Examination of Witnesses (Question Numbers
14 DECEMBER 2009
Q73 Chairman: Good afternoon. John, welcome
back. Could you introduce yourself for the shorthand writer, please,
and then we will go along the row?
Mr Whiting: John Whiting, Chartered
Institute of Taxation and Low Incomes Tax Reform Group.
Professor Heald: David Heald,
Professor of Accountancy at the University of Aberdeen.
Mr Chote: Robert Chote of the
Institute for Fiscal Studies.
Mr Harker: David Harker from Citizens
Q74 Chairman: The PBR has promised
support to tackle youth unemployment and ensuring that those aged
over 50 can come back into work. Are there any other groups that
you have found to be particularly hard hit by this recession?
Mr Harker: Certainly the people
who are at risk of repossessions and people with debt problems
and other people on low incomes.
Mr Whiting: I would just observe
from a business point of view a lot of small firms are struggling
with cash flow and to that extent the help that has been given
over spreading tax bills has been quite effective.
Q75 John Thurso: I am not sure who
to ask this question of. I really want to talk about the efficiency
savings. John, would you like to tackle that? The commitments
that the Government has set out in the PBR, which ones stand out
as delivering most benefits and which ones look decidedly flaky?
Mr Whiting: I think my main reaction
to those various efficiency savings is almost to look at it in
terms of greatest risk. Sitting here as a taxman, the main area
that concerns me, perhaps inevitably, is the potential cutbacks
at HM Revenue & Customs, and to a certain extent the Treasury.
Will that make the tax system more difficult to run? In particular,
will it have quite a knock-on for those without advisers who struggle
to get their tax bills right, very often the low-paid who do not
necessarily know exactly what to claim, how to claim the benefits
to which they are entitled? I am sorry, I am answering your question
in a rather different way, Mr Thurso. That is the main concern
that I have with those savings, plus the inevitable one of will
they be delivered.
Q76 John Thurso: Let me ask Professor
Heald, which ones of the efficiency savings do you think have
got real teeth and which ones are paper tigers?
Professor Heald: The major point
I would make is very heavily flagged efficiency programmes from
Gershon and operational efficiency plans, have created a degree
of scepticism about whether efficiency savings are genuine or
not. There is a very serious presentational issue in terms of
saying, "this chunk of money will be saved in this particular
way". My view would be that we have a much more decentralised
public sector than we had 20 or 30 years ago. Essentially, the
best people to make the judgments about where efficiency savings
can be made are actually the people on the ground, so I would
very much emphasise that when we get the next Spending Review,
setting the spending envelopes, letting the people who run the
organisations decide how best to achieve the cost savings that
are required. I am very sceptical about these top-down plans.
Q77 John Thurso: What I am driving
at is the evidence we have had in the NAO Reports where 25% of
claimed savings have been highly dubious and another 50% questionable.
In answer in this Committee, officials have pointed out that these
are not cash savings, they are resource savings, and therefore
it might not actually involve any money. As an old-fashioned businessman
it seems to me that cash is king and if you are dealing with a
deficit it is actually about cash. I am slightly struggling to
understand this very large number of efficiency savings, whether
it is real or a distraction.
Mr Chote: One point to bear in
mind is that it is a significantly lower number than the Government
has claimed in the previous two exercises. Gershon was 26 billion
and they are claiming they are going to have achieved 35 billion
over the period spanned by CSR07, so 12 by the standards of those
two looks relatively modest. That is not to say whether when you
quiz the NAO in the future they are going to be any more confident
that a higher proportion than 25% of these are well-founded than
otherwise. In a sense, it is quite striking how much of the low
hanging fruit the Government thinks has already been picked.
Mr Harker: A few points on this.
One is I think there is significant scope if departments are prepared
to change the way in which services are delivered, and we have
done some quite interesting work with the Cabinet Office and the
Transformation of Government people particularly on accessing
and processing benefit claims, but there is some considerable
doubt about whether there is the will to bring these through in
practice, so what we have seen in other areasDWP, JobCentre
Plushas been a degradation in service levels. So many of
the other things that are designed to improve economic performance,
like getting people back into jobs, are built around personalisation,
helping people as individuals find their way into work, and yet
we are finding shorter and shorter periods of time devoted to
those individuals and their interactions with JobCentre Plus.
There is a lot of things hidden within the PBR and one of the
things I was going to raise later is the 360 million cut to the
Legal Aid budget, much of which is identified as efficiency savings
in the courts system, but there is a fear that if that cannot
be achieved there will be a reduction in eligibility for Legal
Aid with a direct knock-on consequence for citizens who may have
Q78 John Thurso: Would it be fair
to say in any business if you went to the CEO and said, "I
am going to save you large amounts of money but I do not actually
have a plan to achieve it yet", he would chuck it out? Is
that the level of scepticism you have about a great deal of these
so-called efficiency savings?
Mr Harker: I think that is a fair
Mr Whiting: Yes.
Q79 Mr Love: The Government is also
looking to deliver £16 billion worth of asset and property
sales. Is that realistic?
Professor Heald: I have just spent
a month in Australia and the story was running just before I left
and there was a statement to the Commons with one of the Treasury
ministers clarifying what those numbers meant. There is an important
issue about the focus on net borrowing and the focus on net debt.
One of the things which is underplayed in the Pre-Budget and very
much underplayed in the Long-Term Public Finance Report is what
is actually happening to Government net worth. We are obviously
going to have a very difficult period fiscally compared with the
experience of the last 10 years and it is very important that
we do not reduce net borrowing and net debt by ways which build
us future problems. If the public sector has got assets which
it does not use well and it does not need then very clearly timely
disposal of those assets is very sensible. If it is simply a matter
of disposing of assets whatever the market value in the present
circumstances, whether or not you need them in the longer term,
simply to bring the borrowing numbers downthat is undesirable.
Though clearly disposing of surplus assets when the market permits
is a perfectly sensible part of fiscal consolidation, the idea
that one can achieve a great deal by a fire sale of assets is