Examination of Witnesses(Questions 260-279)|
MP, MR ED
THURSDAY 18 JULY 2002
260. Yes. The fact is that on one side of the
border in the North East of England, the poorest region in mainland
Britain with the worst educational achievement in the whole of
Britain, people do not have their tuition fees paid for, they
do not have personal care for the elderly, they do not have teachers
who have special systems of pay and rewards whereas north of the
border they do. Now how long are we going to go on with these
great differences in fairness?
(Mr Brown) This has been something which has been
accepted by all political parties over the last 30 years since
the Barnett Formula was introduced. Can I just emphasise the point
that outside the Barnett Formula are a considerable, indeed a
large number of expenditures that are based entirely on need.
If you take the Working Families Tax Credit, £310 million
is spent in the North East, that is £120 per person, whereas
in Scotland it is £300 and it is only £98 per person,
in Wales it is £109, so the North East benefits considerably
as it will do when the Employment Credit comes in, the Working
Families Tax Credit and all tax credits, the Child Tax Credit
and the Employment Tax Credit. That is meeting the needs of the
North East on the basis of a fair allocation.
261. Chancellor, everybody gets those tax credits.
(Mr Brown) No, no. Depending on need.
262. Everybody in every part of Britain gets
those tax credits if they are eligible. Now the point about this
is in the Comprehensive Spending Review a great deal of additional
money was made available for transport in London, over a billion
pounds to transport in London. Now under the Barnett Formula there
is a 10.23 dividend on that for expenditure in Scotland under
the Barnett Formula comparisons. People in the North East neither
get the extra tube lines nor do they get the benefits of the Formula
(Mr Brown) My point to you is, for example, if you
look at the distribution of housing expenditure throughout the
United Kingdom then those areas which have a high proportion of
pre-war and post-war housing stockand the North East is
one of themwill get a considerable benefit from the housing
expenditure. But what I was drawing your attention to is not all
public expenditure is under Barnett. I do emphasise to you this
point about the tax credits, that the North East gets proportionately
more as a result of the condition of the North East than does
London, Scotland or Wales.
263. Only, Chancellor, because we have more
people who are eligible because their incomes are low.
(Mr Brown) That is exactly my point, that we are taking
measures which are fair to people in the North East because we
recognise there have been historic problems which have got to
be addressed, including one of them, the low staying on rate,
where I believe the educational maintenance allowances which we
announced on Monday but will go nationwide have already proved
themselves in pilots to be a successful means of persuading people
to stay on at school. The North East has got the lowest staying
on rate of any part of the United Kingdom. The educational maintenance
allowances will be paid on the basis of need. The North East of
England will benefit disproportionately as a result in my view.
264. Coming back to the underspending, Chancellor,
the underspending is not new this year, it has happened in previous
years. You have explained this afternoon some of the reasons for
it. When Mr Macpherson appeared before us at the time of the Budget
he saidand I quote"There are big sanctions
which the Treasury can use". Have you used them?
(Mr Brown) I think the Chief Secretary has been in
discussion with the different departments about their departmental
investment strategies and it is our intention to work with the
departments to achieve that: better forms of procurement, better
forms of ordering, better forms of moving forward the capital
265. This is the third Spending Review. We have
had underspending in various departments over the last four or
five years. Have you actually penalised any department and, if
so, which one?
(Mr Brown) I am pointing out to you that while we
want to move very swiftly ahead with our capital investment projects
that underspending by the end of the year is not always the problem
that you say it is. It is a means by which the departments can
carry over the money into next year. They do not lose the money
and everybody knows that the capital projects, while good in themselves,
have in some cases slipped. It is our intention to move them forward
as quickly as possible and that is why this work has been done
between the different departments.
266. So there is not an example of any department
actually losing out because of its underspending or being penalised
in any review?
(Mr Brown) We have got to decide the allocations in
every three year review and of course we have to be satisfied
that reforms are being put in place to deal with problems as they
arise. You will see as a result of the decisions which we have
made in this review, the increase in inspection will cover, for
example, housing, and therefore we will have a better means of
assessing the results in terms of housing expenditures. Equally,
of course, decisions about future capital investment on housing
will be made on the basis of knowing what has been happening.
267. So far no poorly performing department
has been penalised?
(Mr Brown) I was asked about this, again, at Treasury
questions today. The Prime Minister agreed a reorganisation of
the Department of Agriculture immediately after the last election
because it was felt that it ought to be more a Department of Rural
Affairs, that it ought not to be exclusively concerned with farming
issues and there were changes which had to be made there. Equally
the system of performance pay applies to Permanent Secretaries
and the system of ministerial change, you might put it like that,
applies to politicians.
268. If we can go back to where we started,
targets. Your officials told us yesterday that they had regular
meetings, at least once a quarter, with departments to discuss
their targets. Now you in your first response to them seemed to
be defensive about the Treasury's part in these targets, they
are really the departments' targets. Also you seemed to suggest
that any opposition to targets was because you did not like targets.
Now, one of our witnesses yesterday said that they were deeply
flawed. I would have thought it is almost unanimous in the Committee
after what we have gone through that there are flaws in them,
intellectually flawed in numbers, the relationships, but we are
intrigued with the starting point. Your officials have meetings
with the departments once a quarter, what is the Treasury's part
in these targets? Why are they not meeting with the Prime Minister's
Policy Unit or Results Unit or whatever else he has got at Downing
Street; why is it the Treasury?
(Mr Brown) I think it is important that the department
which writes the cheques and provides the other departments through
tax revenues with the money has a role in monitoring whether performance
is improving or not. As far as targets are concerned, I think,
equally, there is a debate about the future of targets and how
they are applied. There have been three different types of target.
There has been an input target where you could say, "Let's
have x number of people working in this area." There is a
process target of how you get to where you want to be. But the
main thing people want to focus on for the longer term is output
and what is achieved as a result of your efforts. Certainly over
the last few years we have been developing a system that is far
more rational in the way that it sets the targets and, as I understand
269. I thought your answer was better until
you got that note. I do not know who has passed you the note,
but it went off.
(Mr Brown) The note, interestingly enoughand
it is always very helpful to have these notes passed to you, is
the House of Commons Treasury Select Committee, Third report of
Session 2000-01 and it is about visits to overseas Treasury Ministries
and it says: ". . . 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
so you did support us and say at that stage that we were one of
the world leaders.
Chairman: We are a new Committee, Chancellor!
270. We are not supporting you. We are trying
to find out the relationship. I thought you were very direct and
up-front. It is an answer we did not get from your officials yesterday.
The reason you are at the table is you write the cheques. Those
were your words and I think that is first-class.
(Mr Brown) I do not mean I write them personally!
271. We were at pains to find out is if you
write the cheques and if a department under-performs whether you
write a smaller cheque? We see no relationship between the targets
and spending reviews and we would like to know the mechanics.
(Mr Brown) I think you are always deciding in a spending
review when you are planning three years ahead whether you feel
the money is best used in one direction or in another direction.
So in a sense the experience of what you see in previous years,
in consultation with the department, leads you to certain conclusions
about what your priorities are. When I was asked, however, about
sanctions, just as where there are failing services and organisations
we have put in sanctions and penalties, I think it is true to
say that there is now performance-related pay for permanent secretaries
and whereas the ministers are not on performance-related pay,
there are clear sanctions in relation to them as well.
272. Take one of your targets, the eradication
of child poverty by 2020, one of the witnesses we had yesterday
said that his figures were that instead of taking a million and
a half youngsters out of poverty you had only taken half a million
and that as we are moving towards 2020 this early trajectory is
too low. Do you dispute that? That is the first thing and, secondly,
if you do not dispute it what steps are we taking to get back
(Mr Brown) In terms of absolute numbers and absolute
poverty there are more than a million people less in poverty.
273. These are children.
(Mr Brown) I am talking about children. In terms of
the relative definitions that are used, obviously the measures
we brought in in the last Budget, and indeed in the Budget before
that, are the means by which we will get more children out of
poverty. So we believe we will meet what is the PSA target which
is to reduce child poverty by a quarter by 2004.
274. One of the difficultiesand you have
just showed it verballyis that anybody looking at the public
service agreements and the targets does not know where they are.
A lot of the children we are seeking to take out of poverty by
2020 on my estates will have children themselves in poverty by
the time you are finishing your target. Why is there not produced,
if you are part author of this and it comes out of the Spending
Review, a position statement of where we are?
(Mr Brown) The position on child poverty is we do
recognise your point and it is a very important point. To have
just a wholly long-term target that is unrelated to whether you
can see performance in the short and medium term would be susceptible
to the criticisms you have got. That is why we have got this target
for 2004 to reduce child poverty by a quarter.
275. But we cannot agree where we are and it
(Mr Brown) The Department of Work and Pensions has
produced a report on the definitions of poverty and the things
that they would like to take into account when measuring poverty.
There is an income measure of poverty that is relative, an annual
report is produced by what is now the Department of Work and Pensions.
The last one was called Opportunity For All and that was
published last autumn.
276. This is a joint target between you and
Work and Pensions. Why is, for example, the DFES not involved,
Sure Start, the Children's Fund? A practical example might be
a youngster with hearing difficulties who is not picked up because
there are no psychologists available in the schools (and there
is a very great shortage of them). That youngster will have the
greatest difficulty staying the course educationally. Instead
of a battle against child poverty, it is many departments all
contributing. There does not seem to be an acceptance within the
Treasury that they should pool everything together, that there
should be transparency on the resources put in and who is contributing
on the outcomes and how each is contributing. We have confined
this in the public service agreements to two departmentsyourself
putting the money in and I presume tax credits, because that was
the answer we got yesterday. Is that our joined-up government?
Mr Macpherson shakes his head. If it is no why is this not demonstrated
in the document?
(Mr Brown) We are really dealing with two parts of
the issue of child poverty. One is purely income and that is why
it is the Department of Work and Pensions and the Treasury because,
as was said yesterday, it is the combination of social security
benefits and tax credits that we believe are the means by which
large numbers of children will be lifted out of poverty. We do
accept that the numbers of adults with children in work matters
to this and we do accept that how well our programme for helping
single parents get into work or get training and everything else
matters too, so these income measures are the Department of Work
and Pensions and the Treasury, but there are wider issues of poverty
that you focused on rightly. Before this Spending Review was completed,
there was an inter-departmental review of children's services
and we looked at Sure Start, we looked at the case for children's
centres, we looked at how the Children's Fund was going to perform.
We looked particularly at the needs of vulnerable young people
in their teens because that is an issue that has been raised by
many people and the improvement of children's services is absolutely
essential to this review. There is now an integrated budget for
children dealing with service provision for children which will
allow us to increase childcare places by a quarter of a million,
maintain the expected increase to Sure Start to 300,000, and create
a network over time of children's centres round the country. These
are all important to the battle against deprivation amongst children.
277. But does that mean in a future public sector
agreement that you will make some changes and bring together the
figures and the performance?
(Mr Brown) Yes in the sense that we will retain the
income measure because we will be judged by that as well as all
the other things, but we do plan to improve children's services
and, for example, for children in care we recognise we have got
to do a lot more as well, and I think you would agree with us.
Chairman: Public sector agreements, Michael
Fallon and David Ruffley.
278. You have got a creditibility problem with
some of these targets, have you not? If you look at your own document
Chancellor, I do not know if you have read your own introduction
you say: "Most targets have been rolled forward in line with
adjustments, where necessary, to reflect experience. In some cases
separate targets have been combined under a new headline target.
Some of the existing targets have not been included. A small number
of headline targets will not be carried forward when they have
already been superseded by new targets or events." This is
Alice in Wonderland stuff.
(Mr Brown) That is surely exactly what a government
should do. One, it should learn by experience. Two, where a target
is met it is no longer a target. Three, where we can eliminate
process targets and focus on the outputs and indeed where we can
move from input targets to output targets, we should do so. You
would be surprised if everything remained completely unchanged,
either as a result of experience or as the result of our efforts.
For example, we say we want to increase literacy amongst children
at the age of 11 from 60 per cent to 75 per cent. Once we have
achieved that do we say "that is it" or do we have a
new target to do better?
279. You are only taking targets you have met.
There are targets you have not met. You said you would remove
30,000 failed asylum seekers a year, you removed only 11,000 last
year so you scrapped the target.
(Mr Brown) The Home Office has actually increased
the number of people who are removed as a result of the failure
of their asylum appeal but that is a matter obviously the Home
Office Committee will want to look at.
5 Third Report from the Committee, Session 2000-01:
HM Treasury, HC 73. Back