Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 160 - 179)




  160. I notice in your Public Expenditure Assessment Guidance that you say in paragraph 2.4 that a rigid model is not imposed but departments must observe the general principle that they have to read the report objectively. I presume that is clear.
  (Mr Smith) Yes.

Mr Cousins

  161. Because the Strategic Rail Authority document was published yesterday I happened just to look back at, as it then was, the DETR Annual Report for the year 2001. I do have to say it would have been very difficult to anticipate what has taken place from the report. The PSA target established new targets for rail performance in 1999, progress targets published in transport 2010, the ten year plan and so on. Is there going to be any element of review of these things to anticipate risks and challenges?
  (Mr Smith) I do not think you can expect a departmental report to anticipate every contingency that is going to arise, even some serious ones. They do set out departments' plans but in the best world plans do not always correspond to exactly what takes place. When it comes to evaluating risk I would expect if particular projects or particular programmes had a particular element of risk that would be an appropriate thing for attention to be drawn to, not simply in main departmental reports but within the overall body of information that we are talking about, part of which, of course, are the departmental investment strategies.

  162. One has to say looking back at this—I confess not to have read it in any degree of thoroughness at the time—an element of self-congratulation, which has proved not to be warranted, although in fact some of the indications are in fact there, for example punctuality. "A Second National Rail Summit was held in May 2000 to assess progress with the industry's commitments to include rail service. Since the Summit there has been a disappointing decline in punctuality across the rail network". There is no indication, of course, of a Third National Rail Summit, heaven forfend what might have followed that. Some of the indications are in fact there but they are not easily teased out. It is slightly infuriating from that point of view because it is almost as if some of these issues are in fact being referred to but not in an especially clear way.
  (Mr Smith) I think there is a balance to be struck between the accurate reporting of plans and programmes and what could be taken to veer into the area of speculation. I do not think committees or Parliament would thank departments for reporting things which were speculative.

Mr Beard

  163. Can we just talk about the relationship of the Spring Report and the Autumn Report and again going back to the PSAs that James Plaskitt was talking about. Is it that the Spring Report is going to deal with the PSA targets in a non financial way? What I do not understand is the relationship, in publicising the progress towards PSA targets, the relationship between the Spring Report and the Autumn Report?
  (Mr Smith) Okay. They will both be providing information showing the latest progress against PSA targets and in that sense there is a real addition in the information which is being provided to Parliament. One particular frustration which there has been in the Spring Reports—and this was evident last year—is when departments are reporting, and their report has been prepared before the end of the year on which the performance is being reported, you do not have the fourth quarter information usually, for example. Therefore if you want to take the performance reporting as covering the year that is being reported on, there is an element of estimating whereas what should be available in the autumn will enable you to compare what was set out in the report in the spring with what actually happened. I think that is a gain. The other stimulus, if you recall, from the RAB reforms to performance information being reported in the autumn is that one of the principles of RAB reporting is the allocation of expenditure by objectives and being able to see an outturn. Now it will be good when we are able to have the resource accounts alongside the supplementary autumn information, that is certainly the objective we want to work towards. When I said earlier that had we left the original RAB recommendations in place Parliament could have gone an unacceptably long time without performance information, what I was referring to was the fact that under the original RAB proposals, the Spring Report was just going to be forward looking and it was the Autumn Report which was going to report performance. Well, of course, if you delay that autumn performance information until the resource accounts themselves are available, which might not be until early in the following year, you could go a very long time without performance information being reported to Parliament. Just to be clear, what I am suggesting is this autumn performance information, whilst we want to have it alongside the resource accounts, I think we should do that by trying to bring the resource accounts forward rather than delaying the performance information. Where there is a gap we will give the performance information.

  164. Are you saying then that the Spring Report will be a comprehensive report that will enable one to judge to what extent the PSA targets are being met —
  (Mr Smith) On the latest information.

  165. — both on performance measures and, say, in comparison of spending against budget?
  (Mr Smith) Certainly the latest information on the performance measures, and obviously setting out the current year estimates as well as the plan for the future year.

  166. Will we be able to judge for instance in the Spring Report whether the department is underspending or not?
  (Mr Smith) Provisionally I think is the right answer to that and you will know definitely with the Public Expenditure Outturn White Paper but I will ask Adam if that is broadly correct?
  (Mr Sharples) That is right. We publish in July the Public Expenditure Outturn White Paper which gives the best estimate of what the outturn is for the previous financial year. The departmental report will be published in April which will give the best estimate at that point. There may be some further information coming through between April and July.

  167. Just for clarity, we are saying really that the Autumn Report is clarifying and making sure that the second decimal place is right of the figure that the Spring Report produces?
  (Mr Smith) Not quite, no, it is adding later performance information.

  168. And adding for the last month.
  (Mr Smith) Yes.

  169. But only in the Autumn Report will we have the resource account budgeting?
  (Mr Smith) We will have the resource accounts. We want to have them in the autumn. I have to say it has proved harder to get them as early as we would have liked and we are still working on it.

  170. If we do not have the resource accounts or some estimate of the resource accounts in the spring, how do we judge how well the department is doing on its capital spending?
  (Mr Smith) You have got an estimate of the current year and as Adam Sharples said earlier then in the July Public Expenditure Outturn White Paper you have got more final figures. Those figures themselves, of course, can be subject to later revision. It is a definitive record.

  171. There will be some estimates in the Spring Report that indicate how the resource accounts are going?
  (Mr Sharples) The Spring Reports will include the budget figures for the previous financial year, so the best estimate available at the time of the outturn against those budgets for that financial year. The point about the performance reporting that I would emphasise is that the focus of performance reporting is the Public Service Agreement targets. The broad principle that we try and follow is that whenever we report on progress against PSA targets we give the latest available information. Now in the case of exam results, it might be the results from the previous summer; in the case of crime surveys they might be done every two years. Some information is available more frequently, but at the point the report is published we would give the latest available information. The other significant point is that most PSA targets do not depend on financial year information for their reporting. So, it is perhaps a bit of a misunderstanding to imagine that there will be a strong link between the outcome on the finance side for a financial year and the performance for that financial year because the PSA target will be often working on a different cycle to the financial year cycle.

  172. Will there not be a link in terms of capital spending for that particular year? The extent to which you have spent capital in that year will indicate how well you are progressing with your investment programme even in the Spring Report.
  (Mr Smith) Yes, that will broadly be the case.

  173. That will be in?
  (Mr Smith) Yes, but of course if you are linking it with performance, the performance even on the delivery of a capital programme obviously is not an end in itself. The end in itself is the health service or the education or transport services which are provided.

  174. There is no proxy for it in many cases?
  (Mr Smith) Yes.

  175. One final thing, the resource accounts for this last year, only 25 per cent of them were available on 1st November.
  (Mr Smith) Yes.

  176. Is this view that we will have resource accounts available for the Autumn Report wishful thinking?
  (Mr Smith) That is why I said earlier that where we can publish the performance information alongside the resource accounts, clearly it is desirable to do so but the view I have come to is it would be a mistake to delay the performance information to await the resource accounts. Meanwhile we and all the other parties involved need to work to get more of the resource accounts available by November.

Dr Palmer

  177. Just a small supplementary on this point. I remember when resource accounting was debated in Parliament, we all grappled with it with a certain amount of difficulty. I wonder whether your view of the delays in the introduction of resource account reporting is that this is due to departments having certain technical difficulty in adjusting to opportunity costs and so on or is it more a question of priority?
  (Mr Smith) Do you mean what we have just been discussing, the resource accounts not coming forward as early in the year as we would like?

  178. Yes.
  (Mr Smith) I do not think this timeliness of accounts problem has been unique to resource accounting, I think we have not had the cash accounts as early as we might have liked either. Obviously changing to a new system does involve a process of education and training. No, I think it just is that we have got to do more to examine best practice of those departments that are able to get it in a timely fashion and work with the National Audit Office and others to make sure that we do better.

Mr Laws

  179. Chief Secretary, Mr Cousins' intervention highlighted the danger with these types of reports that they can tend to highlight the good news and play down the bad. Could you just let us know what the role of Treasury and non departmental staff is in preparing the annual reports and the departmental reports and scrutinising the information that is in them?
  (Mr Smith) First of all, of course, the example which Mr Cousins gave did include one where punctuality was disappointing, I think was the phrase he used. So it is not like a positive spin was being put on everything even in that report.

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