Administration and expenditure of the Chancellor's departments, 2008-09 - Treasury Contents

Examination of Witnesses (Questions 460 - 479)



  Q460  Ms Keeble: The total number of families living in poverty.

  Mr Timms: The figure that we have published, the half million figure, does take account of all the changes that had been put into effect up until the point to which those figures applied. The projections are not from the Government, they are from the Institute of Fiscal Studies.

  Q461  Ms Keeble: The note we have says that the Government does not hold quality assured data on the family breakdown of LHA customers. You do not have the data, is that right?

  Mr Timms: I think what the note says about that is correct. But that is a slightly different issue from the child poverty figures, where the half million does take account of all the changes there have been up to the point where that was measured. The next set of figures, equally, will take account of all the changes—

  Q462  Ms Keeble: It will take account of the changes to Local Housing Allowance and the fact that quite a lot of poor families are facing a claw-back in income because of these rule changes, which, as you know, a lot of people are very concerned about.

  Mr Timms: Yes, it certainly will. The data takes account of all people's sources of income.

  Q463  Ms Keeble: On the childcare element of the Tax Credit, which is specifically your responsibility, are you surprised at the low average weekly rates of money provided? Do they not indicate that they are being claimed for part-time work and quite minor part-time work and that people are not taking it up in quite the way that was perhaps originally intended?

  Mr Timms: I must say I had not been struck by that as a surprise. We have seen an encouraging increase in the number of people taking up the childcare element of the Tax Credit.

  Q464  Ms Keeble: Two hundred thousand.

  Mr Timms: I am sure there is scope to do better still. Certainly many parents will be using that support to help them manage childcare alongside a part-time job; others will do so for full-time work. It is clear that part-time work is a very important contribution to the progress we have made on child poverty. There are some parts of the country where part-time work is harder to get than others and that is a reason why we have had some difficulties in those parts of the country. But I have not been surprised myself by those figures.

  Q465  Ms Keeble: I want to press you on that. It surprises me, because certainly in my own constituency somebody was paying £500 a month for three days childcare a week, and your average claims here are £68.69. That would barely pay for a bit over half of a part-time place, let alone anywhere near somebody being able to go out to full-time work. What studies are being done of all of this data and of the take-up in what is happening to women?

  Mr Timms: We have looked very carefully at the take-up point and we are working to increase take-up and we are looking as well at whether there are more effective ways in which childcare provision can be supported.

  Q466  Ms Keeble: Material deprivation indicators are another of the measures of poverty. Are you concerned, since again it was your specific responsibility in the Bill, that the very excellent indicators of material deprivation are not enforceable and are not costed?

  Mr Timms: I agree that the indicators of material deprivation in the Bill are excellent. It is worth making the point that they are the result of quite a lot of academic work and reflection—I cannot claim credit for them myself. Their role is to measure material deprivation, so they are not things that are for enforcement, they are for telling us what is happening in the lives of children.

  Q467  Ms Keeble: Is it not of concern that you have an indicator which you measure and for which you have graphs but it is reliant on things which are not costed and which cannot be enforced? Does it not make that aspect of the Government's commitment on child poverty a wish rather than any firm commitment or anything that is achievable?

  Mr Timms: The indicators and the measurements which go with them are informing us about the lives of children in the UK. The commitment in the Bill is that the proportion of children who suffer material deprivation and are of relatively low income should be less than 5% by 2020. It is a measuring tool. That is the purpose of those indicators. We are not saying that people want to abolish the position where anyone on any one of the 21 indicators is below a certain level. That is not the nature of them. It is about getting a view across the board of the level of material deprivation amongst children in the UK and a commitment to ensure that that level is very sharply reduced between now and 2020.

  Q468  Ms Keeble: I want to ask one more question about the Asset Protection Scheme, a completely different subject. What information do you have about the Treasury's calculations of potential losses and when you might expect to see them start to crystallise? There has been much speculation about it and it is a key factor in terms of the cost of these special measures.

  Sarah McCarthy-Fry: I think it is too early to say. We have put the additional cost in with the excess vote. We do anticipate that we are going to get as much back as we can. It is too early to say when we expect or even if we expect any of this to crystallise.

  Q469  Ms Keeble: But it has been too early to say, I have to say, for quite a long time. There must be some sort of scoping out of what the future is likely to look like, given that if the costs do start to crystallise then they could be quite substantial.

  Sarah McCarthy-Fry: It is an ongoing situation and I do think it is too early to give any timetable or exact figures at this stage.

  Q470  Mr Brady: The Permanent Secretary told us that UK taxation is far too reliant on receipts from the financial sector and the housing market. He said that there are important lessons to be learned for the future. What lessons for the future have you learned?

  Mr Timms: I think he said that we have to look for tax where we can find it (or an expression of that kind). As you know, the key commitment that we have made on this is to reduce the deficit by half over the next four years. We have made a number of announcements on tax measures which will contribute to that target already. The Chancellor no doubt will comment on this again when he stands up to address the House in the Pre-Budget Report tomorrow. One area that I would highlight is the work we have been doing on addressing both avoidance and evasion and making sure that the tax that is due is collected in. We have taken a number of steps to close loopholes and to bring in tax that otherwise would have been lost, and I think that is going to be very important work over the next four years while we seek to halve the deficit.

  Q471  Mr Brady: Would you envisage the proportion of the tax take coming from financial services and the housing market being less during a recovery than it is at the moment or than it has been historically?

  Mr Timms: That is going to depend in particular on the level of profitability in the financial sector, and at the moment, of course, things look rather more buoyant on that front than they did a year ago, or, indeed, rather less than a year ago. But it is the amount of corporation tax paid by those institutions that will be the key determinant of that.

  Q472  Mr Brady: You are hoping that we will be just as reliant on tax from financial services in the future as we have been in the past.

  Mr Timms: I suspect that the UK economy as a whole is not going to be able to depend on growth in the financial sector to the extent that we have been able to over the last decade. Of course that is the strategy that Lord Mandelson has just set out, the New Industry, New Jobs strategy which involves, as the CBI have been calling for, for government to identify parts of the economy where we can look forward to higher growth (like, for example, the digital sector, for which I also bear ministerial responsibility) and the Government then making sure that we have the wherewithal in place for those sectors to thrive and do well to contribute tax revenues and contribute employment as well.

  Q473  Mr Brady: To turn to the temporary VAT reduction, do you regret the decision to end it on 1 January?

  Mr Timms: No. The key thing with the change—and by the way I do believe that the VAT reduction has been a very significant contribution to limiting the damage that the worldwide downturn has inflicted on the UK economy—was to be absolutely certain at the outset of when the rate was going to go back up, so that people had confidence to plan for that change. It is also important in order to maximise the stimulus benefit of the announcement, because clearly people have an incentive at the moment to make purchases now and in the early few days after Christmas, ahead of the rate going up. The key thing was to say when it was going to happen and to stick to it, and not to change it. That is what we have done.

  Q474  Mr Brady: Is not 1 January the most inconvenient date possible for many businesses?

  Mr Timms: That point has been made to me by retailers. I understand the difficulties that they might face, but talking to the British Retail Consortium, their overriding concern was that they should have plenty of time to plan for the change. They would have preferred that it was not at the beginning of the January sales but, more than that, they wanted to be absolutely sure when it was going to be.

  Q475  Mr Brady: What other dates did you consider?

  Mr Timms: I do not think we looked at any specific alternative date. We did consider whether it would be right to have a different date, either an earlier date or a later date, but there was not any particular date that we considered, and of course if the date had been deferred at all then there would have been a significant impact. The cost of a month's delay, for example, is of the order of £1 billion Given the importance of consolidating the public finances, change along those line was not attractive.

  Q476  Mr Brady: Do you believe there has been the stimulus effect that was intended at the outset?

  Mr Timms: Yes. Clearly this is something that the economists are going to be looking at for some time, mulling over the data as it emerges, but I think the evidence is clear. It is one of the reasons, certainly, compared with previous recessions, why we have seen retail sales have been very buoyant. The economy has supported a lot of jobs and meant that the expectations that people had about reduced employment or repossessions and so on have not been fulfilled. I think the VAT reduction has been a very important and effective part of the stimulus.

  Q477  John Mann: My questions are about HMRC. Are you proud of your management of HMRC?

  Mr Timms: I am proud of a lot that HMRC has achieved.

  Q478  John Mann: Are you proud of your people management?

  Mr Timms: HMRC has achieved an extraordinary amount in a relatively short time under enormous pressure. It has, for example, delivered a very significant reduction in its workforce from, in full-time equivalent terms, 98,000 to 78,000 between April 2004 and October 2009, so just over five years. That is a dramatic change.

  Q479  John Mann: Are you proud of your people management?

  Mr Timms: It is undoubtedly the case—and I imagine this is what you are referring to—

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