Select Committee on Treasury First Report

Annex 1: Monitoring of recommendations on selected subjects


Eighth Report, Session 1997-98, The New Fiscal Framework and the Comprehensive Spending Review (HC 403), published 29 July 1998.
(Government reply: Eighth Special Report, Session 1997-98 (HC 855), published 5 November 1998.)

Government Response
Committee Response/Follow-up
Further GovernmentAction
1. Any subsequent substantial public spending announcements be accompanied by a two-day debate. There should be adequate parliamentary time; the length of any debate would depend on the nature of the announcement. This is a matter for the Business Managers to decide at the time after consultation with the Opposition parties through the usual channels.     
2. The Treasury should issue a consultative document on spending plans prior to each rolling forward of departmental expenditure plans, and arrange for Parliamentary time to debate it. A number of departments consulted during their reviews and numerous representations were received on specific issues. But the zero-based nature of the Review precluded the Government from publishing in advance a full draft set of spending plans for 1999-2000 to 2001-02 for comment. In future reviews of spending, the Government will also be open to comments and representations from Parliament and from other interested parties. The next review of spending will coincide with the move to resource-based accounting and budgeting, on which Parliament has been fully consulted through hearings and memoranda. Recommendation reiterated in connection with Spending Review 2000.   
3. It is important for Parliament and the public to have advance notice of when major economic policy statements are to be made. We would, therefore, welcome a timetable from the Government setting out the likely date of the PBR and the Budget and the date in the summer of 2000 when the next all-encompassing public spending statement is due. The Government agrees that it is important for Parliament to have as much advance notice as possible of major economic policy statements. The Pre-Budget Report will be published on 3 November but it is too early to put a date to the next Budget or the next public spending statement. Committee concerned about short notice of date for 2000 Spending Review (9th Report, Session 1999-2000).   
4. The Treasury should publish now, and at the time of future Budget and Spending Statements, a set of different possible outturns for key measures of government borrowing based upon a range of scenarios for the growth of gross domestic product. This will increase transparency and allow a better understanding of the risks to official forecasts of the public finances from different growth outturns Documentation regularly includes information on average errors from past forecasts and the sensitivity of the public finances projections to the path of the economy. [Examples given.]     
5. The Treasury should set out clearly the thinking behind the current level of the reserves, how the decision on their magnitude has been taken, what part is to be played by intra-departmental reserves, and what their size is expected to be. [Details given.]     
6. The Treasury should quantify what is meant by inflation varying "substantially" and state whether if such a deviation occurs the Government does intend to make additional payments to departments. The Treasury has agreed with Departments that it will not consider reviewing the cash figures other than in the event of inflation varying by more than 1.5 per cent cumulatively from the projections in the Comprehensive Spending Review. There is, of course, no presumption that any review would lead to any changes at all in Departmental cash plans.     
7. In the interests of transparency the Treasury should now begin to publish its estimates for unemployment when it publishes new spending plans. In line with the convention adopted by previous governments, the Government does not publish forecasts for unemployment. [Reply also refers to Government's planning assumption on the level of unemployment for purposes of projecting social security expenditure.]     
8. Public Sector Borrowing Requirement to continue to be published alongside the Public Sector Net Borrowing. The Code for Fiscal Stability states that the Financial Statement and Budget Report will continue to include forecasts for the net public sector cash requirement (formerly called the PSBR), as well as net borrowing and the current budget balance.     
9. We seek clarification as to what "balancing the current budget over the cycle" actually means. Chancellor should make clear whether the projected increases for Departmental spending are guaranteed even in the face of a faster than expected rise in social security spending, and if so how they would be funded without breaching the Government's overall spending targets. For the purposes of the fiscal rules, 1997-98 is taken to be the starting point of the economic cycle, as the economy is thought to have been close to its sustainable level in that year. Table 4.7 of the EFSR set out projections for the average surplus on current budget since 1997-98 [further explanation given].The Government does not anticipate that it should be necessary to revisit the Departmental Expenditure Limits before the next review of spending plans in 2000. It will keep Annually Managed Expenditure under regular review alongside tax receipts, and ensure that the fiscal rules are met.     
10. Treasury to give figures for the extent of the saving on fraud, if any, that has already been factored in to the social security spending projections. Also, what assumptions have been made of the impact of the New Deal on the social security figures. Details given.The Government does not publish forecasts of unemployment, and has based public expenditure projections on the basis of level of unemployment in May 1998. A prudent approach does not take credit for reductions in unemployment through the New Deal until they actually arise.     
11. In future presentations of the public finances that the cost of the WFTC be set out separately (rather than within "accounting and other adjustments"). We ask the Treasury to explain the implications for costing WFTC if it is decided to raise the amounts. The Treasury will for future projections of the public finances include an additional line in this table showing the cost of WFTC separately from other income tax credits. [Further details given of accounting treatment of WFTC.]Office for National Statistics responded on treatment of WFTC.     
12. We welcome the publication of separate spending figures for capital and current spending, while recognising that there are problems of definition. As the definition actually used is central to the process, it is essential that it should be readily available, by being published in the fiscal documents. The Treasury has for a number of years included a section in the Financial Statement and Budget Report that sets out the conventions used in presenting the public finances, and would expect to include similar information in future Budget documents. Paragraphs B.62 and B.63 of the March 1998 FSBR set out the main components of capital spending, based on the distinction between current and capital spending used in the national accounts. Further detail of the precise conventions used in the national accounts is published by the Office for National Statistics.     
13. We recommend that the Government undertakes further work on intergenerational and other issues which might in time lead to refinement of the Golden Rule The Government recognises the need for further work on intergenerational and long-term issues. The Treasury is currently collaborating with the National Institute for Economic and Social Research and the Bank of England to produce a set of generational accounts for the UK. The Government is also developing long-term projections, as required by the Code for Fiscal Stability, which will give a further indication of the sustainability of current fiscal policy settings.     
14. Data on the new basis should be made available as far back as the fiscal year 1988-89. Data will be made available during the course of the Autumn/Winter. Treasury staff will be extending the series in CSR Tables A1 and A2 back to the late 1980s, using information from old databases. Once that work is completed, these data will be made available.     
15. For the sake of transparency, in future the Government should refer to annual increases over the previous year rather than a cumulative total. The Government believes that it is right to indicate clearly how much new money was provided in the Comprehensive Spending Review on top of the amounts made available for 1998-99. The full documentation provided in the white paper "Modern Public Services for Britain" made clear both the totals of new money, and the components of those totals in each year. It has been common practice for Governments of all persuasions to refer to figures across more than one year [example given].   Spending Review 2000 press notices refer to increases year-by-year.
16. We recommend that every year the Government publish sales from the National Asset Register and a list of local authority assets that have been sold, how much capital was raised and for what the funds have been used. As a matter of principle it should be relatively easy to be able to see how "dead" assets are turned into "live" ones and whether asset sales are being used to fund current expenditure and so reduce council tax bills. We also recommend that the National Asset Register, which we warmly welcome, should be updated at least every two years and should be broken down into local geographical areas such as local authority areas or postcode areas. In response to a recommendation from the Committee during the last Parliament, the Government has already started publishing aggregate figures both for projected and actual asset sales. In addition, it has passed a breakdown of asset sales by department for the years up to 1996-97 to the National Audit Office. In response to the Committee's new recommendation, the Government agrees to publish in future such a retrospective breakdown of sales by department. It will also provide a commentary on some of the larger sales. The Government will look into the practicality and cost-efficiency of publishing future editions of the National Asset Register, including a breakdown of the results into local geographical areas.     
17. We recommend that the figures on the Private Finance Initiative (PFI) are updated twice a year, at the time of the Budget and for the Pre-Budget Report. We would also welcome details of the estimated payments each department is expected to pay under PFI contracts over the next 25 years, and corresponding figures for exposure to capital liabilities. Statistics showing outturn and anticipated investment in PFI projects are collected and published twice a year; for the Budget Financial Statement and Budget Report, and then around the end of September, thereby providing Parliament and the public with regular six-monthly reports showing the latest position. Information showing the estimated annual payments departments are expecting to make over the next 30 years is collected at the same six-month intervals, and published on an aggregated basis (in order to protect commercial confidentiality in those cases where departments have only a small number of such commitments). Committee reported on PFI in Fourth Report, 1999-2000.   
18. If the Public Service Agreements have not already been published by the time the Treasury responds to this report, we will expect the Treasury response either to include the date or to give firm publication dates for each agreement. We would expect the publication dates to be before the start of the next financial year. The Government will publish the public service agreements for departments later this year. Committee reported on PSAs in Seventh Report, Session 1998-99. PSAs published December 1998.
19. To enable external scrutiny to take place, not least by select committees, regular assessments of performance against the public service agreements—which need not be in the form of Cabinet papers—must be put in the public domain. We recommend the Treasury give an undertaking to publish this information and set out the mechanism by which this will be done. The Government is giving further consideration to this proposal.   Assessments of performance against PSAs published in departmental annual reports.
20. The Treasury should set out which Minister is ultimately responsible for the expenditure relating to each cross-departmental initiative announced to date and in which vote the relevant expenditure will appear. Each of the cross-departmental initiatives will have their own PSA in which Ministers with lead responsibility will be identified.     

Ninth Report, Session 1999-2000, Spending Review 2000 (HC 485), published 3 August 2000.
(Government Reply: Eighth Special Report, Session 1999-2000 (HC 941), published 2 November 2000.)

Government Response
Committee Response/Follow-up
Further GovernmentAction
1. There should be a consultative process on the departmental totals in the spending review and on the division of expenditure within departments; several weeks' notice of the date of the statement is important. Government took account of numerous representations. A number of outsiders took part in the cross cutting reviews. PBR said that statement would be by end of July 2000.     
2. Treasury to supply breakdown by department of non-cash elements (depreciation, cost of capital and provisions) in Annually Managed Expenditure. Tables provided in September and printed with Government Reply.     
3. Figures required which allow comparison between the two spending reviews, after taking into account any changes in classification. Comparison possible with CSR figures "as they stood at Budget 2000".     
4. Treasury to publish timetable by which PSAs will be used to measure performance of local government bodies. Timetable for pilot authorities published by DETR in July. Timetable of other local authorities will be published if decision is taken in 2001 to roll out local PSAs more widely.     
5. Information should be published enabling Committee and others to judge to what extent the establishment of PSAs has influenced the process of setting expenditure levels. New PSA targets were integral part of spending review; output information was used to judge value for money of marginal spending increases in particular areas. Allocations of extra resources are linked to commitments to challenging targets.     
6. NAO and Audit Commission should audit performance of public services against established PSA targets. Will wait for Lord Sharman's review of Audit and Accountability in the 21st Century before deciding how to proceed.     

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