Examination of witnesses (Questions 380
TUESDAY 20 MARCH 2001
O'DONNELL and MR
380. It is one of the indications, yes.
(Mr Brown) We would have to look at that.
381. What we have said is that there is a range
of options that one could have.
(Mr Brown) Which one are you suggesting then?
382. I am asking you what your view would be
about Parliament having something similar to that operation in
the United States.
(Mr Brown) As I said, Sir Michael, I find it quite
surprising that you have had an investigation into the role of
the Treasury and you did not think of inviting a Minister to give
evidence, but that is a matter for you, obviously. As far as your
recommendations are concerned, we will reply to your recommendations
but I think you have misunderstood some of the changes that are
taking place in the Treasury. Perhaps if you had had a Minister
before you as you undertook your work you might have seen that
we have devolved a very substantial amount of our work, and rightly
so, including the independence of the Bank of England which I
believe you support.
383. In that case presumably there is a case
for you giving an answer to this report as quickly as possible.
(Mr Brown) Obviously the priority over the last few
weeks has been the completion of the Budget and we will look at
these matters and deal with them as quickly as possible.
384. Within the next week or so?
(Mr Brown) I do not know about the next week, Sir
Michael, but as soon as practicable. We reinforce the view that
I have put to you that there are substantial numbers of things
in this report that appear to be wrongly based because you have
not asked us in advance before you have made your recommendations.
385. That is a matter of judgment and view.
So far as parliamentary accountability is concerned you would,
from what I have just heard you saying, approve of recommendations
in principle which would strengthen parliamentary accountability
of the Treasury?
(Mr Brown) In general terms yes, but obviously you
have now got a range of proposals rather than simply one and we
would have to look at them in detail and give you our views if
that was the right thing to do.
386. Chancellor, I would quite like to return
to the details of the Budget, although it has been an interesting
(Mr Brown) I thought I was here to talk about the
387. You have already answered a number of my
points that I was going to ask on tax credits but I do have a
couple of other questions. Mr Macpherson told us that 3.3 million
have already claimed the children's tax credit. That leaves 700,000
eligible families who have not. Do you regard that as a good take-up
rate or are you concerned about it and what are you going to do
to catch those other 700,000 families?
(Mr Brown) We do not have all the detailed information
about family finances. Our estimate is in the order of four million.
The take-up campaign has been successful in getting quite a lot
of people applying where they previously have not done so. There
is a history in Britain of people applying anyway for these things
at the last minute, so I expect there to be more applications
as we start the financial year. Generally speaking we are introducing
a new benefit. It does take time for people to understand this
tax credit and how it works because it is not simply a benefit;
it is a tax credit and therefore over time I believe that there
will be a greater take-up.
388. A number of MPs like myself have made suggestions
about how to make the arrangements for other tax credits, particularly
the working families tax credit and the children's tax credit,
more flexible. Are you able to confirm what I thought was Mr Macpherson's
extremely helpful statement that you are shortly going to be looking
very concretely at how to do this and how to make it easier to
claim those benefits?
(Mr Brown) Yes indeed. I think the integration of
tax and benefits, once it is understood that a tax credit system
works in such a way that you could receive money as well as pay
money, there will be a greater public understanding there of it
as we move forward. As far as the working families tax credit
is concerned, we are making it easier for people to claim it.
For example, where there is a new birth in the family and where
the numbers of employees become one instead of two, we are making
it easier for people to claim that benefit.
389. What about the eligibility for child care
tax credit, for example, proposals that were maybe too limited
in the range of child care arrangements that were eligible?
(Mr Brown) The numbers of people claiming child care
tax credit from the original scheme under the last government
have risen from something of the order of 40,000 to 50,000 to
125,000, so there has been a substantial increase in take-up,
but obviously, as we said in the Budget documents, we are consulting
on the precise definition of child care, particularly this issue
of whether, if the child is being cared for in your own home,
that could classify as child care for the purposes of the credit.
390. I am very conscious, previously being on
the Employment Select Committee, of the detail of the evaluation
that has gone on with New Deal. What priority are you giving to
evaluation and independent evaluation of how the tax credit systems
are working both in terms of their take-up and of their impact?
(Mr Brown) As we introduce it we have been listening
to what people have said. There has been a 30 per cent or more
increase in the take-up of working families tax credit compared
with family credit. I think that is a significant figure. We are
listening to what people are saying and to what employers are
saying as well, because obviously it is a new system for them.
I believe there are substantial benefits for employers in this
system but we have got to help them make that work. We will listen
to what people say. We have a group of people who are specialists
in issues relating to children which meets regularly, as we do
in relation to issues affecting women, so again we will listen
to the representations that are made.
391. What mechanisms do you have for detailed
evaluation and is any of that going to be conducted independently
(Mr Brown) There are studies being done but perhaps
Mr Macpherson could say a few words about it.
(Mr Macpherson) As I said the other day, the Inland
Revenue have commissioned a really quite far-ranging programme
of evaluation using independent experts. Inevitably it takes time
for the results to come on stream because you have to analyse
precisely what is going on. That requires surveys and so on. The
Government is committed to publishing independent results.
392. Moving on to broad maternity arrangements,
what do you think the net effect of those reforms is going to
be on participation in the labour market, and in particular, as
part of that, do you think it is going to assist where we have
areas of labour shortage and has any evaluation been done on this?
(Mr Brown) I do not know about the independent evaluation
and perhaps Mr Macpherson could mention that. I can give you my
(Mr Macpherson) On the evaluation there has been a
lot of work around the consultation process which has tended to
confirm that the better the maternity pay arrangements the more
likely it is that women will remain in contact with the labour
market and therefore labour market activity will be higher than
if you did not have these arrangements.
(Mr Brown) I would agree with that. We are now seeing
through the participation rates, particularly for lone parents,
that the numbers of people taking up job offers is rising. Since
1997 the numbers have risen from 42 per cent to nearly 50 per
cent. We anticipate these figures rising quite substantially in
the years to come. In fact, we have set an objective of 70 per
cent but that is over a long period of time. I believe the combination
of the working families tax credit and the help for child care
that is available is making it possible for people to have real
choices. You will know, having been on the Employment Committee,
that the new programme, New Deal for Lone Parents, and the choices
are coming in in April on a nationwide basis, and the experience
of the original pilot suggests that there will be quite a marked
take-up in job opportunities.
393. Would you accept that there is an argument
for either tapering the small employer's relief or extending the
limit for that so that you can scotch the suggestion that the
new arrangements will actually deter firms from taking that link?
(Mr Brown) We are happy to look at these things as
we see the effects of the introduction of the measure. I would
say that for a small or medium sized firm trying to attract new
employees for the working families tax credit to be related to
the wage packet, in other words the money that people receive
at the end of the week or month, is an additional incentive that
they can offer employees as they start work.
394. Chancellor, how much Treasury financial
support, cash from central government, will there be next year,
2001-02, for the London Underground?
(Mr Brown) We are in discussions at the moment through
the Department of Trade and Industry's negotiations with the new
395. Trade and Industry?
(Mr Brown) It is DETR, sorry, who are in discussions
at the moment. It would be wrong to give figures that are part
of our discussions.
396. How much was previously planned before
(Mr Brown) What I can say is that the figures that
we have set aside are not going to change and have not changed.
397. The figures you have set aside have not
changed and are not going to change. Can you show me where these
(Mr Brown) These are market sensitive figures. We
are in negotiation that involves private companies at the end
of the line.
398. You publish for the Budget for public spending
in some detail, as you remind us, so somewhere in this vast number
of statistics presumably you have made some arrangements. Is it
a contingency fund? Where would I find it if I were looking through
the Budget Book? You are interested in parliamentary scrutiny.
Where would I find it?
(Mr Brown) If you are interested in getting the best
arrangement for the taxpayer at the end of the day you will respect
the fact that these are market sensitive issues. But of course
the funding for the DETR is in the departmental expenditure limit.
399. So somewhere in the Departmental Expenditure
Limit for the DETR you have made some provision, some money that
is not yet allocated, that you have not identified yet, which
will go to London Underground for next year. Is that right?
(Mr Brown) The allocations are in the end a matter
for the DETR themselves. I know that this Committee has normally
in the past respected issues where there is market sensitivity.
I think you would understand yourself that when you are in negotiation
these matters need to be recognised to be market sensitive.