Examination ofWitnesses (Question Numbers
480-499)
MR STEPHEN
TIMMS MP, ANGELA
EAGLE MP AND
IAN PEARSON
MP
26 NOVEMBER 2008
Q480 Chairman: Louise Tulett, your
finance director, told us that only half of Government departments
met the deadline of 30 September. Why are they ignoring you?
Angela Eagle: The current position
is that three departments are yet to submit their restated balance
sheets to the National Audit Office as part of this system. One
of them, which is the Cabinet Office, is expected to complete
that action by the end of next month. There are two remaining
departments and it is no real surprise that they are the most
complex ones, the MOD and Health Department. We are obviously
working with them to see how quickly they can get through what
for them are a very complex series of calculations. We are confident
that they will be prepared for full introduction but clearly they
have got the most difficult task ahead of them. We are supporting
them and they are actively engaged in trying to complete it.
Q481 Chairman: What sanction do you
have?
Angela Eagle: At this stage this
is a trigger point of a process where we hope by the end of financial
year 2009-10 to be able to completely make the shift to the new
accounting system. We do not particularly want to get into sanctions
at the moment. We want to assist departments in the shift from
the current method of accounting to the new one which requires
a great deal of work in some departments. We are being supportive
and helpful but insistent, I suppose, would be my response to
that. At this stage it is more important that we support this
shift rather than resort too quickly to sanctions.
Q482 Chairman: Does this mean we
will have further slippage in the target of moving to hold other
government accounts?
Angela Eagle: We certainly hope
not. We are still aiming and reasonably confident that we can
do this by 2009-10.
Q483 Chairman: Who is responsible
for HMRC?
Mr Timms: I am.
Q484 Chairman: Their Annual Report
lists 17 areas in which improvements to internal controls are
still ongoing, yet your own resource accounts, at page 27, say
no internal control issues in the Treasury Group were identified.
Can you explain the difference between those two? Who is right?
Mr Timms: The explanation is that
HMRC for these purposes is not part of the Treasury Group referred
to in your second remark.
Q485 Chairman: I thought HMRC was
part of the Treasury Group.
Mr Timms: In the context that
the phrase is used that you just read out, it is not.
Q486 Chairman: That sentence, in
fact, just refers to the Treasury.
Mr Timms: Yes.
Chairman: It will be corrected next year
I hope.
Q487 Mr Breed: Can we turn to the
PSA targets which I suspect you probably thought we were going
to approach. In June 2008 the Treasury and HMRC between them had
met or were "on course" to meet only 13 of the 20 PSA
targets. Could we ask what went wrong in that sense? Perhaps even
more so, bearing in mind the Treasury's performance is very similar
to the Government's performance as a whole, that slippage is being
reported in 40% of the targets, are actually PSAs working in any
meaningful sense?
Mr Timms: Are we talking about
the new PSAs for the current spending review period or is your
question about performance on the PSAs in the previous spending
review?
Q488 Mr Breed: In the Annual Report
of 2007-08, so it is last year.
Mr Timms: We are looking back
over the past performance. What I would argue is that the PSAs,
and there were three PSAs in particular that we were responsible
for, were extremely valuable and indeed effective in directing
the efforts of HMRC. They were not all met but I do not think
that in itself is a surprise. We can go through the individual
points in the targets, if you like, but I do think the system
worked well in directing effort and raising performance. Of course
there were some lessons learnt for drawing up the new set of PSAs
across government. We have a smaller number of PSAs now than we
had before. I do think that the system in place for the 2004 spending
review was effective across government and effective for HMRC.
Q489 Chairman: Were the lessons learnt
that perhaps the previous targets were too challenging so, therefore,
you have reduced the hurdles so you can meet a few more?
Mr Timms: No, not at all. There
were, as I have said, many elements in the old PSAs that were
achieved and the fact they were highlighted in the PSAs in that
way increased the focus on delivering them and raised the level
of performance. The key lesson that was drawn, and this is a point
about the system across government rather than specifically as
it affected HMRC, was that it was better to have a smaller number
of genuinely cross-government performance targets. In the new
system, with the 30 or so PSAs, most of them have more than one
department involved in their delivery whereas in the older system
it was more segmented by department. The new system has a smaller
number of genuinely cross-government targets and I think that
probably is a better way of drawing the system up. There is no
doubt in my mind that the previous system did contribute very
significantly to raising performance across government and in
HMRC.
Q490 Mr Breed: The PSAs are working
but not quite as well as you would have hoped and next year we
can look towards a substantial improvement in meeting the targets?
Mr Timms: We have certainly learnt
lessons and will continue to do so. I cannot tell you that every
single element of the new framework will be certainly delivered.
These are stretching targets, and they should be, because we want
to aim high on performance. We have certainly learnt lessons and
we will be working very hard to deliver all of the new targets.
Q491 Mr Breed: Can we turn to the
unemployment figures which, of course, are higher now than they
have been for a very long time. In fact, the number of unemployed
people is higher than at any time since 1997. You will know that
the Committee has been particularly focused over the last year
or so on child poverty. Can you tell us what you are doing there
to minimise the effect of this rising unemployment on child poverty?
Mr Timms: You will know that we
have made very good progress in reducing child poverty since 1997.
There has been a reduction of 600,000 so far and the headline
numbers started at 3.4 million. Measures that were announced in
this year's budget will lead to a further significant reduction
in the number of children growing up below the poverty line.
Q492 Mr Breed: Even taking into account
the new unemployment situation?
Mr Timms: Yes. We estimate that
the measures in the Budget this year will reduce by half a million
the number of children below the poverty line.
Q493 Mr Breed: But you were using
unemployment statistics which clearly are nothing like what we
have now.
Mr Timms: The measures in the
Budget will have the effect of reducing by half a million the
number that otherwise there would have been. I must say it is
not completely clear. The number of children growing up below
the 60% median income line, it is not completely clear how they
will be affected by what is happening at the moment. It depends
in which parts of the workforce unemployment rises in and so on.
We are confident that the announcements we made in the Budget
will reduce by half a million compared to what the figure otherwise
would have been.
Q494 Mr Breed: You are not taking
any additional pre-emptive action in the light of the current
economic situation or employment figures?
Mr Timms: There were, as you will
know, some changes in the PBR which will be helpful: the bringing
forward of the uprating of child benefit, the bringing forward
of the uprating of the child tax credit, both of those will certainly
help.
Q495 Mr Breed: Can we just go to
regional inequality which has been a problem for a very long time
and is likely to be exacerbated on the impact of the recession.
What additional things might you bring in to try and address what
was, and is, and has been, a problem of regional inequality for
some time but is likely, I suspect, to be made even worse in the
next year or so?
Mr Timms: What we have done, as
you know, is announced a major stimulus to the whole economy in
the PBR this week worth about 1% of GDP and we believe that will
be a very effective measure in rebuilding momentum in the economy
across the country. Alongside that, one of the responses that
the Government has made to the current challenges is the establishment
of the National Economic Council and that is being replicated
now by regional councils involving regional ministers and others
and the regional development agencies for example. I think that
will be a very effective way of concentrating minds in the regions
on what needs to be done, and can be done regionally, to tackle
the particular challenges which, as you rightly say, vary across
the country.
Q496 Mr Breed: I suspect presiding
over the demise of the South East economy to bring it down to
the average of the rest is not what we were thinking about, more
like bringing up other regional economies to try and tackle what
are likely to be quite substantial difficulties in many areas
particularly those that are involved in manufacturing and such.
Mr Timms: Yes. We want to raise
it across the country.
Q497 Mr Breed: Last year the Financial
Secretary told us that she would commission some work on the impact
of rapid food inflation on the wellbeing of low income families.
Can we know what the result of that work was and when it is going
to be published?
Mr Timms: I am not quite sure
where that research has got to but I can write to you.
Q498 Mr Breed: Can you write to the
Committee and let us know?
Mr Timms: Yes.[2]
Q499 Mr Love: Can I come back to this
issue of PSA targets and the unprecedented situation we are now
going through? That is the mantra of government, and I have to
support it, that this is a whole new ball game we are in. In that
whole new ball game do we need to revise and re-look at our PSA
targets? Are you, in fact, doing that as we speak?
Mr Timms: No. I think the framework
that we put in place at the time of the Comprehensive Spending
Review is right. There certainly is not any general review of
the PSAs under way and I do not think it would be right to do
so. If we look at the PSAs which HMRC is contributing to, deliver
the conditions for business success in the UK, reduce the harm
caused by drugs and alcohol and so on, I think those targets,
as they have been expressed, remain right for Britain over the
three year period we are looking at.
Ian Pearson: Essentially PSAs
look to the longer term, and the longer term objectives that we
have set I believe very strongly are absolutely right. There is
a big difference between that and, because of the unprecedented
changes that we have seen in recent months, some of the short-term
things that we need to do. It is quite important that as we go
through this difficult economic period at the moment and have
to respond to very short-term issues that we do not lose sight
of the longer term challenges that face the UK economy and I think
the PSA framework that we have got as a Government really sets
out those longer terms issues that we need to continue to address.
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