending Review
period:
The number of children in absolute low-income
households
- The number of children in relative low-income
households
- The number of children in relative low-income
households and in material deprivation
The Government's headline indicator of child poverty
will remain the relative low-income target. However, poverty is
wider than income alone and the combined material deprivation
and relative low-income measure captures wider measures of living
standards giving a broader picture of poverty. The material deprivation
indicator is combined with a relative income measure to avoid
counting those people with high incomes who may lack specific
items because they choose to spend their money elsewhere.
We hope this material deprivation measure will help
us capture some of the families facing the greatest disadvantage.
As such it will be key to ensuring that the Government continues
to make progress on tackling poverty among those suffering the
most severe disadvantage. Since 1997 considerable progress has
been made in reducing the risk of poverty for many of the groups
who had the greatest risk of poverty in the past for example large
families (4+ children) where the risk has fallen from 56% in 1997/98
to 40% in 2005/06.
6. We note the Government's explanation for the
decision to assign HM Treasury lead responsibility for the new
PSA framework relating to child poverty. However, in view of the
decision to establish a Child Poverty Unit located in the Department
for Children, Schools and Families, we remain to be convinced
that the division of departmental responsibilities will not accentuate
the possible tension between the 2010-11 target and the final
target to eradicate child poverty. (Paragraph 50)
The Government is committed to ensuring that policies
aimed at tackling child poverty are coherent. It agrees with the
Committee that close working across a number of departments will
be key to ensuring that progress against the 2010 and 2020 targets.
The 2010 PSA target is a cross-government target
led by HMT but it will be delivered with DWP and DCSF. The PSA
Delivery Board will comprise of all lead and supporting departments,
including DWP and DCSF.
The Child Poverty Unit is a joint DWP/DCSF unit
which will play a lead co-coordinating role as the Government
pursues its multi-faceted child poverty strategy and HMT will
work closely with the Unit to provide a joined up approach to
delivering on our short, medium and long-term child poverty goals.
7. The Comprehensive Spending Review is not accompanied
by a clear explanation of the linkage between the Government's
target to halve child poverty by 2010-11 and the proposed deployment
of resources to meet that target. We are concerned that the Government
may have drawn back from a wholehearted commitment to meeting
this target. A failure to meet that target would represent a conscious
decision to leave hundreds of thousands of children in poverty
for longer than is necessary or desirable. While we accept that
there may be a long-run trade-off between meeting the 2010-11
target and longer term ambitions to increase employment, the linkage
between child poverty and working households is by no means clear
cut. We consider that the Government must either initiate a public
debate on that trade-off, or rededicate itself to meeting the
2010-11 target, making clear at the earliest opportunity available
both that the necessary resources are available within the Comprehensive
Spending Review settlement and that the Government is committed
to deploying those resources. (Paragraph 64)
The Government reconfirmed its commitment to halving
child poverty by 2010-11 on the way to eradicating child poverty
by 2020 in the CSR. The Public Service Agreement set out the Government's
strategic priorities including: reducing poverty through work;
reducing poverty through raising incomes; tackling poor living
conditions and focusing delivery on at risk groups. The PSA Delivery
Agreement outlines the action that each relevant Government department
will be taking to ensure that we meet the 2010 target.
Measures announced in Budget 2007 and the 2007 Pre-Budget
Report and Comprehensive Spending Review are estimated to lift
a further 300,000 children out of poverty. Decisions on the levels
of financial support provided to families will continue to be
set at future Budgets and Pre-Budget Reports in the normal way.
THE INDIVIDUAL SPENDING SETTLEMENTS
8. We recommend that the documentation accompanying
future Spending Reviews include up-to-date figures on forecast
outturns for the baseline year, as well as baselines used for
the purposes of spending allocations, and an account of the differences
between those sets of figures. (Paragraph 68)
The Government is committed to transparency in presenting
spending plans and will take into account the Committee's views
when determining the contents of Spending Review documentation
in the future.
9. We recommend that the Government,
in its response to this Report, clarify whether its ambition to
match independent sector spending per pupil in schools relates
to a static target, of such spending per pupil in 2005-06, albeit
updated so as to be expressed in real terms, or a moving target,
relating to projected future levels of spending per pupil in the
independent sector. (Paragraph 75)
In Budget 2006, the Chancellor set out a clear long-term
aim that "stage by stage, adjusting for inflation, we raise
average investment per pupil to today's private school level."
The aim relates to 2005-06 levels of private sector spending,
adjusted for inflation.
1 http://www.dwp.gov.uk/consultations/consult/2003/childpov/final.asp Back
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