Letter from the Chairman to the Permanent
Secretary, HM Treasury
Thank you for your letter of 25 September. I
am sending this reply today in order to comply with your deadline
of 5 October, but should make clear at the outset that I have
not had an opportunity to discuss this reply with the Treasury
Committee or its individual members.
I am content on this occasion that this correspondence
should remain confidential until such time as the Comprehensive
Spending Review (CSR) is published, although I should note that
the Committee may want to publish the correspondence thereafter
and may wish to explore the terms of such consultation, including
what is published at what stage, in relation to future Spending
Reviews.
The first issue I wish to raise relates to the
differences between Public Service Agreement (PSA) targets and
outcomes within Departmental Strategic Objectives (DSOs). The
information you have provided reinforces the impression that a
number of objectives that were formerly PSA targets are to become
outcomes within DSOs. This gives rise to the question of whether
this change makes any difference in practice to the priority that
the Treasury attaches to compliance and the way in which performance
will be reported on. Has the status of the fiscal rules, for example,
changed? Will there be a counterpart to Delivery Agreements in
relation to DSOs, so that the performance measurement framework
can be clarified?
Second, I am grateful for your account of the
reasons why the Treasury will lead on the development of the Delivery
Agreement for the child poverty PSA. I note that one of the indicators
in relation to the Treasury's second DSO coincides with one of
the indicators for the current child poverty PSA. There is no
reference to the other indicator—"the number of children
in households with income less than 70% of contemporary median,
combined with material deprivation". Can you confirm that
such an indicator will continue to be used for the CSR child poverty
PSA, and that the precise construction of the material deprivation
indicator will be published in the CSR?
The third issue relates to the lack of specificity
about some outcomes. Again, taking the example of the fiscal rules,
the formulation of the fiscal rules in the draft DSO document
you have sent us is less precise than that given in the 2007 Budget,
and does not go any way towards meeting the recommendations that
the Treasury Committee made in its Report on The 2007 Budget
regarding clarification of the rules. Will there be a dear formulation
of both fiscal rules for the period up to 2010-11 and indeed for
the new economic cycle as a whole in the Comprehensive Spending
Review?
My fourth concern is that a number of important
outcomes or elements of outcomes appear to lack any measurable
or meaningful indicators. I can illustrate this by taking two
topical examples. The Treasury has an aim of "supporting...
stable... financial markets", but has no matching indicator
other than that relating to organised crime and terrorism. Would
it not be appropriate to have an indicator relating specifically
to the Treasury's contribution to financial stability through
the Tripartite Agreement? Also, outcome 2(c) includes aims relating
to savings and pensions, but no matching indicators. I consider
this topical because the Treasury Committee will be making recommendations
about the Government's targets for saving in its Report on Financial
inclusion follow-up: saving for all and shorter term saving products
to be published early next week.
The fifth point I would make is that a number
of indicators are extremely vague and hard to measure. I can give
two examples to illustrate this. First the indicator for measuring
success against the outcome of promoting the efficiency and fairness
of the tax system is set to be "the direct impact of policy
measures on taxpayers, including a reduction in the administrative
burdens resulting from tax policy changes". How is this impact
to be measured and reported upon? Second, in relation to the final
outcome in DSO 2 relating to international matters, there is a
reference to "specific milestones underpinning the indicators",
but no indication as to what those milestones are. What are the
milestones, and do they include any milestones relating to the
Lisbon goals, which previously formed part of PSA 8?
Finally, the document you have sent us does
not address the important issue of the extent to which the Treasury
itself can be held responsible for performance in relation to
a number of outcomes. How does the responsibility of the Treasury
relate to that of others in relation to "helping manage risk
from organised crime and terrorism", for example? Will the
extent of Treasury responsibility be addressed in the CSR itself
or a subsequent document?
I look forward to examining the extent to which
this consultation exercise affects the final published documentation.
5 October 2007
| 
