Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 40 - 59)



  40. Mr O'Donnell, you do not have a view on this?
  (Mr O'Donnell) It is a matter of public spending.
  (Mr Sharples)—within the framework of the ambition the Prime Minister has set out. We are clearly on track towards the European average. The plans that we have made so far, up to 2003-04, will take us up to about 7.7 per cent of GDP for health spending (that is taking public and private together), so, as you can see, we are well on track towards the EU average by 2005. But obviously the precise details of health spending plans for the years up to 2005-06 will have to be reviewed next year in the spending review, taking account of Derek Wanless's report, when the final report is received, and we will be setting firm spending plans for health at that stage.

  41. I do not want to be too boring about this but this is quite a simple question. I am surprised Mr O'Donnell does not have an answer to it as well. The Prime Minister, who is after all responsible for the Government, gave an answer at Prime Minister's Questions last week in which he said that the commitment of the Government was to bring NHS spending as a share of GDP up the EU average by 2005. Is that, Mr O'Donnell, the policy of the Government or not?
  (Mr O'Donnell) I can only repeat what Adam has said, that in terms of health spending we will look at these issues in the light of the Spending Review 2002.

  42. You cannot confirm that the Prime Minister may be wrong about that?
  (Mr O'Donnell) It is an issue that will be sorted out in the spending review.

  43. All right, let me try something else. You follow presumably, do you not, the debates in Parliament, particularly those in which the Chancellor is involved? Are you aware that he was asked this question yesterday by the Member for Truro and St Austell: Does the Chancellor back ". . . the Prime Minister's commitment . . . to raise spending on the health service to the EU average by 2005? Was the Prime Minister right?" Chancellor: "Of course that is our policy." Are you disagreeing with the Chancellor now?
  (Mr O'Donnell) No. I have said that the issue will be considered in the light of the Spending Review next year.

  44. We have had the Chancellor of the Exchequer and the Prime Minister within the last week say that it is the policy of the Government to bring NHS spending as a share of GDP up to the EU average by 2005. Is that the policy of the Government or not?
  (Mr O'Donnell) What I have said is that for health spending they will look at that in the light of the Spending Review.

  45. But they have said that that is their policy. Is it the policy?
  (Mr O'Donnell) I do not disagree with what is being said.

  Chairman: I think, Mr Laws, we do have an opportunity, a golden opportunity, to speak to the Chancellor before us, rather than the officials themselves.

Mr Laws

  46. Perhaps I can pursue this slightly further. You are supposed to be the department that is responsible for looking at the targets that other departments are pursuing. You seem to have no view yourself and no grip on this particular target. If it is the case, as the Prime Minister has said, and the Chancellor, your own boss, has said, that you are trying to bring NHS spending up to the EU average, which average is this that you are looking at? Is it the weighted EU average or is it the unweighted EU average?
  (Mr Sharples) The figure that has been used fairly widely on this is the unweighted average for spending on health in other EU countries.

  47. That is the lower one, is it not?
  (Mr Sharples) Which is currently round about 7.9 per cent of GDP. As I said earlier, the current plans will take us to about 7.7 per cent by 2003-04, so we are well on track for delivering what you say is the ambition set out by the Prime Minister and the Chancellor for getting to the EU average by 2005.

  48. So it is the unweighted that we are looking at, not the weighted.
  (Mr Sharples) There are all sorts of different ways that one can measure these figures and obviously that figure of 7.9 per cent is a figure that goes back a few years. It takes a few years for the OECD, who produce this data, to collect data on a consistent basis. I believe that figure is for 1998.

  49. Mr Sharples, your boss—
  (Mr Sharples) Can I finish the answer. The point is that that figure may change and there are different ways of measuring averages. The shape of the EU might well be different by 2005—who knows? So there are many variables here. That is why we need to take account of all these considerations when we review spending plans in the spending review next year.

  50. So what you are saying is that your boss the Chancellor of the Exchequer and the Prime Minister have set themselves a target but you do not actually know what it is.
  (Mr Sharples) Not at all. Their policy is absolutely clear. There is the ambition of getting to the EU average by 2005 and the details of how we get there will be considered in the course of the spending review next year.

  51. Let me ask you one other question about this really important target of the Government. The EU average that you are trying to get to in 2005, according to the Chancellor and the Prime Minister—although Treasury officials do not seem willing to commit to supporting the policies of the Prime Minister and the Chancellor—the target you are committed to getting to in 2005, is that the EU average now or the EU average in 2005?
  (Mr Sharples) As I say, these are exactly the questions that will need to be considered in the course of the spending review next year.

  52. Mr O'Donnell, does this not give you cause for concern? Here it is, you are the department that is supposed to be ensuring that other Government departments have clear targets that they are trying to achieve, that they are focused on delivering, and here we have the most senior officials from the Treasury come to us to tell us that they do not know what the target of the Government is in respect of this, they do not know how it is measured, and they do not know whether they are trying to deliver it as of now or 2005. Do you not think the Treasury has quite a lot to learn from the measures that it is trying to impose upon other government departments?
  (Mr O'Donnell) Like I say, the details of that specific target will be sorted out in the Spending Review 2002.

Mr Cousins

  53. To clarify the Committee's considerations of this issue, I wonder if it would be possible for you to do us a little table showing, as best you can—and I accept all the statistical limitations—where we stand relative to the EU average, of course distinguishing between gross and net spending on health—because of course in a country like France there is a substantial element of private spending on health and our spending is less substantial—comparing like with like (ie, gross and public sector spending) then we would know slightly more where we were.
  (Mr O'Donnell) We would be happy to provide such a table.
  (Mr Sharples) Could I say on that that there is indeed a table in the Wanless report on page 64 which sets out some very helpful comparisons of health spending in this country and overseas.

  Chairman: Are you looking for more than a photocopy of that table, Jim?

Mr Cousins

  54. Really yes. I do not want to depress Mr Sharples, but we do not, as it were, carry these things around with us, either on our backs or in our heads.
  (Mr Sharples) That does not depress me at all, I can assure you.

Mr Tyrie

  55. David's question was suggesting that we have a Government policy to deliver something but we do not seem to know what the something is. The target seems to be rather vague. Perhaps I could ask the question in a slightly different way. Has the announcement of this target in any way influenced Government policy on the health service?
  (Mr Sharples) Absolutely. It is precisely because of the ambition to raise health spending in this country to the EU average that we set in the spending review last year very ambitious plans for raising spending on the health service, plans which deliver the most sustained growth in health service that we have seen in the history of the NHS. So the ambition set out by the Prime Minister at the beginning of last year provided the basis for the decisions that were taken in the spending review last year which provide for extremely rapid growth, growth of something like one-third in real terms over the five years up to 2003-04.

  56. It may not be of concern now, but at which point do you think you need a clear target. After all, you do not want to find yourself having more than met the target. For you, being Treasury men, that would be an appalling outcome. Presumably you want to be clear about what the target is at some point, even though you have made clear to us now that you are not clear about what the target is at the moment.
  (Mr Sharples) What we have been very clear about is that in the course of the spending review next year, we will be reviewing the spending plans up to 2005-06, taking account of the Government's ambition, taking account of Derek Wanless's report on long-term trends in health spending and health demands, and taking account of the overall fiscal position and the demands from other services. As you will appreciate, spending reviews are quite long and complicated processes in which we have to balance out all sorts of considerations. That is the process we will be going through next year and that process will lead to setting plans for the health service up to 2005-06.

  57. That is a response to the question: When can you meet the target? My question is: when are you going to give clarity to the definition of the target? You have made it very clear that you cannot give clarity now: you may enlarge, you could use weighted or unweighted averages, the OECD figures are produced in arrears and this makes comparisons difficult. I am asking at which point as you approach this target you will feel the need for clarity about what this target is.
  (Mr Sharples) As I have said, the spending plans to be announced next year will set out where we will get to by 2005-06. The point I would like to emphasise here is that what is being delivered is actually quite remarkable. The fact that our present spending plans provide for an increase of one-third in the real level of spending on the health service over a five year period is unprecedented. It is a step-change in the level of funding for the health service in this country towards European levels.

  58. I am asking the same question in different forms each time but we are getting closer. When that spending review is conducted, you will, as part of that review, produce the target and then will it at least be a target that we can all understand?
  (Mr Sharples) We will produce a plan for public spending on the health service up to 2005-06.

  59. That was not my question at all. That was about what level spending will be. I am sure you will produce a plan: Treasury always produces those. My question is: over here you have plans going like this and over here somewhere you have a target. You have said at the moment this target is a moveable feast, you can twiddle all sorts of dials if you feel you have to. I am asking at which point will you need that clarity of that target?
  (Mr Sharples) Can I apologise if I am not answering that precise question.

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