Examination ofWitnesses (Question Numbers
462-479)
MR STEPHEN
TIMMS MP, ANGELA
EAGLE MP AND
IAN PEARSON
MP
26 NOVEMBER 2008
Q462 Chairman: Can I welcome the ministers
to this Sub-Committee. Perhaps formally you could just introduce
your team.
Mr Timms: I am Stephen Timms,
Financial Secretary.
Ian Pearson: Ian Pearson, Economic
Secretary to the Treasury.
Angela Eagle: Angela Eagle, Exchequer
Secretary.
Q463 Chairman: I think you understand
the purpose of this session, which is to examine the annual reports
and accounts of the Treasury and the various supporting departments.
We are not asking questions today about the Pre-Budget Report
on which we are seeing the Chancellor in a week's time. Perhaps
we can begin with the Treasury's objectives, Mr Timms. The stated
aim is to maintain a stable macro-economic environment and promote
efficient financial markets. When the Permanent Secretary appeared
in front of us a couple of weeks ago he said that simply was not
possible in the current climate. Do you think it is right that
the country should accept that you are in no way responsible for
the recession?
Mr Timms: I think it is very widely
known that there has been a global shock of a scale that we have
not seen for a very long time, certainly not in the lifetime of
anybody here. The Governor of the Bank of England said yesterday
that it was the biggest challenge since the Great War. It started
in the USA but it has affected every country around the world.
I went to the meeting of G20 finance ministers in Brazil a few
weeks ago and it was clear that all 20 countries, developing and
developed, were being affected, in many quite similar ways, by
what has happened. Our responsibility is to navigate a path which
gets Britain through this challenge in the best possible shape
and does it in a way that is fair to everybody. In the PBR this
week the Chancellor has set out how we are going to do that. We
have acted in a very decisive and responsible way in responding
to this enormous challenge to the whole world economy.
Q464 Chairman: You set Departmental
Strategic Objectives for everybody else but your own one, 2008-11,
is to ensure high and sustainable levels of economic growth. Is
that going to need revising?
Mr Timms: No. The objectives have
been set and our task is to deliver them. Clearly what happens
is going to be affected by events in the world economy but, as
I have said, we are committed to navigating a path which gets
Britain through those challenges in the best possible shape.
Q465 Chairman: We are in a recession
now so your objective cannot really be a high and sustainable
level of economic growth, can it?
Mr Timms: We want to return to
a high and stable level of economic growth as soon as we are able
to and that is the whole aim of our current policy.
Q466 Mr Brady: The "clear line
of sight" initiative aims to create greater transparency,
in particular with improvements to published documents. Obviously
this is a step in the right direction but what thought have you
given to how parliamentary scrutiny of estimates might be improved?
Angela Eagle: As you have said,
the clear line of sight initiative is an attempt to create a simple
more transparent system to make it easier for the estimates to
encompass all of the expenditure rather than just, at the moment,
some of it. I know there is a great deal of work going on involving
both the National Audit Office and the Treasury about how that
can be done technically. I know there has been a memorandum sent
to the Liaison Committee about how parliament would start to change
the way it examines estimates in order to deal with the alignment
project or "clear line of sight" project as it is called.
It is really for parliament to decide how best it wishes to change
the way it scrutinises estimates going forward. The idea of the
project is to try to encompass, in a much more coherent way, in
one system, government expenditure. I think that is a long overdue
initiative and will certainly improve transparency.
Q467 Mr Brady: You have personal
experience dealing with it from both sides of the fence. Do you
have any views of your own on how parliament could do it better?
Angela Eagle: The first thing
that the project is trying to do is create a much more consolidated
transparent approach to government estimates so that all of the
expenditure is in one place and obvious and actually calculated
on the same basis so that, if we succeed in this, it would be
possible to follow every pound through from when it is raised
through to how parliament decides to approve its expenditure through
to where it is spent, which would be a big improvement. I do not
see any reason why the current ways of debating estimates should
change but again that is a matter for parliament to decide.
Q468 Mr Brady: The Treasury has made
it clear that it would welcome the involvement of this Committee
in developing the "clear line of sight" project. Can
you give any clarification of how the Committee might best help
in that?
Angela Eagle: Again, that is a
matter for the members of the Committee to decide. I am sure when
I was on the Committee I would not have wanted a government minister
to come here and tell the Committee how to do its job. All I can
say is the best thing to do is to deliver a message that we are
happy to co-operate in any way you see fit in order to have proper,
transparent oversight of the way that government spends its money.
The aim that we are all after with a project such as this is to
ensure the most effective and efficient expenditure of government
money. The National Audit Office is involved, the Public Accounts
Committee is involved and it is quite right that this Committee
should be involved. I am sure between all of us we will come up
with a modernised, better and more transparent system.
Q469 Mr Brady: Parliament is surrendering
control of net spending in that we will not be required to authorise
the income in the form of appropriations in aid. What safeguards
are going to be put in place to prevent government departments
from abusing this absence of control?
Angela Eagle: I think the alignment
project itself will ensure that on a consistent basis as the expenditure
process happens there will be more obvious sight of what this
money is. The best controls on that kind of expenditure and against
that kind of abuse—which I do not think is something that
government departments aspire to from my own experience as they
do not go around conniving with each other to keep things from
parliament—is to have clearer accounts which are consistent
across the board, which is what the alignment project will do,
and good vigorous select committees which keep an eye, as this
one does, on what can sometimes look like boring accounts but
are always, in my experience on the Public Accounts Committee,
worth a look.
Q470 Mr Brady: Do you see a greater
role for departmental Select Committees generally in following
that scrutiny?
Angela Eagle: This Sub-Committee
makes it one of its jobs to take a close look at the annual reports
and to take a look at the autumn performance reports. Far be it
from me to tell other select committees how to do their job but
I think that sort of nitty-gritty is part of the day job for all
select committees and I am sure they think that too.
Q471 Mr Brady: Can I turn to UK Financial
Investments Limited which obviously is an increasingly important
institution looking after the government's investments in financial
institutions. Which minister is going to be responsible for oversight
of that body?
Ian Pearson: Paul Miners.
Q472 Mr Brady: How do you intend
to monitor the performance of it within the Treasury?
Ian Pearson: As we would do on
a regular basis with normal institutions. There is clearly going
to be a significant level of interest in how UKFI works. You will
be aware of the statements that we have published as a government.
The Chancellor will take a very close interest in the work of
UKFI. As is the normal course of events, there will be regular
meetings between people from the UKFI and members of the Government
and officials in the Treasury, which is exactly as you would expect.
Q473 Mr Brady: Do I deduce you are
the Commons minister who would take the closest interest in UKFI?
Ian Pearson: The normal analogue
would be that I will take Commons responsibility for this because
it is to do with financial services.
Q474 Mr Brady: Given that the scale
of the holdings in UKFI are already bigger than was first envisaged,
and potentially might get bigger again in the future, are you
confident that the structure and resources that UKFI have are
sufficient?
Ian Pearson: We are talking about
a very new institution. This has happened since the last Annual
Report and Accounts and it is a response to the extraordinary
financial circumstances that we have seen over recent months.
What I can say very clearly is that we are working hard to make
sure that UKFI is being set up on the right sort of basis, has
the resources it needs to do the job that it needs to do to make
sure that we protect the UK taxpayers' interests, has proper oversight
of the re-capitalised banks and it fulfils and discharges its
responsibilities that we are giving to it.
Q475 Mr Brady: How would you judge
whether UKFI has succeeded or failed?
Ian Pearson: We will clearly want
to look to develop performance measures but, as I say, we are
very much in early days with regards to the establishment of UKFI.
As you will be aware, it was only set up either late last month
or early this month in terms of the announcement. It is a little
bit too premature for us to give a full detailed explanation of
exactly how it is going to operate and what its performance regime
is going to be. That is evolving. Clearly there is a lot of interest
here and we will want to be as open and transparent as we can
sensibly be in this matter. I am sure it is something that the
Committee will want to return to at a later date.
Q476 Mr Brady: Without excessive
detail, and I understand it is a very new institution, what would
be success for UKFI?
Ian Pearson: Clearly we want to
make sure the actions that we took and the announcements that
the Chancellor made to the House on 8 and 13 October are actually
seen through, that we proceed on an orderly basis, that we make
sure that, through UKFI, we ensure that the conditionality that
we are imposing on the banks as part of the recapitalisation process
is being fully followed through which is what you would expect
us to do. We need to plan as well an exit strategy as part of
the normal work of what UKFI will do. These things will emerge
over the coming weeks and we will want to report fully to the
House and be subject to full scrutiny in the normal way.
Q477 Mr Brady: When would we reasonably
expect to have a clearer idea on all of that, how many weeks?
Ian Pearson: I do not think it
is possible to give a timescale. Things are rapidly evolving but
all I can say is we have no secrets here. We want to be open and
transparent in the way we deal with things. There are clearly
issues of commercial confidentiality which you will expect but
the normal way in which we want to do these things would be to
be as open and transparent as possible about what is going on.
Q478 Mr Brady: So a full report by
Easter?
Ian Pearson: I certainly can undertake
to the Committee that we will get back to you and we will let
you know more detail about UKFI and how it will operate in the
future and when it will report. The sensible way to proceed is
to let UKFI get on with its work. It is clearly an important point
in time. It is a very new institution and the key thing here is
to say let it operate, let it do its business and let us make
sure we have full parliamentary scrutiny, to the extent that is
reasonable, given the boundaries of commercial responsibility,
and we will endeavour to do that.[1]
Q479 Chairman: Which of you is responsible
for IFRS balance sheets being adopted across Whitehall?
Angela Eagle: I am.
1 See letter from the Chancellor of the Exchequer
to John McFall MP, Chairman of the Treasury Committee, dated 3
November, Ev 111. Back
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