Examination of Witnesses (Questions 280-294)
MR DAVE
RAMSDEN, MR
MIKE WILLIAMS,
MR EDWARD
TROUP, MS
SARAH MULLEN,
MR CHRIS
MARTIN AND
MR SIMON
GALLAGHER
18 MARCH 2008
Q280 John Thurso: No, the actual
tax.
Mr Troup: Those figures for somebody
who does what you have described sound broadly right. What is
important to get right in the implementation of these rules is
to ensure that they act as a deterrent for those who are setting
out to mitigate tax in a way which the Government does not intend
and not as an administrative burden for ordinary small businesses.
Q281 John Thurso: It sounds to me
like the best relief you could possibly give a husband and wife
team as small entrepreneurs and a lot better than 10% for people
on millions in private equity. Why is it unfair?
Mr Troup: I think it is unfair
because it is effectively giving a tax relief to some husbands
and wives—
Q282 John Thurso: To somebody who
is an integral part of the business.
Mr Troup:— and partners
who are working together where one may not be contributing to
the business.
Q283 John Thurso: Could it be that
the small business team have not thought this through and they
need to go back and look at it a lot harder?
Mr Troup: The team have thought
it through extremely well. We do want to make sure that small
businesses, where both the husband and wife or both partners are
contributing, are not adversely affected by this if all they are
doing is entering into ordinary commercial arrangements.
Q284 John Thurso: If you have two
directors of a company are you now going to say as "We, the
Treasury", or, "We, HMRC", "You, director,
we have decided you are not really doing as much as you think
you are doing. Therefore, we are going to take that away"?
Is it the Treasury which is now setting the directors' fees for
small companies in the United Kingdom?
Mr Troup: The points you raise
are exactly the points we have had out of consultation, and the
main reason that this is being put off for a year is to look at
the rules and make sure that we can deliver something—
Q285 John Thurso: Is it because there
was nobody with qualified competence on small businesses when
this was first put forward?
Mr Troup: No, I do not think that
is true at all.
Q286 John Thurso: That is what we
think.
Mr Troup: I think what has come
out is that because of the diversity of small businesses and the
significant number of small businesses we have to consult widely
and that consultation has been very useful.
Q287 John Thurso: It was described
as a "sticking plaster solution" by John Whiting.
Mr Troup: Yes, I saw that comment
and I did not agree.
Q288 John Thurso: I thought he was
being generous.
Mr Troup: And if the Committee
has got time I will tell you why.
Q289 Chairman: Just a couple of questions
from me to finish up on. The Treasury announced in the 2007 Budget
that IFRS would be implemented in central government from 2008-09.
Give us a short explanation of why that timetable is no longer
possible.
Mr Ramsden: Sarah Mullen will
give you that short explanation
Ms Mullen: We announced in the
2007 Budget, as you said, that we are moving in 2008-09. We have
been consulting with departments and with the FRAB over the last
year and looking at how we implement IFRS. As a result of those
consultations it has been concluded that the timetable was too
short for some departments, so we have—
Q290 Chairman: Are the MoD and the
Department of Health the only two departments?
Ms Mullen: I think a number of
departments thought the timetable was quite challenging. Those
two departments in particular, not surprisingly because they have
very complex budgets and a large number of assets, found the timetable
quite stretching. However, I would also say that DCLG raised some
issues with us about local authorities who were not moving to
IFRS until 2009-10, so that was another factor.
Q291 Chairman: Members of the Financial
Reporting Advisory Board told us on 4 March that they had recommended
that all departments that could do so should produce 2008-09 shadow
resource accounts on an IFRS basis alongside their 2007-08 accounts
on a modified UK GAAP basis. Has the Treasury accepted this recommendation
and what steps are being taken to ensure that the momentum towards
IFRS is not lost?
Ms Mullen: Those departments that
are able to produce them we will get to produce them and we want
to maintain the momentum.
Q292 Chairman: But not every department
will have a shadow budget?
Ms Mullen: That is right. We will
still expect departments to be working towards implementing this
in 2009-10. We do not want to lose the momentum.
Q293 Chairman: Over £20 billion
of the savings reported for the period ending on 31 March 2008
are classified as "final" and the Treasury has stated
that "no efficiency gain will be scored as `final' until
maintenance of service quality is evidenced". Is the evidence
about service quality relating to these gains in the public domain
and, if not, will it be in the public domain after 31 March?
Ms Mullen: We will certainly make
available all the evidence when we finally say that we have or
have not met the targets. We have just reported in the Budget
what departments are telling us. I think about 87% of those gains
are final but when we get to a point where we are able to quantify
finally how we have met the target we will make the evidence available
in the normal way.
Q294 Chairman: Okay. It will be interesting
to see how many cases there have been where claimed efficiency
savings have been rejected by the Treasury because service quality
has not been maintained. Will you provide us with a list of such
cases?
Ms Mullen: We can certainly look
at that. What usually happens is that where we have questions
for the department about service quality we go back and get them
to address the issue, and that is the important thing.
Chairman: It is very important for us,
in trying to assess if these efficiency gains are indeed efficiency
gains and if the quality of the output is maintained, and certainly
the customer focus, that you get that information to us. Mr Ramsden,
thank you and your team for your evidence this morning. No doubt
we will see you tomorrow afternoon.
| 
