Select Committee on Treasury Third Report


The Treasury Committee has agreed to the following Report:—



(a)We recommend that the Treasury review its staffing level, particularly the number of staff devoted to the control and monitoring of public expenditure (paragraph 6).
(b)We have heard no compelling arguments for the Treasury to be split into separate economics and finance Ministries (paragraph 11).
(c)We acknowledge at the outset of this Report that there are praiseworthy aspects of the Treasury's role and organisation (paragraph 12). We are aware that the UK Treasury is one of the world leaders in implementing reforms such as resource accounting and budgeting, the private finance initiative and Public Service Agreements (paragraph 13).
(d)We believe that the Treasury has become more powerful in two significant respects in recent years. Firstly, its influence over the strategic direction of the Government has grown. The Treasury's role in leading the welfare reform programme and introducing stakeholder pensions and tax credits has led to the Treasury taking a greater role in social security policy. Secondly, Public Service Agreements have substantially increased the Treasury's influence over the affairs of spending departments (paragraph 19).
(e)We are concerned that the Treasury as an institution has recently begun to exert too much influence over policy areas which are properly the business of other departments and that this is not necessarily in the best interests of the Treasury or the Government as a whole (paragraph 21).
(f)We recommend that, at the strategic level, the Treasury gives greater attention to ensuring that it gets the balance right in its co-operative workings with other departments (paragraph 25).
(g)We are in no doubt that public expenditure should be spent as efficiently and effectively as possible and that the Treasury, as the guardian of the public purse, has a major obligation to ensure this. It is important, however, that once expenditure priorities have been set, departments are left with the task of detailed delivery (paragraph 31).
(h)We recommend that the Government should be clearer about the incentives and sanctions associated with the PSA system (paragraph 31).
(i)We do not think it is desirable for the Treasury both to set the framework within which departments should operate, using the Spending Review and PSA process, and to act as the sole assessor of whether or not departments are achieving their objectives (paragraph 32).
(j)We remain strongly of the opinion that the assessments of departments' performance against their PSA targets should be the subject of external review, by a body accountable to Parliament, such as the National Audit Office, the Audit Commission, or another body, rather than the Government. We recommend that, if the Government appoints an external auditor of its PSA targets as we suggest, the auditor should publish a concise annual report showing the progress made against targets by every department and making recommendations for improvements (paragraph 33).
(k)We recommend that, even if the Government decides against appointing an external auditor for the whole PSA system, the measurements of performance against the Treasury's own targets should be externally validated (paragraph 34).
(l)PSAs are ultimately a matter for Government, but we see no reason why the Government should not invite comments on improving the current set, or why draft PSAs could not be published well in advance of the next Spending Review for consultation. We envisage that the publication of an annual report on the progress made against PSA targets by an external auditor could give Select Committees a more explicit role in the development and scrutiny of PSAs, both ex ante and ex post (paragraph 35).
(m)We are concerned that the Treasury's role within Government in respect of the monitoring of PSAs is too powerful (paragraph 36). We recommend that the Public Services and Public Expenditure Cabinet Committee be reconstituted so that its dominance by Treasury Ministers is reduced (paragraph 38).
(n)During the post-war era, the Treasury acquired a reputation as a department which lurched from macro-economic crisis to crisis, unable to take a long-term view of the policy issues it encountered because of short-term contingencies. Times have changed. A relatively long period of economic growth, coupled with the transfer of monetary policy to the Bank of England, has allowed the Treasury to re-evaluate its role, at least for as long as macro-economic stability continues (paragraph 39). We acknowledge the importance of micro- and macro-economic policies working in tandem (paragraph 40).
(o)The capacity of other departments to help the Government set strategic priorities and to monitor the performance of departments should be strengthened (paragraph 42).
(p)There may be good reasons for the revenue departments to retain significant expertise in tax policy, but we are convinced of the need for the Treasury to build up its own capacity to analyse detailed tax issues and to take a more strategic view of the tax system and of the impact of taxes on the economy than hitherto. We recommend that, in response to this Report, the Treasury informs us of what action it intends to take in response to the peer review of the Inland Revenue's policy-making capacity (paragraph 45).
(q)We firmly believe that in the area of tax policy the Treasury could do better. We recommend that the Treasury give more attention to this area in order to ensure that the tax system is "fair and efficient", one of the Treasury's PSA objectives (paragraph 46).
(r)We recommend that the Government publishes a formal statement of the relationships between the Treasury and other departments, particularly in relation to public expenditure control and micro-economic policy (paragraph 48).
(s)It is our view that departmental Select Committees would benefit from relevant evidence from the Treasury on its relationships with other departments. We hope that, in the next Parliament, arrangements will be made defining how and when the Treasury should give such evidence. We can see that Treasury Ministers and officials could be overwhelmed by too many such requests for evidence, but there needs to be a recognition that the Treasury shall give evidence on appropriate occasions. A protocol should be devised by the Liaison Committee to set out the ground rules (paragraph 50).
(t)We recommend that the Government clarify the relationships between Treasury officials and the officials who staff the Chancellor's other departments (paragraph 51).
(u)The Treasury has a duty to Parliament to provide helpful, timely answers to questions tabled by Members. We recommend that the Treasury reviews its policy on answering parliamentary written questions, with a view to improving its performance (paragraph 52).
(v)We have given our suggestions for improving the scrutiny of PSAs. We believe that the new procedure for dealing with resource accounting and budgeting also allows for improved scrutiny if Select Committees make best use of it. We also support the Liaison Committee's proposals for strengthening the Select Committee system. We trust that proposals to make a reality of these improvements in parliamentary scrutiny will be devised by the Modernisation Committee and quickly brought before Parliament (paragraph 54).
(w)Parliament lacks the resources necessary to hold the Treasury fully to account. Parts of the Treasury's work, such as on the tax system, are inadequately scrutinised, while other aspects, such as the Treasury's influence over other departments in relation to public expenditure, are hidden from our view. We strongly support the calls by the Liaison Committee and others for the House to employ more permanent staff to help Parliament better hold the Treasury to account (paragraph 57).
(x)An important development in the Treasury's role in disseminating best practice throughout Whitehall has been the formation of the Office of Government Commerce, an executive agency of the Treasury, which is intended to promote best practice in Government procurement, measure and benchmark procurement performance across Government and provide a centre of excellence for procurement skills, amongst other aims (paragraph 58).
(y)We can see that the appointment of Ms Margaret Exley as a 'non-executive director' is an interesting experiment in obtaining an outsider's view and advice on management issues. We are not convinced that the title 'non-executive director' is an accurate description of this role and indeed it may be confusing. In any event, we recommend that the Treasury's annual report to Parliament should include an account of the role and activities of anyone who occupies this position in future (paragraph 59).
(z)We recommend that the Treasury draws up an action plan to improve the department's culture and working conditions and to ensure that the targets set for the representation of women, people with ethnic minorities and people with disabilities are met. This action plan should have a Board level sponsor and an update on progress should be published regularly; amongst other benefits this would facilitate parliamentary scrutiny (paragraph 64).
(aa)The Treasury told us that, in terms of construction costs, the present deal for the refurbishment of the Treasury building was cheaper than either the previous deal or the rejected Scheme A and the discounted cost of the new deal is significantly lower than the Public Sector Comparator (paragraph 72).
(bb)The Treasury had an excellent opportunity in the refurbishment of its own building to set an example of best practice in the development of PFI projects. We invite the Treasury to take this opportunity to explain why it revived a version of the original PFI deal with the original private sector partner without a fresh tendering process and to report on the progress of the project (paragraph 73).

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