Examination of Witnesses (Question Numbers
MP, MR DAVE
30 MARCH 2010
Q240 John Thurso: We have repeatedly
had conversations like this at these hearings and pressed for
information relating to efficiency to be published in one document.
This conversation shows why that would be extremely helpful. When
will the Treasury do that for us?
Mr Darling: I have absolutely
no objection in principle. I would hesitate to say that we are
going to be able to do it before the end of this Parliament.
Q241 John Thurso: That would be very
unwise, I suspect.
Mr Darling: But, yes, it is something
that can easily be done.
Q242 John Thurso: Is not the really
efficiency gain with local government because you have just devolved
it and you know that they have got to deliver it because you just
will not give them their money?
Mr Darling: I beg your pardon?
Q243 John Thurso: With local government,
is that not the cut you can bank because you have just devolved
it? They have to do it, they have got no choice.
Mr Darling: What, just because
you say, "Here's your budget. Get on with it"?
Q244 John Thurso: Exactly.
Mr Darling: Well, local government
is autonomous. All we do is to fix how much it is getting and
it then has to proceed accordingly, and that is how it should
be. Local government has to decide what its priorities are, like
anybody else would.
Q245 Mr Brady: Chancellor, you have
told us that efficiency savings of £15-20 billion in the
NHS by 2013-14 are plausible, but the year before that you are
projecting efficiency savings in the NHS of £4.35 billion.
How is it plausible to move from £4 billion to £20 billion
in one year?
Mr Darling: We have outlined the
total that they need to find each year and each year they add
to it, so it is going up, if you like, in instalments so that
it reaches by the end of the period the £15 billion.
Q246 Mr Brady: But it is a very big
jump in one year, is it not, from £4 billion to £15-20
Mr Hudson: There will be more
progress by 2012-13 towards the overall £15-20 billion. The
£4.3 billion savings are the NHS's component of what are
loosely known as the `Smarter Government savings', so those focusing
on operational efficiency. I expect that they will be further
down the track on the wider savings also and, as we stressed earlier,
recyclable into patient care where these are savings at the front
line, they will be further down the track, so it is not such a
Q247 Mr Brady: The £4.3 billion
in 2012-13 is an underestimate?
Mr Bowman: The £4.3 billion
by 2012-13 is the figure that the NHS is contributing towards
the £11 billion Smarter Government savings. On top of that,
they will be making further progress towards the £15-20 billion
overall savings which are in the Budget document.
Q248 Mr Brady: Chancellor, just to
come back to you and your initial response, we had some confusion
with officials yesterday as to whether this £15-20 billion
was an annual figure that would be achieved recurrently.
Mr Darling: We get there over
a period, but it is an annual figure.
Q249 Mr Brady: So from 2013-14 you
are expecting that £15-20 billion to be achieved each and
Mr Darling: That is right.
Q250 Mr Brady: We have been talking
about the public sector efficiency savings. Turning to your planned
changes in tax relief for pension contributions, how can you possibly
justify shifting a compliance cost of £1 billion on to business?
Mr Darling: As you know my objective
was to try and redress the imbalance, which I think had arisen,
where so much tax relief was going to so few people at the top.
We looked at various ways of doing it and the proposal that we
have made at the moment is the one which we think is the best
one that can work. We have consulted with people for just about
a year now on it. I appreciate that, inevitably, in a scheme like
this there are going to be some compliance costs, but unfortunately
the alternative, which has been put forward by some people in
the industry, as you probably know, which is to reduce the relief
to a far, far wider field of people than we are proposing, is
one that I am not prepared to accept.
Q251 Mr Brady: You say "some
compliance costs", but, just to put the £1 billion into
context, judging by your own Red Book figures, the £1 billion
would pay unemployment benefit for another 200,000 unemployed
people, so it is pretty significant costs.
Mr Darling: Except that the saving
to us of changing the pensions tax relief is about £3.5 billion.
Mr Bowman: And it is a one-off
Mr Darling: It is a one-off cost
and the £3.5 billion is a continuing saving, so that is why
we did it. If there were another way of achieving the same end,
especially now with the top rate of tax going up to 50%, then
I would have happily looked at it. However, the suggestion which
was put to me as an alternative would mean that it would affect
people right down the income scale to about £40,000, which
I just do not want to do and I do not think anyone around this
table, or I presume no-one around this table would want to do.
Q252 Mr Brady: I think, to be more
precise, your projection is that the £900 million is a one-off
cost and the £115 million will be an annual recurring cost,
and obviously that could be higher. Have you not actually managed
to alight on an incredibly complicated approach which is going
to cause massive difficulties for businesses in running their
Mr Darling: There is a cost whenever
you put any complication into it, there is no doubt about that,
but what I wanted to do was to end, what appears to me to be,
an absurd situation where so much of the benefit was going to
so few people. When you argue with people, including the profession,
they say, "Yes, that is something of a problem", and
then say, "Well, is there a better way of doing it?"
Well, the only better way they could come up with is an alternative
which would be easier to administer, but would start hitting people
on, what I would call, pretty moderate incomes.
Q253 Mr Brady: Edward Troup yesterday
told me that the reason for not reducing the cap from £255,000
a year was that the senior teacher, the senior hospital nurse
who gets a big promotion and the fire officer would be hit. Was
that the accurate position?
Mr Darling: Yes, it is. When you
are making any changes like this you try and anticipate who might
or might not be affected. As you know, legislation will be in
this year's Finance Bill and we shall see how far we proceed with
that. The principle for me is making sure that we end the situation
with so much benefit going to a few people at the top. Of course,
if there are other ways of doing it, then I will look at it, but
not if the cost of that is affecting people who are earning pretty
Q254 Mr Brady: How many teachers,
nurses and fire officers are currently coming up against that
Mr Darling: I have not got a figure,
but it will not be that many.
Mr Bowman: The point here is that,
in order to raise a similar amount of money from reducing the
annual allowance, you would have to reduce the annual allowance
very, very substantially, and it would obviously depend on the
individual circumstances of the people involved.
Q255 Mr Brady: So the reason is to
raise money and it is not to change the distribution of the benefit?
Mr Bowman: Well, the alternatives
which have been put forward have been to raise a similar amount
of money as the Government's proposal.
Mr Darling: I make no bones about
it, the reason that I made changes for people on top earnings
is because we do need to bring in more tax to get the borrowing
down, and certainly, until yesterday, I thought this was something
where there was pretty much all-party agreement.
Q256 Mr Brady: Are you not concerned,
Chancellor, by taking the approach you have, that you are actually
going to hasten the demise of company pension schemes altogether?
Mr Darling: I do not think this
proposal will do that because there are other factors around,
as I think all of us are aware, which affected pension schemes,
but actually this proposal affects a comparatively small number
of people. I have heard it said that, if it affects the archetypal
company director or boardroom, therefore, assume that it is affecting
those less fortunate than themselves, but I do not necessarily
think that is the inevitable conclusion.
Q257 Mr Brady: You say it affects
a very small number of people, and that is surely true, but it
affects all the schemes that have to do the work, the preparation
and introduce new systems and, therefore, is a disproportionate
hit, cost and bureaucracy.
Mr Darling: I accept that it does
affect schemes, but I just find it difficult to justify a situation
now when people are pulling in their belts up and down the country
and most people are not in the fortunate position of earning very
high wages, £150,000, over £130,000 or whatever. If
you were sitting down and inventing a scheme today, you would
not invent a scheme where so much of the benefit ends up going
to so few people, and I think you and I could probably agree on
that. The next step is a more difficult one and, okay, how do
you fix it and how do you fix it in a way that is least onerous?
Now, if there was a better way of doing it which someone came
up with, of course I would have looked at it, but the problem,
as Mark Bowman has just said, is that, in order to do it in the
way that has been suggested, you start taking away tax relief
from people way down the income scale, and that, I think, would
be very, very difficult to justify.
Q258 Mr Brady: But you expect to
keep the £255,000 limit increasing to £265,000, I think,
Mr Darling: We have not made any
proposal to change that.
Q259 Nick Ainger: Chancellor, you
said earlier that the private sector investment was muted in the
past year. You have brought forward the proposal for an annual
investment allowance doubling to £100,000 but, if you look
on page 42 at the level of lending, the net lending to business
by the Lloyds Group and RBS, they are very, very small figures,
are they not?
Mr Darling: Yes, the net lending
figures are because what happened last year, and contrary to most
people's expectations, is an awful lot of people repaid their
loans, overdrafts and so on, so for everything the two banks were
putting out, it was being eclipsed by what was coming back in.
In gross terms they met their targets, but in net terms they did
not. This year, for the sake of completeness, we still need to
show the net figure because that is important, but in gross terms
both those banks are obligated to lend over £90 billion with
half of it, I think, going to SMEs.