House of Commons - Administration and expenditure of the Chancellor's departments, 2007-08

Administration and expenditure of the Chancellor's departments, 2007-08 - Treasury Contents

5 The Treasury Group's performance against objectives

61. The 2007-08 financial year marked the end of the 2004 Spending Review period and its associated Public Service Agreements (PSAs). As at June 2008, the Treasury Group reported slippage against three of its ten PSA targets.[75] The three targets against which the Group 'slipped' were: PSA 6 on regional economic growth; PSA 7 on child poverty; and PSA 9 on supporting all Departments in achieving their PSA targets.[76] In addition the Department reported "slippage" against subsection three of PSA 8, a target which assessed delivery against the Lisbon goals on growth and employment. Each of these is considered in this section.[77]

Regional Economic Growth

62. In June 2008, the Treasury reported slippage against its PSA 6: to "make sustainable improvements in the economic performance of all English regions by 2008, and over the long term reduce the persistent gap in growth rates between the regions, demonstrating progress by 2006".[78] In its response to our 2006-07 report regarding this PSA, the Government stated that:

it will not be possible to measure regional trend growth until regional price deflators can be robustly estimated. The Office for National Statistics has been developing a methodology to estimate deflators and expects to have deflators available in 2009.[79]

63. In October 2008, Mr Macpherson told us that the issue of measurement remained unresolved:

Part of the problem about really understanding what is going on remains the fact that we do not have regional deflators. So we know in gross terms what is happening to the incomes per head, or the gross value-added per head, but we do not really know whether the rate price change, say, in the north-east is significantly different from London or the south-east, it just makes analysis of real trends more difficult. I think we have got to use all the data we can get hold of to understand what is happening to employment, unemployment, skill levels and so on. [80]

64. We are disappointed that after three years the measurement of performance against the Government's target to reduce regional inequality remains problematic. We welcome the work of the Office for National Statistics and recommend that the Government publishes the results of the work on regional deflators as soon as it becomes available.

65. The economic downturn may act to reduce regional inequality if the financial services industry, largely based in the South East, is very adversely affected. Mr Macpherson suggested to us that it was too early to tell if the present recession would lead to a narrowing of the gap between the regions..[81] This is an issue we may return to in the future.

Child Poverty

66. In June 2008, the Treasury reported slippage against PSA 7: to "halve the number of children in relative low-income households between 1998-1999 and 2010-11, on the way to eradicating child poverty by 2020".[82] The Treasury reports that "between 1998-99 and 2006-07 the number of children in households with relative low-income fell in the UK by 600,000 from 3.4 million to 2.9 million".[83] This continues the pattern of failure acknowledged in the Treasury's 2007 Autumn Performance Report.[84]

67. In its 2007-08 Annual Report, the Treasury described the three metrics used to measure performance against the child poverty target, the third of which was introduced for the CSR 2007 period (see table 4). Table 4 - Metrics for the measurement of child poverty reduction

1 The number of children in households with income less than 60 per cent of contemporary median compared with 1998-99.

2 The number of children in households with income less than 70 per cent of contemporary median, combined with material deprivation.

3 The number of children in absolute low-income households. The level is fixed as equal to the relative low-income threshold for the baseline year of 1998-99 expressed in today's prices.

Source: HM Treasury Annual Report 2007-08, p 62

68. When challenged to defend the clarity of reporting against this target, Mr Macpherson accepted that the Treasury "needed to be clearer because we clearly have not convinced you".[85]

69. We recommend that the Treasury reviews its reporting against its child poverty target in order to ensure that users of the accounts can easily see performance against each of the three measures individually. We are concerned that, despite assurances that the Treasury has "redoubled efforts to meet the 2010 target", it may be beginning to resign itself to failure, an attitude which will not help those children still living in poverty in the UK.

Cross-Government delivery of PSA targets

70. The Treasury reported slippage against PSA target 9: "Improve public services by working with departments to help them meet their Public Service Agreement (PSA) targets".[86] By the Treasury's own metric, in order to meet this target "a full 100 per cent of SR 2004 PSA targets need to be met or partly met".[87] The Department suggested that this was an "exceptionally ambitious" target and that it was "not surprising that there is some slippage in meeting it".[88]

71. The Treasury reported that, of the 80% of targets given overall assessments in the 2007 Autumn Performance Reports, some 40% had reported slippage.[89]

72. We are concerned by the scale and amount of CSR2004 Public Service Agreements which have been missed and recommend that the Government explains why the rate of failure against targets across departments was so great.

Lisbon Goals

73. In June 2008, the Treasury reported slippage against its PSA 8 (iii): to "promote increased global prosperity and social justice by: working with our European Union partners to achieve structural reform in Europe, demonstrating progress towards the Lisbon goals by 2008".[90] When questioned on the absence of the Lisbon goals from any of the CSR 2007 PSAs, Mr Macpherson stated that the goals remained an aspiration but not a target:

This is one of the more amorphous areas and, although Lisbon matters, my guess is that, in terms of what the Treasury does as a finance and economics ministry, it will be about focusing on the immediate challenges of now rather than spending all our time looking at a particular target around Lisbon.[91]

… It remains an aspiration and I think it is really important. It certainly informs our approach to Europe which is to try to get a more dynamic market economy but we are not going to hit that target.

74. We note that achievement of the Lisbon goals will not feature in any Public Service Agreement during the CSR 2007 period. We are concerned that this omission will lead to progress against the Lisbon goals being omitted from Government reporting. We recommend that the Treasury publish within its Annual Report an update on progress against the Lisbon goals.

New Performance Targets

75. CSR 2007 introduced a new system for performance measurement of departmental performance. In place of the 110 PSAs of the CSR04 period, there are now 30 PSAs, in addition to which each department has declared its 'Strategic Departmental Objectives'. We have previously reported on the CSR 2007 and this move towards Departmental Strategic Objectives.[92]

76. HM Treasury has two Departmental objectives: maintaining sound public finances; and ensuring high and sustainable levels of economic growth, well being and prosperity for all.[93] In addition the Treasury is a delivery partner for seven PSAs and has lead responsibility for a single PSA: to halve the number of children in relative low-income households between 1998-99 and 2010-11 on the way to eradicating child poverty by 2020.[94]

77. The 2008-09 financial year is the first year of delivery against the Departmental Strategic Objectives and Public Service Agreements arising from the CSR2007. In our review on administration and expenditure in 2008-9 we will be examining HM Treasury's performance against these targets.

75 HM Treasury, Annual Report 2007-08, Cm 7408, July 2008, p 19-20 Back

76 Ibid., p 19-20 Back

77 Ibid., p 20 Back

78 Ibid., p 51 Back

79 HC (2007-08) 564, p 16 Back

80 Q 185 Back

81 Q 184 Back

82 HM Treasury, Annual Report and Accounts 2006-07, HC 518, July 2007, p 62 Back

83 Ibid., p 62 Back

84 HM Treasury, Autumn Performance Report 2007, December 2007, CM 7256, p 8 Back

85 Q224 Back

86 HM Treasury, Annual Report 2007-08, Cm 7408, July 2008, p 69 Back