Conclusions and recommendations
1 We note the ongoing underspending against estimate
by the Treasury Group and we are concerned that this may represent
under-delivery or poor estimate preparation. We recommend that
the Government takes steps to ensure that the Treasury presents
an accurate estimate to parliament and delivers against the approved
estimate. (Paragraph 9)
2 We recommend that, in its response to this
Report, the Government indicates whether any of the Treasury Group's
End-Year Flexibility will be transferred to other Departments
or how else it might be used. (Paragraph 10)
3 While we recognise that the quantity of staff
is not the only factor in the delivery of services, we are concerned
that continued headcount reductions in the Treasury Group may
now leave its constituent organisations unable to provide the
required economic support and management during the economic downturn.
We recommend that the Government reconsider any planned further
headcount reductions in the Treasury Group in the light of the
demands on the Group of the economic downturn. (Paragraph 15)
4 The nationalising transactions of 2008-09 raise
some complex accounting questions for the Treasury. In order to
ensure that the Treasury Group's 2008-09 Annual Report and Accounts
can properly be laid before Parliament before the summer adjournment,
we recommend that the Treasury engages early with the National
Audit Office to agree appropriate accounting treatments for the
transactions surrounding the nationalised and part-nationalised
banks. (Paragraph 20)
5 We were disappointed to note that the Treasury
Annual Report was published separately to its Resource Accounts
in July 2008. We recommend that, in order to aid users of the
accounts, the Treasury publishes future Annual Reports and Resource
Accounts in a single, combined document prior to each summer adjournment.
6 By nationalising financial institutions, the
Government has taken on responsibility for significant liabilities.
In order for public scrutiny to be effectively performed, the
magnitude and nature of these liabilities must be comprehensively
disclosed. We recommend that the Treasury quantify and disclose
the liabilities involved in the nationalisations and part-nationalisations
of financial institutions. These disclosures should appear in
the Treasury Group Resource Accounts, must be at least as comprehensive
as those made by major banks and should go further then meeting
the minimum acceptable accounting standards. (Paragraph 23)
7 We recommend that in future years the Treasury
disclose the total bonus payments made to staff in their Resource
Accounts. (Paragraph 24)
8 We recommend that the Government ensure the
Treasury is sufficiently resourced to manage its extended responsibilities
arising from the economic downturn, especially those regarding
financial stability. (Paragraph 28)
9 Given the interest in the fully nationalised
institutions of Northern Rock and Bradford & Bingley, and
the Treasury's role in their governance, we recommend that the
Government publishes key performance information for these institutions
within the Treasury Group's own Departmental Report and Resource
Accounts. (Paragraph 30)
10 We recommend that the Government identify
and publish performance measures for UK Financial Investments
and report against these measures on a six-monthly basis. (Paragraph
11 The adoption of International
Financial Reporting Standards will fail if the Treasury does not
assert its authority and aid departments in meeting the agreed
milestones. We recommend that the Government take steps to re-emphasise
to all departments the importance of meeting IFRS implementation
deadlines. (Paragraph 37)
12 We recommend that the Treasury
considers not only the presentation and authorisation of expenditure
but also the way in which the revised documents might best facilitate
parliamentary scrutiny. (Paragraph
13 We acknowledge that the requirements
of the alignment project mean that it is not possible for parliament
to maintain control over gross totals. We are concerned that without
adequate levels of information regarding income, parliament's
authority may be diminished. We recommend that the new estimates
provide appropriate levels of information relating to income.
We do not wish to impose an unreasonable administrative burden
on the departments and hope that a pragmatic solution can be adopted.
14 The increase in planned gilt
issuance for 2007-8, announced in Budget 2008 reportedly surprised
the market. We recommend that the Debt Management Office reviews
lessons learnt from this process in order to ensure the market
is better prepared in future. (Paragraph
15 We note that the forecast gilt
issuance for 2008-09 has increased from £80bn to £146.6bn.
These higher levels of gilt issuance, at a time when other governments
will also need to raise cash, significantly increase the risk
that supply of Government debt might outstrip demand and uncovered
gilt auctions might result. We note the Debt Management Office's
confidence in its ability to cope with the occasional uncovered
auction but we seek assurances that the Government has put in
place contingency plans capable of responding to repeated uncovered
auctions. (Paragraph 49)
16 The unprecedented increase in
gilt issuance levels in 2008-09 has created pressures for the
Debt Management Office staff and such pressure increases the risk
of mistakes being made. We recommend that the Government review
the resources of the DMO in the light of its significantly increased
workload. (Paragraph 51)
17 We note that 2008-09 will see
a dramatic increase in the workload of the Debt Management Office
and thus an increased risk of control failure. We recommend that
the DMO revisit controls relating to publications in order to
ensure that factual errors are minimised.
18 We note that the DMO takes an
average time of 10 minutes to publish the results of its gilt
auctions compared to the 2 minute publication time achieved by
other countries. While the discretionary checks performed by the
DMO may account for some of this disparity, we recommend that
the DMO sets a target for further reducing the delay.
19 We note that a technical breach
within the CRND function of the Debt Management Office occurred
in 2007-08. Any technical breach is a serious matter. We note
that in this instance the DMO has been advised that no adverse
consequences resulted, and that a review of the procedures in
place has been undertaken. We recommend that the DMO undertakes
regular reviews of its control environment to ensure that emerging
risks are mitigated where possible.
20 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.
21 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. (Paragraph 69)
22 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.
23 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.
24 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.
25 We are disappointed that HRMC
took 12 months to replace its Chief Executive, thereby deepening
the uncertainty felt by staff members already part way through
a far reaching review of HMRC's operations. We recommend that
the Government ensure a full permanent senior management team
is in place in HMRC as soon as possible.
26 We believe that having a 'Permanent
Secretary for Tax' alongside the Chief Executive and Chairman
of HMRC may obscure clear lines of accountability. We recommend
that HMRC publish and widely circulate clear information on the
respective responsibilities of its senior management team, including
responsibility for data management.
27 It is our view that HMRC's explanation
of the basis for the payment to Stuart Cruickshank is wholly inadequate.
We are further unconvinced that the £88,125 received by Stuart
Cruickshank represents good value for the taxpayer. We recommend
that the Government ensure that all departments are adhering to
best practice regarding ex-gratia payments.
28 We note the National Audit Office's
assertion that, in order to maximise the benefits of its Transformation
Programme, HMRC must convince staff of its benefits. The low levels
of morale within the Department are startling with profound potential
impacts on both the Transformation Programme and core service
delivery. We will continue to monitor the efforts made by senior
management to improve matters. We seek an explanation of how Ministers
will monitor and report progress.
29 We are concerned that individuals
without access to the internet, notably less well off or elderly
taxpayers, may face increased levels of non-filing penalty charges
following the revision to the paper filing deadline. We recommend
that the Government should publish any analysis available to it
of the demographic profile of those facing non-filing fees following
the 31 October paper filing deadline. If such evidence is not
available to the Government then it should be commissioned as
a matter of urgency. (Paragraph 95)
30 We recommend that HMRC disclose
information regarding the financial case for individual office
closures in order to allow better public scrutiny of these decisions.
31 We ask the Government to update
the latest progress made by HMRC against Kieran Poynter's recommendations
regarding information security. (Paragraph
32 We are extremely concerned by
the level of fraud within HMRC. We will continue to monitor the
steps taken to improve controls. To assist us in this we recommend
a disclosure of immediate past known fraud levels to provide a
33 We recommend that the Government
ensure the performance against agreed targets by PFI contractors
is published within Departmental Annual Reports in order to enable
clearer scrutiny of these recipients of public funds.
34 We recommend that HMRC reviews
the contracts with its IT provider in the light of the very serious
errors which have recently occurred and seeks financial compensation
where appropriate. We regard it as wholly unsatisfactory that
people entitled to Child Trust Fund payments should not have received
them owing to the poor performance of an IT contractor. We seek
assurances that the contracts drawn up with the PFI companies
adequately allow for appropriate compensation to the taxpayer
in the event of serious performance shortcomings.
35 We note that the introduction
of HMRC's new IT system has been delayed by a year. We accept
that postponing the 'go live' date until testing is complete is
prudent. HMRC should publish the performance targets for the new
system in terms of reduced open cases and other measures so that
we may better monitor its effectiveness.
36 Low staff morale is a risk to
the quality of service delivery. We note that staff satisfaction
in the Valuation Office Agency is worryingly low. We will continue
to monitor management's performance in improving staff morale
and safeguarding the delivery of services.
37 We note the Valuation Office
Agency's recognition that its communication with businesses affected
by the revaluation of statutory ports had been deficient. We hope
that the Agency can apply the lesson learnt from this situation
to all future revaluations. (Paragraph 127)
38 We note that Port Occupier's
are facing bills for backdated business rates which do not take
account of payments they have already made to Port Operators towards
rates. We recommend that the Government take steps to ensure
that the financial liabilities faced by Port Occupiers take such
payments into account. (Paragraph
39 Port businesses are facing backdated
charges because the Valuation Office Agency failed to identify
discrepancies in the ratings at the time of the 2005 revaluation.
This mistake was compounded by the VOA's failure to communicate
changes promptly and effectively with Port businesses.
40 The Government's proposal to
extend payment terms for port businesses comes too late for those
firms which have already ceased to operate in the face of the
huge rates bills presented. It is probable that, even with an
eight year period to pay, the backdated and prospectively increased
rates bills may make many firms technically insolvent.
We recommend that, in recognition
of the fact that the Valuation Office Agency is to blame for the
situation faced by the port firms, the Government takes steps
to mitigate further the difficult position faced by port businesses.
41 We are concerned that the Government
Actuary's Department's estimated net expenditure position deviates
so far from its actual outturn. We do not accept that the Department
is justified in building in 'headroom' of some £2.8m (38%).
We recommend that GAD reviews
its supply estimate process and improves budgeting to ensure the
validity of forecasts and estimates laid before parliament.
42 We are concerned to note that
prior to 2007-08 the Government Actuary's Department were operating
a bonus system which made no reference at all to performance.
We recommend that the Government ensures that bonus payments are
performance-based and of a reasonable scale.
43 We note the controversy surrounding
the valuation of miners' pensions and recommend that the Government
Actuary's Department issues a statement addressing the risk of
future liabilities being faced by the ultimate guarantor of these
schemes, the UK taxpayer. (Paragraph
44 We note the Government Actuary's
equanimity regarding the impact of Equitable Life on the reputation
of Government Actuary's Department. We hope that GAD have learnt
lessons from its involvement in Equitable Life and will reflect
on the findings of the Health Service Ombudsman.