Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 320 - 339)



  320. Chancellor, I am sure you would not want to mislead the Committee. You have just said that information is not something that is available. Could I direct you to evidence given to this Committee by your very own Director of Budget and Public Finances, Mr Colin Mowl, on 20 November 2000. When he was asked a question "What proportions of the rise in the tax burden would be attributable to decisions taken by this Government?" Mr Mowl replied "I think probably around about half might be due to policy changes". Now if Mr Mowl can calculate that in 2000, why can you not do that?
  (Mr Brown) I think, Mr Ruffley, you should give the full picture. Subsequently a note was prepared by the Treasury which was submitted to the Committee which explained the difficulties of making these calculations. The note is called Supplementary Notes from HM Treasury sent to the Treasury Select Committee last year, following the Budget hearing, on the difficulties of disaggregating contributions to changes in the ratio of net taxes and social contributions to GDP. Perhaps I should ask Mr O'Donnell to explain the position.

  321. I know the excuses. The point is you have done it before, you are choosing to discontinue.
  (Mr Brown) I think it is only fair, Mr Ruffley, to give a full picture. A note was sent to this Committee, we have had no reply from the Committee on that basis.
  (Mr O'Donnell) I think it is quite clear that it is impossible for us to give reasonable estimates within margins of error on that subject.

  322. Mr Mowl was happy to do it in the past.
  (Mr O'Donnell) No. If you read that he said "probable" and there were lots of uncertainties around that and I think that was quite right.


  323. We did discuss this yesterday.
  (Mr Brown) The note stands. It is a note from the Treasury to the Select Committee explaining how this process works.

Mr Ruffley

  324. Could I ask, Chancellor, by how much NHS spending will rise in the years 2006-07 and 2007-08. Those two years together, how much will health spending rise?
  (Mr Brown) In my Budget, if someone has got a copy of the Budget.

  325. A number will be quite sufficient there.
  (Mr Brown) Yes, but in my Budget I read out the actual figures. I just read them out again. Of course we are dealing with the UK.

  326. How much in cash?
  (Mr Brown) Hold on. It goes from 72.1 to 79.3 to 87.2 to 95.9 to 105.6. I think if you look at the change from the beginning of the period to the end of the period, you are talking overall from last year, a 40 billion pound rise. Now the National Insurance rise is something in the order in total of nine to ten billion pounds and it is helping towards paying for £40 billion extra expenditure in the National Health Service but of course other means by which that expenditure is financed is economic growth and the reduction in debt and the reduction in unemployment that we have achieved.

  327. The IFS have calculated, have they not, Chancellor, this is not covered by your tax plans, those two years I have just referred to?
  (Mr Brown) That is absolutely untrue. It is in all the plans that we have set out. We have included the extra expenditure on the National Health Service right up to 2007-08. It relates to the borrowing figures that we have given to the House of Commons and to the Committee. The rise is totally covered by the figures that we have given both to the House at the time of the Budget and any subsequent figures that have been provided. The IFS is wrong.

  328. The IFS is wrong? Is that covered by borrowing? What proportion of that is covered by borrowing?
  (Mr Brown) The borrowing figures have been announced. The borrowing figures go from 13, 13, 17, 18, it is all published. We have published the figures up to 2007.

  329. Your tax plans go further than three years out?
  (Mr Brown) Our spending on the National Health Service is a five year plan.

  330. Do your tax plans go beyond three years?
  (Mr Brown) Our spending is covered by the announcements that we made during the course of the Budget. If I just explain. We have a five year health plan where I have given you the figures which lead to 105.6. All that spending is covered in the announcements that I have made.

  331. By tax. So there will not be any tax increases to cover what the IFS think are two years which are not covered by your three year tax plan?
  (Mr Brown) I have said to you that the IFS are wrong, that the spending is covered in all the figures that we have produced. If you would accept my explanation of it then that is the position. The IFS have got it wrong.

  332. Can you guarantee then in that case that there will not be any further tax increases to pay for that especially in those two years?
  (Mr Brown) No Chancellor talks about these things between Budgets and no Conservative Chancellor ever did. The only person who did do that rather regretted it. What I do say is that the public spending plans that we have set out to 2006, and the Health Service plans to 2008, are covered by all the figures that we have published and therefore covered by the announcements that we have made for taxation and for spending and for borrowing last week and it is wrong for the IFS to make that assumption.

  333. You are denying there is a £7 billion black hole and you are certain you will not have to raise tax to cover health spending in those two years? You are saying that quite clearly?
  (Mr Brown) All the figures we have set out for the Health Service are covered in the—

  334. So you will not have to raise taxes, is that what you are saying?
  (Mr Brown) No Chancellor makes announcements between Budgets about what he is going to do. You announce your commitments in your election manifesto about what you are prepared to commit yourself to. As far as the Budgets are concerned, we make our Budget judgments at the appropriate time. If you are asking me about the spending we have committed to, it is covered in the figures we have brought to the House and it is covered to 2007-08, and the whole series of questions you are putting to me is based on a wrong assumption and I am correcting that assumption because it is wrong.

  335. Just answer me, Chancellor, you will have to raise taxes to cover those two years of spending on the Health Service?
  (Mr Brown) What I am saying is, because you seem to have misunderstood—

  336. Do not answer questions I do not ask, can you answer questions I do ask. I am asking you, are tax increases ruled out in order to cover those two years of health spending?
  (Mr Brown) I have answered that question three times. I said that no Chancellor makes pre-announcements of Budgets but equally, at the same time, the spending plans we have set out are covered in all the figures we have provided to 2007-08, and when you alleged they were not covered for the last two years and that somehow there was a black hole you were acting on wrong and erroneous information.

  337. And you will not have to raise taxes—
  (Mr Brown) I have corrected that information and I think you should accept that the information on which you b ased your question, indeed the total assumption on which you based your question, was wrong.

  338. Could I ask you what the under-spend in the Department Health budget was for the year 2000-2001?
  (Mr Brown) The under-spend in the Department of Health budget was mainly an allowance set aside for emergencies which might have happened if there was a winter crisis. The under-spend on health 2000-01 was £692 million, 250 of that was planned, was carried forward as a contingency. Under the rules we accept there is end-year flexibility so the money could be spent in the course of the next year. I think you should be pleased there was not a winter crisis which required that reserve to be used to meet that winter crisis and the money could be carried forward for better uses. I think, Mr Ruffley, you are acting under a misunderstanding. The end-year flexibility that we have introduced because we have three year spending plans means you do not need to throw money around at the end of the year otherwise you lose it, you can carry the money over to the next year and use it as you would like to do for better services. It is right for the Health Department to have a reserve to deal with a potential winter crisis, the fact there was not a winter crisis means we should be pleased the money can be used for other things, and therefore the under-spend you are talking about is not a failure on the part of the Health Department, it is allowing them to use these resources for extra purposes.

  339. Are you going to guarantee, now you are putting huge sums of money into the NHS, that there will not be any under-spend in the Department of Health in the future?
  (Mr Brown) I think again you have misunderstood my answer.

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