Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 260 - 279)



  260. And how much value to the UK economy did that review show that this relief would have?
  (Mr Gibbs) I cannot put a number on it, I am afraid, I do not remember it.

  261. You came up with a number?
  (Mr Gibbs) I cannot remember. What it did show is that the relief had succeeded in many ways in meeting its original objective. One year on we have got new evidence that it is also supporting lots of TV programmes. I do not think there is any inconsistency between that.

  262. Through the Chairman, before I ask my last question, could I ask whether we could have a note on that economic evaluation because it seems to me it is extremely important that we should know how much this tax has benefited the UK and how much it has cost.
  (Mr Gibbs) We would be happy to give you a note on the effects of the film tax relief.

  263. Turning to a last question on the reduced rate of duty on small breweries?
  (Mr Gibbs) Me again.

  264. What economic evaluation have you carried out into the benefit of reduced rate of duty on small breweries?
  (Mr Gibbs) Customs & Excise have done a lot of work. We have worked with them on this. We have had a lot of discussion with the sectors of the brewing industry that would be most affected.

  265. Have you carried out any economic evaluation of the benefit of this measure?
  (Mr Gibbs) I think it depends what you mean by an "economic evaluation". What we have done is try to assess the need for the measure in terms of the structure of the brewing market


  266. What is the rationale for the measure?
  (Mr Gibbs) The rationale is to help the smallest brewers compete with larger brewers and so to promote diversity in the brewing industry.

  267. And this should be extended to many other sectors, should it, whether small cheese manufacturers or—? You favour the general principle that the tax burden should be lighter on small producers than on large producers?
  (Mr Gibbs) I do not think we have a general principle in that area in one direction or the other but it is the case that 20 years ago under the UK Presidency of the EU the then Financial Secretary of the Treasury negotiated into EU law provision for a small beer duty relief for small brewers on the basis that both in the UK and overseas it is the case that small brewers face particular problems in gaining access to the market, principally because they find it hard, even though most consumers say they produce a very good product, getting anybody to distribute it and sell it.

  268. Are you concerned that implementing these types of measures leads to seven pages which are down on the Order Paper, descriptions of small breweries, definitions of co-operative breweries and so forth? Are you getting worried that this is leading to further complications in the tax system and, who knows, maybe even more loopholes that you will have to close in future years?
  (Mr Gibbs) I think the relief, as I understand it, has been very tightly defined.


  269. What percentage by volume of the beer sold in this country will be subject to the low rate?
  (Mr Gibbs) I think I have the number somewhere but I am afraid it has slipped my mind[2].

  270. Could you reflect on it and we will go on to the next section and then come back.
  (Mr Gibbs) From memory I think it is in the low single figures of percentage. I will see if I can find it.
  (Mr O'Donnell) We would hope for a behavioural effect here, that it might increase.

  271. It is a populist measure then, is it?
  (Mr O'Donnell) It is a measure that we hope will be responded to.

  Chairman: Okay. We have got ten minutes left, we will move on to health spending.

Dr Palmer

  272. I was going to ask one more business question but in view of your comments I will go straight on to health. The Wanless report notes that in regard to health spending "the range of uncertainty is large and grows rapidly the further ahead one looks". How much confidence do you actually place in the figures suggested by Wanless?
  (Mr Macpherson) We think this is a good report. It reflects extensive analysis. I think most people agree that it has gone into greater detail in terms of making a long-term projection of health spending than any attempt hitherto. It is also worth bearing in mind in looking at the report in April that there was also an extensive interim report last November. I think we attach reasonable confidence to it. Having said that, of course we have only set plans for the next five years. The Wanless review does produce wider confidence intervals in terms of the various different scenarios it sets out as you go into the future, so whereas for the first five years the confidence margin is actually pretty narrow, by the time you are getting up to 2022 quite rightly it suggests a rather wider margin.

  273. One aspect which has not had a great deal of publicity is the fact that Wanless places, I think rightly, great emphasis on public health education, on the behaviour of individuals. One thing he does not do is actually predict which of these three scenarios is likely to happen. Also he does not, as far as I can see, set out ways in which the Government can influence which scenario is going to happen. Which scenario do you think will happen?
  (Mr Macpherson) I think Wanless in a sense has laid down a challenge for Government at various levels to actually respond to this. It is quite clear, it came out in the consultation period since November, that a lot of the experts think that this is an area which can yield a pretty big return. It is one reason why in terms of the various PSA targets which the Department of Health have we attach quite considerable importance to health inequalities. It is very striking that it is amongst lower socio-economic groups that actually the greatest gap can be made up if we want to come up the health outcome performance of comparable European countries. If you look at Sweden, for example, which on the whole is a more equal society than the United Kingdom, the health outcomes are very much more impressive across the board.

  274. Would you go as far as to say, in fact, that because the Treasury is obviously anxious to get value for money that one of the major points in discussing the increased budget for the Department of Health would be that a significant proportion of this new spending is spent on moving to the more favourable scenario, in other words promoting public health?
  (Mr Macpherson) I regard that as a very high priority. If you look at—I cannot remember what it is called—the fully engaged scenario, it is desirable on just about every front. For a start it actually has better outcomes, people live longer and they live more healthily, so that is pretty desirable, and we make serious progress in terms of the anti-smoking strategy. I think from the Treasury perspective you will be astonished to hear that we are particularly attracted to the scenario on productivity where you get far better productivity gains both in the first ten years but, looking further forward with this engagement on all fronts, even better results in the second decade. We are actively engaging with the Department of Health and their Secretary of State made a whole raft of announcements last Thursday with which we fully concur. Reform is critical to this process. The more we can make progress in terms of creating an even better managed, even more dynamic National Health Service, the better return in outcomes we will get for a given sum of money.

  275. Just pressing you very slightly more, we would all agree with that but would you actually say that this is a specific objective which you are asking the Department of Health to reach to maximise the chance of the fully engaged scenario?
  (Mr Macpherson) What we are doing with the Department of Health over the next two or three months is finalising the Public Service Agreement which will be announced at the finish of the Spending Review. Although I suspect we will not articulate the fully engaged scenario as a specific target because it is actually rather long-term, I hope that it will certainly inform the sort of targets we agree with the Department.

Mr Beard

  276. The Wanless report says "The Review believes that its projections for UK real terms spending growth of 7.1 to 7.3 per cent over the next five years are at the upper end of what could sensibly be spent. Indeed, to be wisely spent, they would represent a very considerable management challenge". How are you going to ensure that these very big increases are wisely spent? How are they going to be spent? How is it going to be divided between salaries, replacement costs and new investment? Especially, if I may add, as you have just had three years where under spending has been a characteristic of the Department and other public service departments.
  (Mr Macpherson) I do not think that has been the case with the Department of Health recently. Clearly this is a large amount of money and the Treasury, as the representative of the taxpayer, is extremely keen to get the best possible deal for it. Over the next couple of months we are going to be agreeing with the Department of Health its new Public Service Agreement which will set out clear targets and we will also be agreeing a Departmental Investment Strategy to ensure that the really very big increases in capital spending get a decent return. In terms of how precisely the money will be allocated, I think that will be decided later in the year. I do not think that Alan Milburn has yet made an allocation, but there are certain key principles which are going to inform how money is allocated. The first is that we are moving to a National Health Service where power over delivery is increasingly devolved. Some people argue that the old NHS was consistent with a Stalinist approach to life. Well, we are moving away from that and a lot of money, something like 75 per of funding, is going to go through primary care trusts at local level.

  277. In that case although you have the PSAs which will define where it should be going, are we likely to end up this time next year looking at PSAs and saying "Whoops, we have only half spent it." How are you going to ensure that in the meantime you have got the management expertise and systems in place where you are going to be spending consistently and not just wringing your hands at the end of 12 months when it has not been spent?
  (Mr Macpherson) I think you are quite right to raise that issue. The Health Service at a local level is going to be increasingly incentivised to deliver those targets. It is striking that in the year just finished it did hit its waiting times targets in terms of a 15-month wait for an operation in the hospital, but there is a lot more to be done. Through the reforms I think we will make quite rapid progress because people will be increasingly incentivised.

  278. What does "incentivised" mean?
  (Mr Macpherson) One example is greater freedoms which are going to be given to high performing trusts (three star trusts) which will have far more freedom in terms of allocating their money. We are also moving to a more efficient system across the Health Service in terms of money following the patient. There are various pilot schemes to introduce greater choice within the Health Service and, as part of that, money will follow the patient to the most efficient and high-performing trusts.

  279. These are all general principles. Who in any particular district or hospital or primary care trust is going to be accountable not just for making sure that nobody has got their fingers in the till but for making sure that they have fulfilled what the money was intended to do?
  (Mr Macpherson) The new strategic health authorities are going to have a key role in terms of holding local hospital trusts and primary care trusts to account. They will be helped by a new and strengthened independent Audit and Inspection Commission, which I think will give the public far greater information in terms of what is going on in their area. Ultimately it is going to be the public that is going to hold a lot of these institutions to account and one of the key planks of the reform process is greater public engagement.

2   Note by witness: The Treasury estimate that 2 per cent by volume of beer sold in the UK will benefit from the relief. Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 15 May 2002