Select Committee on Treasury Minutes of Evidence


Examination of Witnesses(Questions 320-339)

RT HON GORDON BROWN MP, MR ED BALLS, MR NICHOLAS MACPHERSON AND MR ADAM SHARPLES

THURSDAY 18 JULY 2002

  320. We are looking for clarity. The issue of the dividing line between the Minister, the department, the people who deliver on the ground and the integrity of the targets, that is the issue.
  (Mr Brown) That is exactly the point I was trying to make earlier on. Again, this is part of the debate between us and the Committee that in the same way as we made the Bank of England independent, the Government set the objective that those people who were charged with making the decisions were allowed to get on with the job and you built around that an open system of accountability where information flowed freely to the public. That is in a sense the model on which we are working with public service agreements. We set the objectives but it is up to the individual organisations, particularly now with local service providers, to get on with the job.

Mr Mudie

  321. One of your partners, on the matter we have discussed earlier, child poverty, your only other partner, has stated in the book that Works and Pensions underspent (we got the figures a day late but we got them) £440 million on child poverty issues. Could you tell us what conversations Mr Macpherson and his colleagues had with Works and Pensions? That is a key one that you feel deeply about, child poverty.
  (Mr Brown) Mr Mudie is actually referring to the New Deal and it is actually because more people got back to work without having to use the New Deal. If the New Deal underspends it is a good thing because more people are getting back to work.

  322. Chancellor, you should not listen to these siren voices in your ear. You allocated the department much sought after public resources, so they saved on one thing, New Deal, but they have a 20-year target and we think they are well behind on their target. I would take a dim view if I were Chancellor of a department which was my partner in such a sensitive area underspending £440 million.
  (Mr Brown) I do not think that is a fair criticism, Mr Mudie, if I may say so, because the New Deal is financed by the windfall tax. It is in a sense a separate fund. It depends on the demand for it and we have been quite happy to put in resources to enable people to get the training to get back into work, but obviously, because of the condition of the economy being in a good state, it has been possible to get people back to work in many instances without having to use the New Deal or only to use the New Deal sparingly because they were quickly offered jobs. If we underspend on the New Deal that is money available in future for other employment projects, but to make decisions about child benefit and about child tax credits and about income for families, these are decisions that are made principally in the Budget in relation to child tax credits and in relation to child benefit by the reforms that we are making in the approach to children's benefits as a whole. I would regard that £400 million less as a failure and more as a success in getting people back to work more easily than we had expected.

  323. I would have regarded it as an opportunity to move it across to the Sure Start part of the programme to get more kids in nurseries.
  (Mr Brown) I am happy to talk about Sure Start.

  324. They underspent as well, Chancellor, if you want me to give you the figures.
  (Mr Brown) The important thing about Sure Start is that while it is working well and all the experiments and pilots in different areas have been successful, we are anxious as quickly as possible to extend it nationwide.

  Mr Mudie: We were also very united in our disappointment about the so-called new audit and inspection arrangements. We examined these and discovered that there were probably no new arrangements; there was a bit of rationalisation. This is the new people that you set up as part of the statement, the new audit and inspection arrangements. When we went into them in your Spending Review document, none of them is new. We are just wondering why it got such a big place in the announcement.

Chairman

  325. There was an extensive exchange with Mr Macpherson.
  (Mr Brown) We commissioned a health care audit and inspection.

Mr Mudie

  326. That was the one that worried us.
  (Mr Brown) It is bringing together in one single organisation the work that is done by a number of organisations at the moment, in particular the Commission for Health Improvement and the value for money work being carried out in the Audit Commission for the NHS. There was a very good reason for that, that as long as the work was carried out by these different institutions it was not properly co-ordinated and it was not yielding the scrutiny that was necessary. I hope that you can support that, although I am sure that there are very legitimate questions about how it is going to operate. It is a good idea in my view to have this inspectorate which brings together the existing functions of others.

  327. Mr Macpherson on your right, a very sound fellow, described the Audit Commission's work in health as very effective as of yesterday. Today we are talking about taking this work from a very effective (Mr Macpherson's word) organisation and setting up a new body. The first thing is, have you told the Audit Commission? Have you consulted with the Audit Commission?
  (Mr Brown) This was announced in the Budget. There was consultation with the Audit Commission and the work on this is proceeding well and it has been legislated for in the National Health Service Reform Bill, so these are measures that have been thought out in detail and are moving ahead as a result of parliamentary legislation, but it is to bring together the existing auditing work that is done by at least two institutions at the moment into one.

  328. Chancellor, we failed to get an answer, despite some gentle questioning on the cost of this, the additional cost. Do you have an additional cost? We agree that they have been costed but we were not going to be privy to the costs. Are you prepared to tell us? Was Mr Macpherson prepared to tell you to tell us?
  (Mr Brown) What I know is that by rationalising the operational processes of two institutions into one there is an expectation, indeed there is an understanding, that the administrative burdens will reduce and therefore there will be savings.

  Mr Mudie: So you are saved.

Mr Plaskitt

  329. For much of the last hour my colleagues have been trying to elicit an example of a department which you punished as without a PSA process and I am not sure how realistic an expectation that was. I just want to put an alternative view to you. It would be a pity to leave the Committee with the impression that the PSA process is divorced from the allocations. Would you agree, Chancellor, that if a department consistently failed to meet its PSA targets it would have a credibility problem when it came to making bids for new allocations, that this would be one way in which the PSA process would affect the next spending round?
  (Mr Brown) This is exactly why reform is brought in. If you are not satisfied with the way things are going and you think things can be done better, that is precisely why a reform agenda is agreed. I do not think anybody can say about this public spending exercise that there is an absence of reform. The inspection and auditing is one aspect of how departments are brought under greater scrutiny, but equally I described in relation to schools the process by which now departments are dealing with failing organisations at a local level—schools, hospitals, how they are dealing with prisons, how they are dealing with the Probation Service, how they are dealing with local authority housing departments, how they are dealing with social services departments. That is an example of how reform is being brought in to deal with the need for greater efficiency and value for money in the delivery of the health services. I have said, and I repeat, that as far as the departments themselves are concerned there has been a reorganisation of one department, the Department of Agriculture, because it was felt that it was too closely identified simply with farming and it ought to be for the wider countryside. These are matters for the Prime Minister, not for me. The Permanent Secretaries are now on performance related pay and these are changes that have been brought in.

Mr Cousins

  330. Chancellor, in your spending plans you have slightly increased the reserve that you hold back, very slightly, as a proportion of total spending plans. By and large there is nothing left. You have not held much back. Are you comfortable with that, if something should go wrong?
  (Mr Brown) The new system of three year budgeting is basically that each individual department is supposed to take far more care of contingencies as they arise than they used to do when there was an annual spending round. You would expect a department, and I gave you the example of health, to have provision in case something was going to happen during the course of the year. Obviously, foot and mouth, Afghanistan and other problems that arise, that cause difficulties that cannot be foreseen, are to be dealt with by the reserve.

  331. Are you sure you have got a reserve that is high enough to deal with it?
  (Mr Brown) That is obviously an issue that you have to look at from time to time but, as I say, the new system is that departments themselves have got to plan for the provision of the services for any contingency that arises and that is why I was raising with you the question of an underspend, because sometimes a department is expected to make provision for things but that emergency does not arise.

Mr Tyrie

  332. Chancellor, Peter Mandelson not long ago said that in an economic sense we are all Thatcherites now. Are you a Thatcherite now in the economic sense?
  (Mr Brown) I must say I thought this discussion was to look at the public spending White Paper. We are spending more money, not less. We are investing more substantially in improving our public services because we believe that in Health and Education the public services would do well. I think the policy pursued by her Government is not the policy that we are pursuing. As far as the expansion of enterprise is concerned, I believe that the fault in the past was perhaps that enterprise was felt to be only for a few and we are trying to open up the opportunities for enterprise, small business creation, the chance to be self-employed, to a far wider group of people so that the entrepreneurial economy that was talked about in the eighties we are trying to make more widely accessible to more people.

  333. So the answer was no really?
  (Mr Brown) I think the answer in terms of investment of public expenditure is that we are expanding it whereas here Government would like to have cut it. We are doing that because we believe in a free Health Service and we believe in education open to all.

  334. So if I can just turn the question on its head, does this mean that we can take it that this Spending Review is a Socialist Spending Review?
  (Mr Brown) It is a Labour Government Spending Review based on the principles we set down in our manifesto and it is based on enterprise and it is based on fairness, and that is the Government's political philosophy that I am putting across and that is opportunity for all.

  335. Are you a Socialist, Chancellor?
  (Mr Brown) I am a person who believes in fairness.

  336. Are you a Socialist, Chancellor?
  (Mr Brown) You have your own definition, I suspect.

  337. You are an expert on it. You have written books on it, Chancellor. I am a mere amateur.
  (Mr Brown) I believe in policies that advance fairness and equality of opportunity and some people would describe that as social democracy; some people describe it in different ways.

Mr Cousins

  338. Are you embarrassed that we never got to be Brownites?
  (Mr Brown) I would be very pleased if the whole of the Committee unanimously were to be able to say that, but I somehow suspect that that is not the case.

  Chairman: I do not think so, Chancellor, and I will hand over to David Ruffley.

Mr Ruffley

  339. Chancellor, when you announced the 1998 CSR did you increase the spending totals during the lifetime of that CSR? You added extra money on, did you not, after the original announcement?
  (Mr Brown) Yes.


 
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