Examination of Witnesses (Question Numbers
220-239)
MR NICHOLAS
MACPHERSON AND
MS LOUISE
TULETT
22 OCTOBER 2008
Q220 Nick Ainger: I am looking at
pages 62 and 63 of your annual report. The figures there certainly
confused me and would confuse anybody else that was looking at
this important issue. At the bottom of page 62, you say that the
baseline is 3.4 million children in 1998 to 1999 in households
below average income. You go on to say that between 1998-99 and
2006-07 that number fell by 600,000 to 2.9. At the top of page
63, you then go on to say that the number of children in households
with incomes below the 60% median income has fallen by 1.7 million.
You then go on to say in paragraph 4.36 that, taken together with
the Budget measures in 2007, the PBR 2007 and the 2007 CSR and
Budget 2008, there will be a further 500,000 children taken out.
What is the figure? I know George Mudie was trying to get to the
bottom of this some time ago. One figure you have quoted there
as 1.7 million actually is halving child poverty two or three
years almost before the target date of 2010-11. I do not think
that has happened because you have announced that you have slippage.
What are the figures so that people do understand what is happening?
We have campaigning charities saying that you are failing miserably
and another three billion is required to get back on track. What
are the figures?
Mr Macpherson: There is no unique
measure of child poverty.
Q221 Nick Ainger: We will never know
whether you have delivered or not.
Mr Macpherson: You will do because
we will publish figures. There are three different ways of looking
at this. One is an absolute measure and we get a very nice reduction
of 1.7 million. If you look at 1998-99 income levels and uprate
those for inflation, there has been real, absolute progress. On
the other hand, generally over time incomes go up so having an
absolute measure perhaps does not do full justice to the issue.
That is when you look at relative measures. The problem with relative
measures is if there are forces at work which are continually
stretching your income distribution. Relative measures will generally
underestimate the progress you have made. We have been happy to
be judged on that. The Child Poverty Action Group quite rightly
home in on the measure which is most difficult and it is that
one. I used to run this part of the Treasury and we spent a lot
of time talking to the poverty lobby. We had lots of conferences
on measurement and we came up with a third measure which combines
relative poverty, albeit at a high level, with material deprivation.
One of the ways in which you really get a handle on poverty is
to ask people what they think is a minimum level of income in
terms of having a television, a few days off or whatever, so we
have that measure as well. It is complicated and I am sorry that
we have failed to—
Q222 Nick Ainger: You have a PSA
target which is to halve child poverty, however it is defined,
by 2010-11 and eradicate it by 2020. What you are saying is it
is very difficult to define child poverty, but all people expect
is that there is some consistency. Those figures I have quoted
from your annual report are not consistent. They actually are
misleading, not deliberately so, but they do not say, "This
is how we are going to judge whether we are performing well, meeting
that PSA target of halving child poverty." Do you not think
you ought to establish, perhaps with consultation with the child
poverty lobby, what is a good baseline, what is a way of identifying
what is child poverty and then you can judge all performance accordingly?
The figure of three billion in the current circumstances is quite
frightening. Politically, it is absolutely vital that that target
is met. Statistically, you cannot tell me. Perhaps you can. Somebody
is saying, "We know we are slipping." The report says
it is slippage.
Mr Macpherson: The reason why
it is slipping is because we are not making sufficiently rapid
progress on the relative measure.
Q223 Nick Ainger: Without defining
what the relative measure is.
Mr Macpherson: We have done. That
is the number of children in households with income of less than
60% of contemporary median compared with 1998-99. It is set out
in paragraph 4.32. If we focus on one measure on its own, the
risk is that we may hit that measure but you will criticise us
for some other reason. That is why we have a number of indicators—three,
in fact. Let me undertake to ensure that we are far clearer on
this in next year's report because it is not unreasonable to have
more than one indicator but I think you do have a right for this
to be explained rather better than we have done.
Q224 Nick Ainger: Quoting that 1.7
figure is totally contrary because you have achieved the target.
That figure will mean you have achieved it two or three years
ahead and we know that is not true.
Mr Macpherson: We need to be clearer
because we clearly have not convinced you.
Q225 Chairman: Perhaps we can have
a note rather than wait until next July.
Mr Macpherson: I would be very
happy to provide you with a note.[3]
Q226 Mr Love: I want to take us on to
efficiency savings again. We are living through the biggest financial
crisis since 1929; yet, over the last year, you have had a headcount
reduction of 235 posts. Has that left you in a weakened position
to be able to respond to the crisis that is going on out there?
Mr Macpherson: I do not think
it has. Much of the reduction was in the Office of Government
Commerce as part of a refocusing of that organisation. However,
I would say that from here on—it goes back to my earlier
point—I am really keen to ensure that the Treasury has the
staff to do the job. What has been striking over the last year,
especially over the other weekend, is that we are really operating
at our limits. It is as much an issue of having the right sort
of people at the Treasury as numbers. We are having to multitask
in certain areas. This comes back to the bonus point. You may
argue next year that none of us should have a bonus and you are
quite entitled to do that, but there are a lot of people who have
been really working at the limit, in terms of not getting any
sleep and in terms of working really intensively. I am really
proud of how the Treasury has worked over the last few months.
Q227 Mr Love: Could they criticise
you and the senior management for forcing them into that pressurised
position? Do we not get the wrong or bad decisions as a result
of that pressure?
Mr Macpherson: I am happy to be
held to account for that. The challenge for management is to ensure
that you can get more people into the trenches while some other
people go back and get a rest.
Q228 Mr Love: Do you regret the fact
that your target of last year was 150 for core Treasury and yet
you managed 235? What will you end up with at the beginning of
next year? Will you have to take some people back on?
Mr Macpherson: We did overshoot
a bit. We have been recruiting actively recently. I am optimistic.
One of the few positive sides of life being rather less attractive
in the City of London is that the Treasury should be able to attract
some really good people to come and work there on salaries which
are affordable. That is the challenge. We have recruited people
recently. I am more confident than ever that I have the senior
management team to deal with the current crisis. I have been really
impressed by the quality of staff, but it is really important
that we manage them in such a way that they do not get burnt out
and can provide the right advice and do the right job.
Q229 Mr Love: The Debt Management
Office reduced its staff last year by 13 according to your report.
We had them with us last week and they pretty much told us that,
with all the additional money that they will have to raise on
markets, they will need to take those 13 back on again. Would
that be right?
Mr Macpherson: I speak to Robert
Stheeman most weeks. His organisation is taking on new tasks.
They are going to have to be staffed to do the job. It may be
that they have to take on more people but, coming back to your
original point, at a time when the financial challenges are massive,
there is no point cutting corners. The Debt Management Office
will have the resources to do the job.
Q230 Mr Love: I think what you have
said to us so far is that you might have had to review the situation
for core Treasury, certainly for the Debt Management Office who
indicated that the Office of Government Commerce had already faced
significant reductions. It took the bulk in proportionate terms.
Yet, under the CSR, by 2011 you are going to have to make significant
further additional savings. Can you do that?
Mr Macpherson: I hope by 2011
we will be in the uplands of—
Q231 Mr Love: So do we all. Hooray
to that.
Mr Macpherson: It comes back to
my earlier point about spending our budget. We just have to be
a lot smarter in terms of getting the people into the Treasury.
Obviously, if we reach a point where getting more staff is critical
to what we have to do, then I would have to talk to the Chancellor
of the Exchequer about that because the Treasury is a small department.
There is no right number of Treasury officials. Personally, I
think it is important that the Treasury remains small. I think
it is key to its success and the cohesion of the organisation,
but we have to keep this under review.
Q232 Mr Love: Finally, the assumption
is almost universally made that the reason why the Treasury overshot
in terms of efficiency savings is that it is the department that
has to enforce it for everyone else. If you now throw that into
reverse up to 2011, what signal does that send out to every other
government department?
Mr Macpherson: That is one reason
why we have to be careful about this. I am certainly not wanting
to be profligate. The issues for us are really at the margin of
around 30, 40 or 50 people. It is nothing big, but we have to
be conscious of that. We have to set an example. Equally, there
is no point in our being excessively hair shirt.
Q233 John McFall: In terms of the
past few weeks I know from talking to quite a number of people
in the City and elsewhere that they have been grateful for the
work of the Treasury. Tom Scholar, John Kingman and Clive Maxwell
are names that have been put forward, but you will remember a
Northern Rock report and the criticism about the run down in the
financial services department. Can you give us an assessment of
that (a) in terms of the present number and (b) the number which
you will be happy with eventually, because that needs strengthening.
You would agree?
Mr Macpherson: It needed strengthening.
It has been strengthened. Do I need to strengthen it further?
If we had the banking crisis which we had two weeks ago and it
was going to be every day of the week, then we would seriously
have to strengthen it. We have to keep this under review. It is
both the quality of the people and the quantity. When the Northern
Rock problem arose, we had Stephen Pickford both running financial
services and doing the international side. Stephen is a very able
guy but that was asking too much. Having Tom Scholar there who
does financial services 100% of the time—you mentioned Clive
Maxwell but I am also really pleased that Mridul Hegde from Brivati
is also working there—especially when it is a representational
role, if you have to speak to a chief executive of the bank, you
need to have enough senior people to manage those relationships
and I think we have a really good team there now. Equally, I think
we have learnt a hell of a lot over the last year and we will
continue to learn from that. I think the Treasury is in a better
place but I would not claim that everything we have done has been
completely brilliant over the last year.
Q234 John McFall: Why do you not
invite us in, give us a nice lunch and tell us what you have learned?
Mr Macpherson: You have come into
the Treasury in the past and I would like to extend an offer to
invite the Committee.
Q235 Sir Peter Viggers: In November
last year, you said that achieving your £30 million efficiency
target would depend significantly on staff reductions. You have
reduced staff considerably. Are those staff reductions you referred
to last year still outstanding and have they been announced? Might
there be redundancies?
Mr Macpherson: We have delivered
the staff reductions. To live within our CSR plan, we really would
not need to reduce staff by very much. As I mentioned just now,
I am keen to step back and look at how we spend our resources.
At the margin, it may be that our plans for people set out on
page 91 of the report—1,006 it says here in 2011—and
that number should be a little higher. Although people are our
main cost, there are other ways you can reduce spending.
Q236 Sir Peter Viggers: Your value
for money delivery agreement suggested that your efficiency savings
in the Comprehensive Spending Review 2007 period will be calculated
in a manner which excludes non-recurrence of structural costs.
How does that square up with your own requirements that efficiency
savings are calculated to be net of implementation costs?
Ms Tulett: I am not sure that
I quite recognise the point you are making but the chart that
we have on page eight of the delivery strategy clearly demonstrates
how we are going to achieve our savings target against the baseline
which I recognise as being the total resource envelope.
Mr Macpherson: Can we give you
a note on that because I would be quite surprised if we were in
breach of our own guidance.
Q237 Sir Peter Viggers: It is a very
detailed point. The references I have before me are your value
of the money delivery agreement 2007, page 11, and the CSR 2007,
chapter three, paragraph 3.31.
Mr Macpherson: We will look into
that and give you an answer.[4]
Q238 Mr Brady: The bank special liquidity
scheme was established at around about the end of the financial
year. We know that so far it has seen more than £100 billion
of assets swallowed. Can you tell us how much more?
Mr Macpherson: No.
Q239 Mr Brady: Is that because you
do not know or you cannot tell us?
Mr Macpherson: I do not want to
go beyond what the Chancellor of the Exchequer said last week,
not because I am trying to be unhelpful. I want to help the Committee.
It is just that this is remarkably sensitive. All the information
will be published in due course but at the current time people
can read huge amounts into random, very large numbers.
3 Ev 76 Back
4
Ev 77 Back
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