Select Committee on Treasury Minutes of Evidence


Examination of witnesses (Questions 180 - 199)

WEDNESDAY 23 OCTOBER 2002

MR NICHOLAS MACPHERSON, MRS ROS DUNN, MR ALLEN RITCHIE, MR MARK PARKINSON AND MR IAN SCOTTER

Mr Laws

  180. Mr Scotter, we obviously have this SSA Review underway at the moment, could you explain in a very short and concise way for an average constiuent of mine—not going into vast detail, I know you can but I do not need you to—what the defects are that this Review is seeking to remedy in terms that my constiuents would understand and who the winners and losers are in areas in terms that my constituents would understand?  (Mr Scotter) One of the defects which the Review is trying to address is that your constituents will probably not understand how the money is allocated, and the aim is make this more understandable to people who actually have an interest in it and are engaged, the informed constituent who wants to know about this. Another issue is the way that SSAs have been used and portrayed in the past as an estimate of the needs of the local authority, rather than the way of distributing grants between local authorities. You will know that the past capping has been based on spending assessments. A third element is the fact—these are all set out in the White Paper which was published last December—that this is very much based on looking at past patterns of expenditure. Of course to some extent that is self-fulfilling. If you look at what people spent last year and base your estimates of needs on what they spent last year you may come up with what they spent last year—

  181. You are beginning to lose my constituent. Would you be able to say to my constituent, this is a fairer system than we had before.  (Mr Scotter) What the government is looking for is something which is simple, more straightforward, more stable and fairer.

  182. The previous system was unfair in what respect?  (Mr Scotter) The point I was obviously not explaining very well was it tended to perpetuate the pattern of expenditure that has existed in the past rather than looking independently.

  183. From your detailed study it had that aspect of unfairness that perpetuated these things that it should not be perpetuating, who was losing out in broad terms in terms of areas of the country?  (Mr Scotter) I think the formula is very complex and naturally particular features may have an effect in all areas of the country if you are asking me about regions. There is a clear issue which has already been raised about the Area Cost Adjustments, where there are people in some local authorities who think it is excessive and others in local authorities who think it is inadequate.

  184. Before you lose my constituents entirely, if my constituents said, Mr Scotter was there a part of the country that appeared to be losing out under the previous unfair system rather than it being randomly distributed throughout every local authority area is the answer there was or there was not?  (Mr Scotter) The answer is—  (Mr Macpherson) I think the answer is that the Deputy Prime Minister will be announcing the new proposals very soon and your constituent should hang on.

  185. That is why I did not ask you the question. Are you telling us that after all this work you have done, and you already developmed various options, and so forth for this, that you do not know, you cannot actually say to us there was any area that was dealt with unfairly?  (Mr Scotter) I think I would have to—

  186. I would rather have your answer than Mr Macpherson's, his answers are not helpful to my constituents.  (Mr Scotter) The position is that the government has looked at a range of options. We are consulting with local government and other people and we have consulted with local government about the choice between those optionss. When ministers take those decisions we will reflect those.

  187. I thought you said this was going to be a simpler system! If only we had more time to follow it up. I want to deal with another area and I want to put this to Mrs Dunn—I think it is her area—we discussed earlier and Mr Macpherson mentioned how we had a bottom-up system, we arrived regionally at this system and it came to expenditure per head. It is not done in a coherent way that tries to get money into regions from the top. When you look at the distribution we have across the various regions—and Mr Cousins has drawn your attention to the situation in the north east, I come from the south west—when you look at all of the detailed figures in your area do you believe that it is a satisfactory distribution we have ended up with as a consequence of a bottom-up process or do you think that the kind of concerns you have heard from Jim Cousins are quite legitimate?  (Mrs Dunn) I think it goes back to what you are trying to do. I think that if we had a situation where we looked at health, we looked at local authority spending, we look at regional development spending and so on and if in each of those areas—criminal justice would be another—we felt we were able to devise an allocative formula that we thought was fair for that particular area of expenditure then I think it would be correct to say that if you aggregated that up to a regional level and added in things like social security, and so on, that we would have the right allocation. It is worth thinking about the way in which we distribute money to Scotland, Wales and Northern Ireland because in effect that is what we are doing there, we are saying if you add all of that up it is then up to devolved administrations to determine the allocative mechanism.

  188. Mr Cousins encouraged you to go to the north east and if you turned up on the doorstep of one of his constituents and they said, "It is somebody from the Treasury, we know we have been short-changed for years, this area is losing out compared to other areas of the country", would you able to answer, "no, you are not losing out", to that person at the moment?  (Mr Macpherson) I think—

  189. I was asking Mrs Dunn. I am keen to get Mrs Dunn's view, this is her area of expertise.  (Mr Macpherson) I am quite happy to give a collective answer.

  190. My question was to Mrs Dunn. I would like an answer to it.  (Mrs Dunn) I may not be able to answer without losing your constituent in the way Mr Scotter might have.

  191. Could you answer to Mr Cousins' constituent, "no, you are not being short changed".  (Mr Macpherson) I would say—

  192. I do not understand why you are cutting across your officials, Mrs Dunn is a very senior official, this is her area of speciality and frankly I would like an answer from her.  (Mrs Dunn) I would say that I thought that the systems we had were fair but that does not mean that they cannot be subject to the sort of review that enables them to be refined.

  193. If we move to a situation where the south west or the north east has a regional assembly and they end up in situation that looks a bit more like the situation that Scotland and Wales would it make sense to have a situation where we look at the whole thing again and the north east or the south west gets a regional block allocation in the same way as Scotland and Wales do?  (Mrs Dunn) I think that if you look at the detail of the regional government White Paper it sets out quite clear proposals for elected regional assemblies and it does not talk about giving a block grant in the way that you are suggesting. What it does talk about is looking at the functions that are to be devolved, allocating expenditure to those regions in the normal way and then, rather in the way that we have done for the Regional Development Agency, creating a single pot giving the regional assembly freedom over distribution.  (Mr Scotter) I do not think I have anything to add to that.

Chairman

  194. Moving towards the end now can I just ask you one question on a technical point, on this Standard Spending Assessment there is an area of cost adjustment included but in your own memorandum you draw attention to the fact that the NHS resource allocation includes what is called a market forces factor, which is a premium paid for recruiting staff in different wards and parts of the country, how do you reconile those two?  (Mr Macpherson) The answer is that I would need to go back and provide you with a note. These allocation mechanisms evolve for different purposes in different ways. Clearly within the Treasury we are keen for them to be broadly consistent, and the health one reflects the special needs of the Health Service. I am happy to provide you with a note on how precisely those aspects of the formula work.

  195. Okay. You said it was early days on the Regional Venture Capital Funds, have they actually started, they had trouble getting clearance from Brussels? Have they now kicked in?  (Mrs Dunn) They are starting in England, yes. I think they have. We will check that.

  196. Thank you. You promised us some information on how the allocations are done amongst RDAs. You also promised to get back on RSA, on the jobs issue and the total amount. There are a number of other studies floating round, the ONS study on regional GDP you are going to comment on when it comes out.  (Mr Parkinson) Regionalisation of accounts.  (Mr Macpherson) The 31st of October.

  197. You promised to forward your comments on that. The Office of the Deputy Prime Minister study on Regional Output Analysis.  (Mr Scotter) That is a joint Treasury/DTI study.

  198. When does that come out?  (Mr Macpherson) Another 18 months or so.  (Mr Parkinson) 21 months.

  199. We will hear about that in due course, will we. Fine. Finally, the Department of Health allocation formula, the basis for that. You are going to let us have a note on that, are you?  (Mr Macpherson) Yes.

  Chairman: Good. Thank you very much indeed.





 
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