Select Committee on Treasury First Report


Letter and Memorandum from HM Treasury


  I enclose the paper you requested in your letter of 3 August giving details of progress on recommendations made by the Treasury Committee.

  Please let me know if there is anything more you need.

31 October 2000



The terms of appointment of external MPC members should be increased

  The Government believes that a period of appointment of three years strikes the right balance between accountability and independence in the appointment of external MPC members. Each external member is eligible for re-appointment, so that the possibility of individuals serving as members of the MPC for longer periods of time is not ruled out.

The non-executive members of the reconstituted Court are to be appointed for shorter, three-year, terms. We favour establishing the status quo ie a four-year term of appointment for members of the Court.

  The Government remains of the view that three years is the appropriate term of office for non-executive Court members. This is in line with the Governance Principles of the Hampel Committee which state that, "All directors should submit themselves for re-election at regular intervals and at least every three years". Non-executive members of the Court will be eligible for appointment for two or more terms.


The Committee believes that it is time to bring the needs assessment up to date; this would help to show whether the Barnett Formula remains the appropriate method of allocating annual public expenditure increase (or savings) to the four nations of the Union.

  The Government's position on these matters was set out in the White Papers on Scottish and Welsh devolution published in the July 1997. The White Papers said that the Government had concluded that the financial framework for the Scottish Parliament and National Assembly for Wales should be based on the existing arrangments for the Block and Barnett formula, which had produced fair settlements. They also said that any more substantive revision to the Barnett formula would need to be preceded by an in-depth study of relative spending requirements and would be the subject of full consultatiions between the devolved administrations and the UK Government.

  The details of the funding arrangements were published by the Treasury in the Statement of Funding Policy in March 1999. A second edition was published in July 2000, setting out the arrangements which applied in the 2000 Spending Review, including for example updated population figures.


FSBR to show cumulative effects of tax changes as a whole as well as changes in current budget separately.

  It is not practical to show the cumulative effects on the public finances of all past Budgets, and no government has ever done so. However, the effects of each Budget are clearly set out in the relevant Financial Statement and Budget Report. Moreover, Chapter 2 of the March 2000 FSBR included various additional tables that showed the effects of Budget 2000 and PBR 99 on the current budget surplus and net borrowing.

The Government should examine the issue of savings as a whole to ensure that the tax treatment of savings, the services provided by the National Savings Department and proposals for stakeholder pensions are co-ordinated. The Committee also recommended that the effects of the savings limits and tariff income scheme for social security benefits should be re-examined.

  The Government's recent quinquennial review of National Savings recommended that it should in future focus on delivering a positive contribution to the cost effective management of the national debt. National Savings has been set a clear and overarching objective to that end. The Agency offers a range of retail savings and investment products, including a cash ISA, and is committed to improving quality of service and levels of access, to ensure it is competitive and that all its customers are offered a fair deal. But the review concluded that National Savings is not well placed to address financial exclusion or to increase the level of savings in the economy.

  ISAs and stakeholder pensions have been driven by a common desire to encourage more people to save in a tax-free environment. They provide simple and flexible savings products, reflecting people's wide-ranging saving needs for the short, medium and longer term. The Government continues to give favourable tax treatment to pensions because it recognises that an additoinal incentive may be required to encourage people to save for the longer term.

  The Government wants to ensure that benefits are targeted at those who need them while ensuring that people are not unfairly penalised for having saved for their retirement. From April 2001 it is doubling the amount on savings that pensioners can hold without losing some benefits—from £3,000 to £6,000. And the new Pension Credit will abolish these capital tests altogether, by introducing a fairer system which takes into account the income that people derive from their capital, and will reward savings in retirement.

  The next phase of the modernisation of tax credits provides an opportunity to review the treatment of income and capital in assessing a person's or family's entitlement. The current rules applied to Income Support and those inherited from Family Credit by the Working Families Tax Credit have developed over a considerable period of time and reflect a process of incremental change. A modern system should be simple and aim to promote work, fairness and incentives to save.

The effects of tax measures designed to affect behaviour should be regularly assessed.

  The Treasury and Revenue Departments monitor the effects of all tax changes. For tax measures designed to affect behaviour which have only recently been implemented, it will take time for the full effects of Budget measures to work through. This is particularly the case for tax changes to encourage enterprise and raise productivity growth. Similarly, there is a time lag before sufficient data becomes available to enable a proper assessment of taxes designed to affect behaviour.


We recommend that the Treasury and the Bank of England should continue to press for the UK to have access to the TARGET system on the same terms as member states participating in Stage Three.

  In December 1998, the Bank of England concluded an agreement with the European System of Central Banks (ESCB), which permitted the Bank to operate a euro-based payments system in the UK (CHAPS Euro) and connect it to the TARGET system. The agreement allows the Bank to provide intra-day liquidity of up to

3 billion from a credit position in euro held by the Bank. The Bank is required to deposit

3 billion with the ECB each day; at the end of each day, the Bank withdraws the same amount and invests it in the markets overnight.

  The terms of the agreement mean that UK institutions' access to TARGET differs to that of euro-area institutions in two aspects.

  First, euro-area banks have access to unlimited intra-day credit through TARGET (subject to fulfilling collateral requirements), whereas UK banks' intra-day credit is limited to 3 billion. In practice, this limit is not perceived as a significant problem. Where it is needed, UK banks raise additional intra-day euro credit through subsidiary banks in the euro-area.

  Second, access to the TARGET system closes at 1700 hours central Europe time for members of CHAPS Euro, compared to 1800 hours central Europe time for euro-area members. UK institutions therefore have one hour less access to the system each day.

  The agreement is considered to have met the needs of the Bank satisfactorily and CHAPS Euro is heavily used. Moreover, TARGET is considered to be operating successfully with limited operational problems—it is now the dominant euro payment system.

If the euro did become widely used in the UK it might be necessary to consider shortening the period between entry and the formal introduction of notes and coins if the UK did join Stage Three. We recommend that the Treasury give urgent consideration to the implications of the widespread use of the euro in the UK after 1999.

  Were the UK to decide to join EMU a number of factors would influence the length of the period between entry and the introduction of notes and coins. All sectors would need to prepare over this time, but the ones that would dictate the overall timescales the UK would follow are the retailers and utilities, key parts of the public sector, and those involved in the process of producing and distributing euro notes and coin.

  If the UK were subject to transitional arrangements equivalent to those applying to the first wave, any euro cash from the first wave would not be legal tender in the UK during this period. Businesses and individuals would not be obliged to use euros, but some might decide to do so for commercial reasons.

  The pattern and scale of euro use would have some influence on a changeover. Assumptions on demand for euro services during a UK transition will be refined as the experiences of the first wave and patterns of euro use in the UK become clearer.


Attribution of assets of life assurance companies and definition of "policyholders' reasonable expectations"

  There have been a number of developments that bear on the issues identified by the Committee since the Government responded in December 1998 to the Committee's report.

  Attribution of assets of life assurance companies

    [This section of the Memorandum has not been printed because of a related court case.]

  Definition of policyholders' reasonable expectations

  The Government is aware of continuing calls for greater clarity of the phrase "policyholders' reasonable expectations" (PRE). As stated in the Government's earlier response, current legislation contains no definition of policyholders' resonable expectations. Rather, it remains a legal concept that must be interpreted purposively in the light of the particular circumstances of each case. Indeed, this is an approach followed by the Courts in the recent case by a policyholder against Equitable Life, concerning the application of a guaranteed annuity rate to a with-profits pension contract.

  Earlier this year, the Financial Services and Markets Act 2000 received Royal Assent. The Act does not refer to PRE, but the high-level objectives of the FSA say that a firm must pay due regard to the interests of its customers and treat them fairly. When the relevant provisions of this Act have been implemented, the FSA will be able to make rules and issue guidance to authorised insurance companies for the purposes of protecting the interests of policyholders and potential policyholders. The Government believes that this modernisation of the statutory framework will provide for increasing clarity on the concept of PRE as the FSA makes use of its new powers in the interests of policyholders.

Progress on Basle Committee's principles on effective banking regulation

There are strong advantages in complete capital account liberalisation; however, if this liberalisation is not undertaken in a regulated manner, there may be potentially damaging consequences. It is therefore imperative that is done in the correct sequence and that appropriate methods of regulation and supervision are devised. We look forward to this being done by the Basle Committee.

  The Treasury's response to the Report noted that the UK, along with other G7 countries, is encouraging all countries to implement the Basle Committee's core principles for effective banking supervision. This work is on-going, including through the Financial Stability Forum which recently endorsed recommendations on market and official incentives to foster implementation of international standards for strengthening financial systems, such as the Basle core principles.

Work of Financial Stability Forum (arising from the Third Report, 1999-2000 on the IMF)

We welcome the Fund's new proposals on Codes, standards and financial regulation but are concerned that, without continuing input from developing countries, they may not achieve their objectives. We urge the Chancellor to give this work a higher priority, and to ensure that the Financial Stability Forum works in an open and transparent way.

  The Financial Stability Forum recognises the importance of openness and transparency. The Chairman of the Forum, Mr Andrew Crockett, of the Bank for International Settlements, reports on the work of the Forum to the IMF's International Monetary and Financial Committee (formerly known as the Interim Committee). The Forum also publishes press releases following its meetings and these, together with reports of working groups established by the Forum and other documents, are available on the FSF's website.


As we have received many representations about the inadequacy of competition in the field of financial services, we attach particular importance to improving competition. The Government should consider whether this can be done better by adding this as a fifth objective for the FSA, or whether primary responsibility should remain with the Office of Fair Trading.

  The Government shares the Committee's view about the importance of competition between financial services providers. As it made clear in its initial response to the Committee, it believes that this requires two things. First of all, there needs to be a mechanism by which any unjustifiably anti-competitive agreements or behaviour arising within the industry can be identified and dealt with. Secondly, there need to be powers to remove any unnecessary regulatory barriers to competition, should these arise.

  The first of these matters is currently dealt with under competition law, by the general competition authority, that is to say the Office of Fair Trading (OFT). The Government remains of the view that this is right. It is the OFT's responsibility to detect and deal with unjustifiably anti-competitive agreements or behaviour by businesses in the financial services industry, just as it is in all other sectors of the economy. The new powers which it has acquired under the Competition Act 1998 will strengthen its effectiveness in this regard. To involve the FSA in this area would simply lead to confusion about the respective roles of the two bodies.

  Where the FSA does have a responsibility is in ensuring that in carrying out its own regulatory functions, for example in making rules, it does not create any unnecessary barriers to competition. During the passage of the Financial Services and Markets Act through Parliament, the Government strengthened the safeguards against this possibility. So Section 2(3) of the Act now provides that in discharging its general functions, the FSA must have regard not only to the need to minimise the adverse effect on competition of the actions it takes, but also to the desirability of facilitating competition between those who are subject to FSA regulation.

  It is, of course, still possible that the FSA may, on occasion, get the balance between the needs of competition and of regulation wrong. So the Act provides a further safeguard in the form of a competition scrutiny mechanism, which will enable the OFT to consider whether any rules, guidance or practices of either the FSA as regulator, or as the Competent Authority for listing securities, or of recognised investment exchanges, or recognised clearing houses, have a significantly adverse effect on competition. If the OFT believes that this is the case, it must report the matter to the Competition Commission. And if, after an investigation, the Commission agrees with the OFT's conclusion, then the Treasury will be able to take action to correct the problem.

  The Committee will also be aware of the Government's response to the Cruickshank report on competition in UK banking which was published in August. In accepting the report, the Government announced a number of measures to improve competition in the UK banking market and deliver benefits to consumers.

We stress the importance of ensuring that financial crime is combated effectively; this requires close co-operation between the agencies involved, both in the United Kingdom and internationally. Although the FSA's new civil powers will be useful, we believe that criminal prosecutions should be set in train whenever the evidence is strong enough.

  The Government fully shares the view of the Committee that close co-operation is required between the agencies in the UK, and internationally, to fight financial crime effectively. We are committed to improving co-operation at home and overseas. The Financial Services and Markets Act includes provisions that will allow the maximum flow of information, consistent with European law, from the Financial Services Authority to the other agencies fighting financial crime both domestically and internationally. We continue to support the valuable work of the Financial Fraud Information Network (FFIN) which plays a key role in domestic co-operation by bringing together regulators, law enforcers and investigators at the earliest stage of an inquiry. FFIN provides a framework within which information from different elements of an inquiry can be shared and investigation co-ordinated.

  Following the full implementation of the FSMA, the FSA's new powers will take effect to enforce civil and criminal sanctions against those engaged in financial crime or breaching regulatory standards. Where the evidence and circumstances warrant it, the Government excpects the FSA will make full use of its powers to prosecute breaches of the criminal law.


The Committee commented on monitoring the effect of the Budget measures designed to increase productivity and said that it expected the results will be published.

  The Departmental Report (Cm 4615), presented to the House of Commons on 7 April 2000, outlined progress that had been made towards the Treasury's PSA target to narrow the productivity gap with US, France, Germany and Japan over the economic cycle.

  In order to meet the PSA target, the Government has initiated a wide programme of reforms, which were detailed in the Departmental Report. More details, including information on progress alongside future measures, will be given in the Pre-Budget Report that the Treasury will publish later this year.

  Future Departmental Reports will provide updated figures on progress towards meeting the PSA target.

The fairness of the tax and national insurance system as between companies and unincorporated businesses should be reviewed.

  The Government explained in its response to the Committee's Report all areas of the tax system are subject to ongoing review to ensure fairness and simplicity and to make sure that no sector or individual bears an unfair burden or enjoys an unfair benefit.


  The Inland Revenue and HM Customs and Excise have each provided memoranda by way of follow-up to the Sixth Report and officials will be giving oral evidence to the Sub-Committee on 1 November 2000.


We formally request the Government and Parliament to put confirmation hearings for new members of the MPC and for the re-appointment of existing members on to a statutory basis.

  The Government welcomes the role the Treasury Committee plays in ensuring that the Monetary Policy Committee is held properly to account, including through non-binding hearings on MPC appointments and reappointments. However, the Government sees substantial difficulties with the Treasury Committee's suggestion that it should hold statutory confirmation hearings for new members of the MPC and for the reappointment of existing members. This proposal raises important constitutional issues which go far wider than MPC appointments. It would therefore be more appropriate for the House to consider first the issue of official appointments and the role of Select Committees in general rather than to legislate for confirmatory hearings for the MPC in isolation.

  The Government is committed to appointing top calibre candidates, with appropriate expertise and independence.


We recommend that the valuation quality indicator is reviewed in the course of the forthcoming Next Steps review with the assistance of valuation experts from outside the VOA to ensure that the Agency's performance measures pay due weight to those valuations which do not go to appeal. We further recommend that the Inland Revenue and DETR publish an assessment of the quality of the VOA's valuations drawing on other information such as the assumptions about yield and losses on appeal which underpin the rating formula set by the DETR and the VOA's own quality control data. This assessment should consider whether there is any evidence that the existing indicator introduces distortions into the VOA's valuations.

  A review of the Agency's quality assurance systems has just been completed. As part of the review process, members of the private sector both inside and outside the surveying profession were consulted. The report of the review contains recommendations for further development of the valuation accuracy indicator to reflect valuations which do not go to appeal. We shall publish plans for a new indicator in the light of this review in our business plan for the next financial year.

We welcome the establishment and continuing development of the Specialist Rating Units, and would encourage their further development, with appropriate resources, to the benefit of the VOA and its customers and clients.

  The Specialist Rating Units (SRUs) have been confirmed as part of the Valuation Office Agency's (VOA's) organisation, following an internal post-implementation review of its new structure. The present arrangement of seven such units each covering either three or four of the Agency's generalist Groups continues. The types of property to be dealt with by the SRUs is kept under regular review.

  The process of undertaking the rating Revaluation, which came into effect on 1 April 2000, ensured that a clear and comprehensive division of responsibility between the SRUs and the Groups was put into place, with corresponding clear indentifiers on the computer systems. This has helped considerably in facilitating communications between the SRUs and the Groups.

  Further improvements are being effected by appointing an individual in each Group to be in charge of the day to day process of measuring properties on behalf of the SRUs, ensuring their needs are recognised and met and that service standards to customers and clients continue to be enhanced.

We recommend that as part of the VOA's review of its new organisational arrangements the Agency seeks structured feedback from its staff and from bodies which deal with its staff day to day.

  The Agency undertook extensive consultation with staff as part of the internal post-implementation review of its new organisational structure. It sent structured questionnaires to groups of staff, making use of the Whitley machinery, and also collected the views of individual staff. The Agency has also recently undertaken a second staff attitude survey, following the first in 1998. This second survey was completed by nearly 80 per cent. of staff. It included questions on communication and management, as well as joh satisfaction and training. In addition the five yearly Review of the Agency, led by the Inland Revenue, invited representations from a wide range of external bodies on organisational and other issues. These views and representations have informed the Agency's conclusion that its new organisational structure has largely been successful, and should therefore continue.

We also recommend that the VOA's review specifically addresses the question of what further measures might need to be taken to safeguard valuers' local knowledge in the long term.

  Steps taken to safeguard local knowledge include a sophisticated IT-based recording system to capture and retrieve market information, and more generally the internal review referred to above has confirmed no present reason to withdraw from the 85 locations throughout Great Britain where valuer staff are currently based. The Agency's five year strategic plan, drawn up in the light of the Agency Review, will strengthen the collection and management of both data and knowledge.

Any further cutbacks of staff and resources should ensure the highest possible quality of staff are retained and give greater consideration to recruiting, retaining, developing and motivating the VOA's staff.

  The Agency's plans to recruit and develop its staff were made known to staff last February through its Civil Service Reform Action Plan. It has secured £400,000 from the Government's "Invest to Modernise" fund to take forward, in particular, recruitment and training of graduates, a management development scheme, and additional training for team leaders. Following the outcome of the five yearly Agency Review, the VOA is also producing a more comprehensive human resources strategy, which will incorporate the work already in hand in these areas. The results of the staff survey (see above) show a pleasing advance, though there is still further to go.

  The VOA was asked to provide data on recruitment and retirement. It is worth noting that over the next five years only about 5 per cent of staff currently working for the VOA will reach retirement age. Turnover rates have been low—at around 4 per cent—for several years, as the following figures demonstrate:

31.04.00 to date

We welcome the VOA's progress towards achieving the financial efficiency and productivity targets although we note that a declining workload may have assisted in this task. In the light of the evidence we have received about the steps taken to achieve the targets we do not believe it would be appropriate for further significant efficiency savings to be required following the next quinquennial review unless this goes hand in hand with a major change to the VOA's responsibilities or to the non-domestic rating system. Instead, we think the emphasis should be on ensuring that the VOA is well placed in the longer term to carry out its valuation work effectively and competitively and on improving the way in which the non-domestic rating system is operated.

  The five-yearly Agency Review (published on 13 September 2000) has made a number of recommendations on how the operation of the non-domestic rating system can be improved, reflecting inter alia the outcome of the review of rating revaluations led by the Department of the Environment, Transport and the Regions (DETR). The Agency is preparing a five-year strategic plan in the light of these recommendations, which are expected to lead to major improvements in service for ratepayers, and savings in costs through a reduction in the number of appeals against rating assessments (excluding those relating to material changes of circumstances) once the changes have been implemented.

We recommend that the full and accurate completion of "forms of return", which is required of all non-domestic ratepayers so requested, should be enforced more stringently and that the fine payable on conviction of failure to comply be raised significantly.

  The DETR-led review of revaluations, the findings from which are set out at annex G to the Green Paper on Local Government Finance published on 19 September 2000, considered means of improving the rate of return of "Forms of Return" (FOR).

  Two main suggestions were canvassed as part of the review; the introduction of incentives to encourage submission, and the replacement of a criminal sanction with a civil fixed penalty system. These options were placed in the wider context of the review, which was considering the means of achieving an improved dialogue and exchange of information between ratepayers and valuation officers, as part of the revaluation process.

  The review discounted the use of incentives, finding it hard to see what would induce a commercial ratepayer or their professional rating agent to return a form when they did not do so already. The current sanction of a criminal prosecution was seen by the review as being heavy handed and impractical to pursue. Whereas the alternative of a civil penalty was seen as more practical and effective, such a system already being effectively used in respect of income tax returns.

  The conclusion of the review was that a move to civil penalties for non completion of FORs should be adopted, but should be seen as a mechanism of last resort, placed in the context of improved information flows between ratepayers and valuation officers as part of the valuation process. Work is now being undertaken within the Agency to achieve this improved information flow. The proposals in the Green Paper are out for consultation with responses invited by 8 December 2000.

We welcome the VOA's proactive move towards improving communications with ratepayers to ensure valuations are correct first time.

  Building on this support by the Committee was a major theme of the Agency Review and the Green Paper, and will be a key objective of the Agency's strategic plan for the next five years. The process of consulting with organisations representing business interests about the detail of setting up ratepayer panels is underway; first national panels then local panels will follow. An early subject for the panels to consider will be the options for the presentation of valuation summaries to ratepayers as part of the revaluation process. The panels will also be involved in the process of developing and improving information seeking arrangements to ensure that they are fully business friendly and that the same information is only collected once. In the latter stages of the 2005 revaluation, before the publication of the draft rating lists, we expect the local panels to be a conduit for information about emerging value levels to be communicated to ratepayers, and for their representations. We believe that the closer involvement of ratepayers, and the provision of information about valuations and the underlying valuation schemes will justify increased ratepayer confidence in accepting valuations as right first time.

We note that appeals lodged in 1995 have yet to be resolved, and we recommend that the VOA should clear all appeals made against the original 1995 rating list (as distinct from maintenance cases) or any prior list before the new 2000 rating list is introduced in order to improve the quality of the new list.

  The new rating lists came into effect on 1 April 2000 in accordance with the provisions of the Local Government Finance Act 1988. However the Agency has given priority to the clearance of 1995 and earlier list appeals during the current year. Thus a key target is to clear 80 per cent of 1995 list appeals outstanding as at 31 March 2000 by 31 December 2000.

  Whilst the valuation date for the 2005 revaluation is unlikely to be before 1 April 2003, early work is planned to improve the way in which information about the rents etc, which will underpin the valuations, is progressively gathered and held. This work, and work to make the valuation process more visible and understandable, is vital to achieving the change from the present appeals culture, to acceptable first time, and will be undertaken in parallel with the resolution of the outstanding 2000 list appeals.

We welcome the DETR proposal to improve the timeliness of appeals and the efficiency of the appeal process. We are concerned that without them the resources of the VOA and its clients will be wasted in unnecessary appeals, the primary purpose of which is to kickstart negotiations. We recommend that consideration be given to making the appellant pay a proportion of the VOA's costs if the appellant loses—and vice versa—at the discretion of the Valuation Tribunal. This would give ratepayers an additional incentive to provide the information necessary to arrive at a fair valuation and the VOA an incentive to negotiate at an early stage. We further recommend that DETR undertakes now to provide the resources necessary to ensure that, at an agreed cost per appeal, appeals against the initial 2000 list and any previous rating lists can all be concluded before the 2005 rating list is introduced and that the VOA makes sure the cases are indeed settled.

  The issue of introducing a power to award costs in valuation tribunal cases is currently under review by the Review of Tribunals (The Leggatt Review).

We recommend that the 1920 minute is reviewed as part of the 2000 Next Steps Review. If it is found to be a source of ambiguity as to the scope of the VOA's activities within the public sector a new formulation of the remit should be published following the review. If any proposal to extend the VOA's remit is considered a consultation document setting out the Government's rationale for the proposal, its assessment of the impact on private sector competitors of the VOA and addressing the aspirations of private sector companies to compete for existing VOA work should be published in advance of a final decision.

  The five yearly Review consulted business and the profession on whether the remit should be extended and whether private firms had aspirations to compete for existing VOA work. On the VOA's existing work, it found that there was no evidence of active interest in bidding for the Agency's business as a whole; and fragmentation of the business would raise significant concerns about consistency of standards and would be unlikely to deliver efficiencies. Privatisation would raise significant concerns about the potential for conflicts of interest. So it recommended that the VOA should not contract out the whole of its core valuation services but keep under active review the option of the occasional contracting out of some of its core valuation work to help manage peaks and troughs. On the remit it noted that legislation would be necessary for extension. It recommended that consideration be given to this after the VOA has developed its marketing strategy and the new land services business stream. The VOA has now introduced a new strategy for this work and has started an internal review of the best way to organise the business stream. Consideration will be given to legislation to allow sales into wider markets where there is a public interest in valuations after the success of the new strategy has been evaluated.

We recommend that consideration be given to staggering the revaluation of properties according to their classification (eg shops, factories) in order to smooth the workload of the VOA.

  The issue of staggering the Revaluation by classes was considered by DETR in the recent review of revaluation and its conclusions are set out at annex G of the Green Paper on Modernising Local Government Finance published on 19 September 2000. After consideration of this issue under the heading of "Rolling Revaluation" it was concluded that such a system would be more complex and less transparent than the existing five-yearly cycle on the current basis.

We do not believe that the DETR would be the most appropriate sponsor department for the VOA.

  The five-yearly Review has concluded, and Ministers have agreed, that the Valuation Office should continue as an Agency of the Inland Revenue: but a new Advisory Board is being set up with representation from DETR and the National Assembly of Wales to ensure more integrated oversight of the Agency's funding, strategies and service delivery.

The Sub-committee would also like to be informed on measures taken to address the computer software problems which hampered the updating of the Rating List and when these problems are expected to be overcome, and the reasons why timeliness in 1999-2000, on the original indicator, only improved to 79 per cent.

  The results of the new timeliness indicator have been published in the Agency's Annual Report for 1999-2000 alongside the result of the original timeliness indicator (see Annual Report page 36). The indicator calculated by the original formula shows a marginal improvement from 77 per cent to 79 per cent. This still reflected the problem of updating the Rating List which was rectified with effect from 1 April 2000. It is now possible to run the batch process for updating rating lists as often as required, rather than solely at predetermined intervals. The result compares with 91 per cent under the new indicator which covers a wider range of transactions with the public.


  The issues raised in the Third Report will be covered in the second Annual Report to Parliament on the UK Operations at the IMF, which will be published shortly.


The Government undertook:

    —  to consider how to improve the clarity of treatment of risks and benefits in the constructions of the PSC and the assessment of vfm.

    The Treasury is reviewing its general guidance on Appraisal and Evaluation in Central Government (the Green Book), not least with a view to making it more user-friendly. The guidance on constructing public sector comparators will then be reviewed in line with the Green Book.

    —  to consider with PUK cost-effective ways ensuring that lessons from on-going projects are passed back to departments considering new projects.

    OGC has already asked PUK to review and where appropriate update guidance on contract standardisation following experience since it was published last year, and to undertake work on identifying successful PFI examples of the development of long term strategic partnerships in IT procurement.

    —  to work with departments to access how staff relations in PFI projects develop over time.

    OGC will take work forward in the context of a wider on-going evaluation of the effectiveness of PFI projects in delivering improved public services throughout their lives.

    —  to put in place arrangements to ensure that the OGC can continue to access the experience and skills available in PUK.

    A framework agreement will be drawn up to ensure that OGC can continue to access PUK's experience and skills.

FIFTH REPORT, 1999-2000: THE 2000 BUDGET

The Committee requested that the Treasury monitor, as information becomes available, the burden on employers of paying tax credits.

  The Inland Revenue has put in place a comprehensive programme to monitor and evaluate the Working Families' Tax Credit and the Disabled Person's Tax credit. As part of this evaluation, Inland Revenue is carrying out some research with employers which will, amongst other things, seek to identify and quantify the extent of any additional costs faced by employers in paying these tax credits. The findings of this research will need to be seen in the context of the wider package of measures that the Government has introduced, such as the reform of employer National Insurance Contributions.

We would like to see in future Red Books information on the effect of the Budget measures as a whole, including direct and indirect tax measures on (a) households grouped by income decile and (b) different types of household.

  As the Government made clear in its response to the Committee's report, it is committed to continue producing a range of meaningful statistics that show the impact of the Budget on different types of household.

October 2000

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