Select Committee on Treasury First Report


APPENDIX 3

Further letter from HM Treasury to the Clerk of the Treasury Sub-committee

  Thank you for your letter of 16 June about the changes to the departmental expenditure (DEL) and running costs limits for Treasury, Inland Revenue and HM Customs and Excise announced on 13 June.

TREASURY

  The change announced in the written answer for Treasury was an increase in DEL of £26,376,000. There is a Capital Modernisation Fund (CMF) allocation of £28.3 million in 2000-01 for the new Partnerships UK (PUK), and £27 million will be drawn down from it in the Summer Supplementary Estimate. PUK was established as a Government owned company on 13 June and will be launched as a Public Private Partnership in late autumn. The increased provision is sought to meet the costs of PUK's operations until the autumn launch, and for the Treasury's investment in PUK thereafter. It will also provide for payments to PUK for provision of services to the Treasury under a framework agreement which comes into effect this summer, the cost of advisers' fees; and the fit-out and IT costs of PUK accommodation.

  The supplementary estimate also includes additional provision for the continuing costs of the Treasury Taskforce, which has been financed by a transfer from the department's existing running costs provision.

INLAND REVENUE

  As part of the 1998 Comprehensive Spending Review, the Inland Revenue is committed to making efficiency savings of 10 per cent in total over the three year period covered by the Review. In addition to this, the Revenue plans to make further savings of £23 million in the current year, 2000-01. However, the costs of recent policy changes and growth in workloads have been very substantial and Ministers have decided that the Revenue requires additional funding.

  The increase in running costs of £154.6 million is made up as follows:

    (a)  increases in expenditure arising from a variety of individual requirements which are set out in the Annex to this note, in total £125.4 million.

    (b)  a transfer from the Department of Social Security of £16.9 million. This transfer covers the costs of work being undertaken by the Inland Revenue for the Welfare Reform Agenda. Much of this work is being undertaken by staff and systems transferred from DSS last year. The main components of the transfer are for work on stakeholder pensions, state second pension, pension sharing on divorce, incapacity benefit changes, bereavement benefit changes and pensions forecasting;

    (c)  £3 million being transferred from the Modernisation Fund in respect of the Civil Service Reform programme;

    (d)  £2.1 million being transferred from Customs and Excise. This transfer is from the allocation to Customs and Excise of the Invest to Save Budget and is for closer working initiatives with the Inland Revenue in 2000-01. This closer working will be in areas including joint teams working on the Shadow Economy, a pilot closer working scheme in the fashion industry, local pilots on compliance work, and some sharing of data.

    (e)  a small transfer of £0.2 million from the Property Advisers to the Civil Estate (PACE) following the change in ownership of a building in Peterborough.

    (f)  a sum of £7.0 million which is added to the Department's unallocated provision, pending consideration of the Makinson and Bichard reports on pay and incentives, in the context of the Civil Service Reform Programme.

  The items above add up to the total of £154.6 million running costs announced in the written answer. Against this sum, there is offset a £7 million reduction in capital provision, leading to the increase in the Departmental Expenditure Limit of £147.6 million, also announced in the written answer.

CUSTOMS AND EXCISE

  The change announced for Customs was a reduction in DEL and running costs of £2.1 million which is being reflected in a Revised Estimate. The £2.1 million is the transfer to the Inland Revenue for closer working and details of this are given above.


 
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