Select Committee on Treasury Minutes of Evidence

Examination of Witness (Questions 52-59)




  52. Minister, welcome. Congratulations on your appointment. Welcome to the Committee, I think, for the first time.

  (John Healey) That is very kind of you. I am pleased to be here. In fact, this is only my third week, but although any assessments I have made so far are obviously early, sometimes first impressions are useful, so I am delighted to be here.

  53. We would like to begin, if we may, with Customs progress against the PSA targets, which are something which you or your predecessor had responsibility for. Are you satisfied with their progress so far?
  (John Healey) Generally, yes. On the details, particularly with the in-year targets where they are falling short, I think there are questions equally to be raised about performance, and, in fact, the nature of the targets, and, in some cases, the quality of robustness of the evidence and the analysis which underpinned their being set in the first place. Generally, yes, I am pleased with the progress, particularly in the context of what has really been a period of substantial change within Customs over the last couple of years, not just internally, but in terms of the environment they have been working in, and, indeed, the expectations of them.

  54. We have been examining the Chairman against the Spring Report which only takes his performance up to December. Do you, as Minister, have information on their performance more recently than that?
  (John Healey) The Spring Report is based on the third quarter outturn to December 2001. As you say, they were the latest set of figures that were available where we are tracking them in-year when we came to compile the Spring Report. What we aim to do is to update those probably in keeping with the PBR cycle when, as Mr Fallon, you may be aware, we are aiming to consolidate as much data as we can, both analytical data and progress data and projection data, increasingly in what will become a very substantial Annual Report, published to coincide with the pre-Budget Report cycle.

  55. That will be helpful, but my actual question was, given it is now June, have you yourself received any progress check on the last quarter, taking the story up to the end of March?
  (John Healey) No, I have not myself receive that data. I have been working off the data that we published in the Spring Report, and am now very much turning my attention to how we can improve the quality of the information that we report regularly, in keeping with the PBR cycle, in a way that really helps to establish a sensible basis for the strategies we need to put in place, and also helps put in place a much fuller range of information that allows the public, and indeed Parliamentarians, including your Committee, to examine what is being done and what is being achieved.

  56. The PSA targets we have just been talking about are the targets for 2000-01, which was the first year after CSR 2000. We are now into the second year, 2002-03. Why are those targets not in this Spring Report? Have they been set?
  (John Healey) No. You are right, the PSA targets and the Spring Report does concentrate on PSA targets, and are set for the spending review 2000 period, so they run from 2004-05. In some cases, they will have been broken down so that they are, if you like, our annual or milestone targets during that spending review, in other words, the PSA period. Where they are identified, they are in the report. For instance, on tobacco fraud, we have a target to have reduced the share of the total consumption in the UK from illicit cigarettes to 18 per cent by the year 2004-05, so that is in there. On some of the other PSA targets where there is not that breakdown, you do not find those figures. I appreciate that is somewhat piecemeal; that is the nature of the way that the PSA targets were set. I hope we can, in a sense, marshall our target setting, our milestones against which we judge the progress against those much more effectively in the future, and based, principally, on what I hope will become a much more substantial, much more informative, much more open Annual Report.

  57. So you are not going to add any mini targets for this current year after the year has started?
  (John Healey) We will not be adding mini PSA targets. They were set with the spending review period. What we may do, as we did last year, was to develop—where we had an increasingly sound basis for understanding the dimensions of areas of fraud, we were able to analyse more effectively than in the past what was going wrong, and then able to work out sensible strategies plus targets for dealing with it, then we may well be setting targets in the forth coming year, as we did last year. An example of that is with the oils fraud, where, in the PBR last year, we published our analysis, not just of the problem as it stands, but importantly, of the projected worsening of the situation that we anticipated if we did nothing about it. We published proposals on which we consulted at the time of the PBR through to the Budget itself for the strategy that we thought we needed to be in place, and we confirmed that in the Budget with targets built into that. So in that respect, but separate from the PSA targets, which, of course, is the proper focus of the Spring Report, we may well do that. But they will not be PSA targets.

  58. The PSA targets, you have one for tobacco smuggling, but you do not have one for alcohol; why is that?
  (John Healey) On alcohol, you may recall, at the time of the PBR proposed tax mark system, rather akin to cigarettes, we consulted on that with the Industry, and in the end decided not to go ahead with that. It was a decision confirmed in the Budget. At the moment, we are now in more detailed discussions with the Industry to see what other much more voluntary based strategies we need to put in place, particularly on alcohol, to deal with spirits, and that is, although not sizeable in total tax revenue lost in the big scheme of things, nevertheless, significant in the spirits field at 15 per cent because it is a significant market distortion and undermining those businesses that conduct their affairs legitimately.

  Chairman: Minister, we will have to suspend the Committee now for 10 minutes for the division. Reassemble at exactly 6.00 pm.

  The Committee suspended from 5.50 pm—6.00 pm for a division in the House

   Chairman: We will resume. Mr Ruffley.

Mr Ruffley

  59. Economic Secretary, could you just recap: you have not set a PSA target for alcohol for what reason?
  (John Healey) We have not set a PSA target for alcohol because PSA targets, of course, were set to coincide with the current spending review that we are more than halfway through. We have not set, subsequent to that, firm targets on alcohol and we are in detailed discussion, as I explained just before the short break in the Committee, following the consultation period where we proposed, as part of an anti fraud strategy, a tax mark, particularly for spirits where the main problem lies, and after consultation with the industry, came to the conclusion, which we confirmed in the Budget, that the practical and compliance costs of doing so would, at this point, be disproportionate to the benefits. That moves us into a different territory. We are determine still that we need a strategy to deal with alcohol fraud, particularly spirits fraud, and we will produce that when we have come to a sensible conclusion on what we can do in conjunction with the Industry.


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