Examination ofWitnesses (Question Numbers
TIMMS MP, ANGELA
EAGLE MP AND
26 NOVEMBER 2008
Q500 Mr Love: I certainly accept
that. However, as a minister who will no doubt be better aware
than I am, there are certain PSA targets which are much more firmly
in the public mind than others. The ones you quoted from HMRC
I do not expect the ordinary person in the street would be able
to quote them but quite a lot of people can quote the halving
of child poverty by 2010 and its eradication by 2020. While I
accept the figures that you have given, and they were given at
the time of the Budget, that we would reduce it by half a million
as result of the measures taken in the Budget, we are still a
long way from reducing it by half likely in 2010. How confident
are you that in the changed economic circumstances it will be
possible for us to even approach that target?
Mr Timms: It is certainly true
that there is more to be done to achieve the 2010 target. As you
know, and the Chancellor mentioned this in the Pre-Budget Report
speech, we are committed to introducing legislation for the 2020
target and we will be consulting on the form of that legislation
and the content of it over the coming months. As I said earlier,
I do not think it is completely clear what, as yet, the effects
of the changes in the economy are going to be on the proportion
of children growing up below 60% of median income. We may see
an impact on median income because of what is happening in the
economy at the moment. At this stage it is a little too early
to say precisely what the effects on the child poverty statistics
measured in terms of relative income are going to be.
Q501 Mr Love: This is a rather unfair
question because it is a London member asking another London member
but in terms of regional inequality the actual target we are setting
ourselves is about growth rates going forward and the differential
in growth rates for different regions. Whether or not London and
the South East have much greater impact in terms of the current
recession we are going through, it is still very likely that they
will grow at a faster rate than other regions of the country.
We have had little real impact in the level of growth of different
regions. I know it is unequal and an unreasonable question but
how do we improve the growth rates in some of our lower growing
regions in the country?
Mr Timms: As you know, we have
had an ambitious, and I would argue, effective programme of regional
development ever since we set up the RDAs a decade or so ago.
We have seen very substantial benefits to regional economies from
the measures we have put in place. Just on the point of London,
I would just make the point that the growth of the London economy
has, as you have indicated, been very healthy but London employment,
and the employment rate amongst Londoners, has not moved very
much. There is more work there still to be done but the framework
of the regional policy that we have put in place has been a sound
one and an effective one.
Angela Eagle: I wanted to point
out how we are taking that forwards with some of the changes with
multi-area agreements, with sub-regional developments, our working
with local authorities, asking them to take a duty of taking care
of economic development in their areas more explicitly on the
institutional side. On the other side, the Government is working
to try to assist and encourage greater levels of entrepreneurship
in regions. Some of the measures we took in the Budget last year,
for example particularly focusing on female entrepreneurship,
if we could have women creating businesses at the same percentage
as they do in America we would have nearly a million more small
and medium-sized enterprises. There are a range of interventions
that the Government is making explicitly with developing the focus
on economic development at both regional and local level that
we hope will produce a positive result.
Q502 Mr Love: Ian, you can respond
but I will add something to it. A couple of years ago we lost
European structural funding which had quite a heavy impact in
some of the regions. Is there a need for the Government, because
of the shift to the East effectively when all the new countries
came in, to look at that again?
Ian Pearson: We still do have
European structural funding. There is European regional development
funding available in the regions. It is right, as you say, to
point out that with the accession countries a lot of the structural
funds that have been allocated by the European Union have gone
in that direction but there is still a programme, during this
current financial perspective to 2013, from the European Union.
I do not want to stray too far from the brief of the Committee
this morning but in terms of direct response, if you look at Regional
Development Agencies and the regional level of government I want
to offer a couple of reflections. The RDAs are doing a good job.
Ten years into existence they have found their feet. There were
issues early on with RDAs but now they are making an effective
contribution at a regional level. A lot of them, like my own West
Midlands region, have set targets about closing the output gap
with the rest of the UK, in particular the South East as you mentioned.
It is important to recognise that a lot of what we do as a Government
is to pass legislation and to have budgets that get implemented
at a regional and sub-regional level. I do not think the level
of scrutiny, particularly in terms of performance management,
at a regional level has been strong ever when it comes to government.
It is one of the reasons I think regional ministers and regional
select committees are an important innovation. I find it very
surprising that some people do not really accept that. It is at
a regional and sub-regional level that a lot of this money that
comes from government does get spent and it should be accountable.
I would hope that Select Committees like this would want to strongly
support regional ministers and regional Select Committees as a
way of ensuring that taxpayers' money is being spent in the best
Mr Love: I will say Amen to that!
Q503 Chairman: Mr Timms, the Revenue
and Customs Annual Report disclosed that they had lost a quantity
of Class A drugs held at their own lock-up. Have you found them
Mr Timms: Not that I know of.
Q504 Chairman: Can you tell us how
much went missing? This is the loss at Coventry.
Mr Timms: I do not think that
is a figure I have in front of me.
Q505 Chairman: It is an entire paragraph
in the Report so it sounds like it was a substantial amount of
Class A drugs. Are you not aware of that?
Mr Timms: I am aware of the paragraph
in the Report but I am not aware of the quantity or the value.
I am sure that is something we can provide you with.
Q506 Chairman: This was last Christmas.
What have you done since then to ensure that when HMRC seize drugs
they remain secure?
Mr Timms: HMRC will certainly
have been seeking to learn the lessons from that episode. I do
not have in front of me the specific measures that they have taken
in response to that but I agree with you that it is a serious
loss, it should not have happened and steps I know will have been
taken to make sure it does not happen again.
Q507 Chairman: You understand why
we are asking you. You are the minister responsible for HMRC and
it seemed quite a serious matter that drugs go missing in its
Mr Timms: I agree with you.
Q508 Chairman: Perhaps you could
let us have a note as to what has been done to improve security
Mr Timms: I would be happy to
Q509 Nick Ainger: We were told when we
interviewed HMRC officials that in terms of the head count reduction
in HMRC they were 3,000 ahead of target. You referred, in your
opening remarks, to the unprecedented situation that we face globally
and the downturn and its severity and so on. Are you going to
review the head count reduction, as an employer of a substantial
number of people, bearing in mind the unprecedented situation
that we face?
Mr Timms: If you mean are we going
to back off the head count reduction or indeed the efficiency
measures more generally, the answer to that is no. It is very
important that we maximise efficiency across Government, including
in HMRC. Indeed, of course, as you will have heard the Chancellor
say earlier this week, across Government we want to look for additional
efficiency savings to those that have already been announced and
committed to by the end of the current spending review period.
We have not worked out what that is going to mean for individual
departments but I certainly do not think there will be the opportunity,
and neither should there be, to reduce the commitment to improving
efficiency in HMRC.
Q510 Nick Ainger: Nicholas Macpherson
told us that the Treasury was operating at its limits and that
is before there is the next tranche of job losses. Are you satisfied
that, in fact, the Treasury can maintain its efficiency with these
additional job losses?
Mr Timms: Yes, I believe it can.
It is certainly a very substantial managerial challenge to undertake
the level of efficiency reduction that is required while maintaining
standards. Actually there are examples where through genuinely
transforming the organisation, whether it is in HMRC or other
parts of Government, it is possible both to achieve these efficiency
goals, very demanding as they are, whilst also improving performance
and raising the levels of performance. It is a very demanding
challenge but I am confident that it will be achieved. There are
certainly examples in HMRC where it is already, and examples elsewhere
in Government as well, and I am confident we are going to be able
to achieve that.
Q511 Nick Ainger: In the 2004 Spending
Review Final Report on the efficiency programme published this
month, in relation to relocations under the Lyons Efficiency Programme,
the Chancellor's department delivered only 2,987 relocations against
their target of 5,050. These are relocations out of London into
the regions of Britain. Your head count reduction programme and
the HMRC tax office closure programme will actually reduce even
further the number of jobs in the regions of Britain. How are
you going to meet that target?
Mr Timms: First of all, the target
that was set in Spending Review 2004 for HMRC, including the Valuation
Office Agency, was 1,950. The relocation savings actually achieved
was 2,492, so HMRC exceeded the Lyons relocation target set for
it in the 2004 Spending Review. The target for 2010 is 5,050 and
that will be achieved as well.
Q512 Nick Ainger: Looking at the
figures in the report, page 11, it does say reported relocations
by June 2008 just under 3,000. The target is a further 2,050 ahead
of that. You have until the end of 2009 to achieve that so that
is a very substantial number of relocations to be achieved in
Mr Timms: I am confident that
it will be achieved. As I have said, in terms of the target set
for March 2008 HMRC substantially overachieved by a margin of
28% and I am confident that the 2010 target will be achieved as
Q513 Nick Ainger: Can we turn to
staff morale because it is linked with these job losses particularly
in HMRC. The staff survey shows that 70% of staff are dissatisfied
with HMRC. What are you going to do to improve that performance?
Mr Timms: That is a very fair
point. There are odd pieces of data in the survey that I could
point to which give a slightly rosier picture than the figure
you have given but your characterisation of the overall picture
on morale is a fair one. In my view one of the major difficulties
that staff have to contend with has been the uncertainty over
the workplace re-organisation. As you know, HMRC is committed
to concluding the exercise by the end of this year or making the
announcements about the final configuration of the HMRC estate
by the end of this year. I think when there is certainty everywhere
then that will be a very important milestone to pass from which
it will be possible to rebuild staff morale. Other changes have
happened as well. There is a new chief executive, a new chairman
in place, and I think the organisation is now in a position to
move forward. I am confident that one of the effects of that will
be to improve morale but there is no getting away from the fact
that at the moment the picture is a rather unhappy one as you
rightly pointed out.
Q514 Nick Ainger: Have you recently
met with the trade unions, PCS in particular who represent the
vast majority of staff in HMRC?
Mr Timms: No, I have not.
Q515 Nick Ainger: Do you think it
would be a good idea to start with that?
Mr Timms: There are very regular
discussions between PCS and the executives of HMRC. I have only
been in this role for a few weeks and I have not yet had that
opportunity but I think it is extremely important that HMRC continues
to work very closely with its trade unions and I am certain that
under its new leadership, as with its old, it will do so.
Q516 Nick Ainger: In terms of the
overall efficiency of HMRC, is not one of the problems that you
face in the future not only tackling this morale problem, which
obviously affects people's performance and maybe sickness levels
and all that sort of the thing, but also the fact it would appear
that many of the staff in the small tax offices are the most experienced
staff that you have and they are going to be going. The quality
of your overall workforce is actually reducing at a time when
you want to see it radically improving. Is that not a structural
problem that you have?
Mr Timms: It is certainly true
we have a large number of highly experienced and indeed expert
staff in HMRC. Once the final decisions on the HMRC estate are
announced then HMRC will work with all of the staff in the offices
which are going to close to try and find alternative locations
to which they are happy to move. There will be support for additional
transport costs, and so on, and there will be a very careful interview
with every single member of staff affected. I hope the consequence
of that will be that the expert staff you are referring to will
continue to work in the organisation. No doubt some will choose
that they do not wish to and that will need to be addressed by
HMRC. As you are relating to our earlier conversation, there is
a continuing need to reduce overall numbers further and I think
that is something we are going to be able to manage successfully.
I am very optimistic that staff morale will improve quite sharply
once there is certainty about the future of this configuration.
Q517 Mr Brady: Are there any management
or technical implications that arise for HMRC from the temporary
Mr Timms: There certainly have
been some very short-term implications in that some hundreds of
staff have been trained up to respond to questions from businesses
in this period between the announcement and the implementation
of the VAT fall next week and some of those staff will continue
to be working on those phone lines after implementation of the
reduction on Monday. In terms of a larger scale impact, no, I
do not anticipate a substantial effect.
Q518 Jim Cousins: We have just nationalised
a good chunk of the commanding heights of the economy, and the
commanding heights of the economy have responded to this by blowing
a polite raspberry and putting up "business as usual"
signs. Do you think the Treasury has the firepower in terms of
numbers, expertise and experience to actually shift that?
Mr Timms: This may be something
that Ian will want to comment on but I just make the point that,
as you know, we have committed to regular reporting on the extent
to which banks are meeting the commitment that they have signed
up to: to maintain lending to households and small businesses.
Alongside that we have made a number of announcements in the PBR
this week specifically around supporting people looking to buy
homes and small businesses.
Ian Pearson: What I want to say
in response to you is we are very aware as a Government of the
concerns that are out there and that are very clearly expressed
by industry about some of the lending practices of the banks at
the moment and that is why we have had numerous meetings. The
Chancellor and Peter Mandelson have been involved in talking to
the banks about their lending practices for the future. I think
it is fair to say when it comes to the banking recapitalisation
issues this is a process that is still going on. There has been
clear conditionality attached to those banks which are taking
advantage of the recapitalisation scheme that we have introduced
as a Government and we do expect banks to continue to make available
competitively priced lending both to the mortgage market and to
small businesses. You will be aware of the announcements we made
in the PBR, which we are not discussing this morning, which take
our policy further in this area. We will continue to want to hold
bank's feet to the fire to make sure they do the right thing by
small businesses and by people who want mortgages for the future.
Q519 Jim Cousins: Talking about holding
people's feet to the fire is a very dramatic phrase. Personally
speaking I am very New Labour so the last thing I would want to
see are bodies swinging from lamp posts or feet being held to
the fire, although in some respects the medieval Catholic Church
is an inspiration! That is a very dramatic phrase but the reality
stands in great contrast to that. The reality is nothing has changed
and the drama of your language I am afraid does not mitigate the
fact that nothing has changed. The conditionality has not been
worked to. You have conceded yourself this morning that the performance
indicators have not yet been worked out. Nothing has changed and
the drama of the language only emphasises that point.
Ian Pearson: I do not accept that
nothing has changed. When you see some of the recent announcements
only this week about RBS and how they are acting with regard to
their small business clients, I think that shows things have changed.
Also let me be very clear I do not think it is acceptable for
bank chief executives to be saying one thing to Peter Mandelson,
Alastair Darling and indeed the Prime Minister and then the lending
practices down the line at regional and local level show no recognition
of what those chief executives are saying to us. We cannot, as
a Government, accept a situation where we are being told one thing
and something completely different is happening. I think some
of this is a communication issue within the banking system at
the moment. We do need to make sure that we have responsive responsible
bank lending and that is a key issue for us. We will continue
to want to hold the banks accountable particularly those that,
as I say, have taken advantage of the recapitalisation scheme
to make sure that they continue to lend to small businesses at
what is a very difficult time.
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