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

Examination ofWitnesses (Question Numbers 462-479)


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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