Examination of witnesses (Questions 360
TUESDAY 20 MARCH 2001
O'DONNELL and MR
360. He has just said he is not going to answer
(Mr Brown)that I have no knowledge of and are
not based on actual quotations from Lord Burns at all, as is becoming
clear as Mr Ruffley reads this out.
361. "I refuse to be involved . . ."
in relation to that conversation on the 5 December 1997. That
is the quotation.
(Mr Brown) I think, Mr Chairman, that Mr Ruffley is
bringing the whole of the Select Committee system, where we are
examining the Budget,
Mr Ruffley: You would say that, would
Chairman: It is clearly the run-up to
the election. The Daily Mail is very interested in muck-raking
about the election. Unfortunately one member of the Committee
is prepared to act as the Daily Mail's
Mr Ruffley: I am quoting Sir Terence
362. Chairman, can we return to the Budget?
(Mr Brown) These are not quotations from Lord Burns
as you very well know.
Mr Beard: This is out of order in a session
on the Budget.
Chairman: The majority feeling is that
this is out of order. The Chancellor has made it quite clear he
is not answering your question, so give way to further questions.
Mr Ruffley: I have no further questions.
Chairman: That was not a particularly
useful use of time, I did not think.
363. Mr Macpherson, you are Director of Welfare
Reform in the Treasury.
(Mr Macpherson) Yes.
Mr Davey: Is the Treasury more involved
in welfare reform nowadays than it used to be?
Chairman: That seems to me, if I can
draw a distinction between these two questions, a perfectly valid
question to ask on the remit and it is part and parcel of what
we are doing.
364. Good. Mr Macpherson: is the Treasury more
involved with welfare reform than it used to be?
(Mr Macpherson) The Government is committed to bringing
the tax and benefit systems closer together. It also is committed
to raising employment. It is inevitable that, given those objectives,
the Treasury plays a bigger role at the current time in these
365. When we did our inquiry on the workings
of Her Majesty's Treasury under the Chancellor's stewardship we
took evidence from Sir Michael Partridge, the former Permanent
Secretary at the DSS, and he made similar comments to you, that
the Treasury is more involved, but he did say: "Particularly
in the last five years the Chancellor tends to cook up ideas and
the DSS is either told at the last minute or not told at all.
There is no chance to work it through like a proper policy and
say, `Will this really work? Is it feasible? Is it practicable?
What is the best way to do it?' It gets rushed in and things get
done and they do not work." That is a former Permanent Secretary
of the DSS. Do you recognise that approach?
(Mr Macpherson) No, I am afraid I do not recognise
it. I think actually the unique nature of working over the last
few years is that the Treasury has worked more closely with other
departments than it ever has before. A very good example of that
is the Taylor review which the Chancellor set up in 1997, after
consulting his colleagues, where Martin Taylor ran this task force
and Treasury officials, DFEE officials, DSS officials and Inland
Revenue officials all worked very closely together, producing
a report which enabled a far better broader perspective to be
brought to the problem which cut across departments. You are working
here on the tax system which is the preserve of the Inland Revenue,
and the benefit system which is the responsibility of the DSS.
366. Can you think of no example then where
the Treasury has taken initiative within the welfare remit without
informing the DSS and has just gone ahead with it?
(Mr Macpherson) All I can speak about is from my experience
where I work extremely closely with DSS and DFEE colleagues.
367. In the area of pension reform, for example,
there has been no Treasury-driven initiative?
(Mr Macpherson) The Chancellor was responsible for
working with the Secretary of State very closely. I do not know
if the Chancellor wishes to say anything
368. I was coming to him.
(Mr Macpherson) The pensions system is one of the
biggest areas of public spending. There is a big tax aspect to
pensions as well. For example, the Chancellor announced in the
Budget an increase in the personal allowances for pensioners over
the Budget period. I have worked in the Treasury since the early
eighties. I have worked on the Fowler review of the state earnings
related pension scheme and we worked very closely then with the
DSS because these were big issues. Nigel LawsonI do not
know if I am outside my remit in terms of talking about what happened
under previous governments
369. Oh, go on.
(Mr Macpherson) But Nigel Lawson and Norman Fowler
worked very closely together, though, if you read Norman Fowler's
book, he did have some questions about the extent to which Nigel
Lawson would actually discuss tax issues with him. Close working
has always been the case. These are big areas, huge areas of expenditure.
I do not have in front of me how much we spend on the state pension
scheme but we are talking in the region of £50 billion. It
would be astonishing if the Treasury did not get involved in that.
It would equally be astonishing if I did not work very closely
with my opposite numbers in the DSS. It would equally be astonishing
if the Chancellor of the Exchequer did not spend a lot of time
talking to the Secretary of State, which indeed
370. My point was that he might not be doing
that sufficiently. Can I ask the Chancellor to comment on whether
he has read the Committee's report on Her Majesty's Treasury,
and when the Government expects to reply to that report?
(Mr Brown) I would have been happier if, when you
were doing your work on the Treasury, you had asked me to give
evidence on it. You did not seem to think it was worthwhile before
you had your report to ask one of the Ministers to give evidence
on how they thought the Treasury was performing. As far as the
individual points about the report are concerned, let me just
say that despite the suggestion in the report that there has been
a degree of centralisation around the Treasury, the fact that
we have made the Bank of England independent and we have set up
the Financial Services Authority, we have set up three-year spending
reviews and not one-year spending reviews, we are signing public
service agreements which give flexibility not only to departments
but also to local authorities, we are setting up a new regime
with Regional Development Agencies where they have flexibility
as well, the public sector pay is devolved to the departments,
suggest that the Treasury has been devolving responsibilities
rather than centralising them.
371. That is helpful but you did not actually
answer the question. The question was, when are you going to reply
in full to the report?
(Mr Brown) We will reply in the normal course of events.
372. Do you think we could have a reply before
(Mr Brown) You will have a reply as quickly as possible.
I would have thought it would come quite soon, yes.
373. In paragraph 21, which is a summary of
conclusions, (e): "We are concerned that the Treasury as
an institution has recently begun to exert too much influence
over policy areas which are properly the business of other departments.
This is not necessarily in the best interests of the Treasury
or the Government as a whole." Do you reject that?
(Mr Brown) I have just explained, and that is why
I was answering the question. The Treasury is exercising less
influence in many areas. We do not control monetary policy. The
Financial Services Authority has been set up to deal with all
the issues of financial regulation when we come to these in a
minute. Public sector pay was traditionally an area where the
Treasury exercised such control that people complained about that.
The departments make their own decisions in relation to the Pay
Review Bodies, in relation to teaching, in relation to nurses'
salaries. All these are matters where devolution has taken place
and I believe that you have got to balance the need to have an
integrated approach on pensions and social security and work related
benefits, where we have been active, with the very big measures
of devolution that started the first few days that I was in the
Treasury when we made the Bank of England independent.
374. The criticism, we have heard from some
of the witnesses, is that through the public service agreements
the Treasury is micro-managing the other departments and getting
very much involved in the minutiae of the work of other departments.
Would you reject that?
(Mr Brown) Yes, I reject that, because it is the opposite
that is true. Instead of the old days where every iota of public
spending representations was gone over in great detail by the
Treasury, we have a three-year spending plan, we have the targets
that have got to be met, and within meeting these targets there
is a great deal more flexibility than existed before for the departments,
including end year flexibility in relation to spending. The old
public spending system that we inherited was essentially not dissimilar
from that created by Lord Plowden in the early sixties. It was
one year, it was ad hoc, it was incremental, it was based on failure
to distinguish between investment and consumption, there was very
little relationship between the private and public sectors in
terms of investment programmes, and it was input driven rather
than output driven. As a result of the changes that we have tried
to make over time it is three-year and therefore long term, it
is not incremental; in other words when these spending reviews
take place they look at the different things that departments
are trying to achieve and not just at whether you have an incremental
basis for awarding additional money. It is driven by a distinction
between investment and consumption. It is driven also by a desire
to bring private finance in where possible and there is a degree
of cross-departmentalism that was missing under previous spending
plans, for example, in Sure Start, the provision of services for
the young, or work amongst drugs or services for the elderly,
all the departments that have an interest in these matters are
brought together. In all these areas we have made big changes.
These changes give the departments more flexibility, not less,
in a whole series of different areas. I just point to this, which
is totally unmentioned in your report, the measures of devolution
that took place as a result of the first decisions we made when
we came into the Treasury, which included making the Bank of England
independent, creating a new Financial Services Authority and then,
latterly, devolving public sector pay to the departments themselves.
375. Moving on to separate points in our report,
Chancellor, paragraph 57, we say: "Parliament lacks the resources
necessary to hold the Treasury fully to account". Would you
be prepared to debate with the Committee, particularly in your
formal reply before or after the election, and try to assist us
in that and provide more resources to Parliament to hold your
department to account?
(Mr Brown) I do not quite know what you are suggesting.
Perhaps you can tell me what you are imagining.
376. You referred to a Liaison Committee report
and indeed a report by other Select Committees where we believe
there should be offices of the House set up to enable Select Committees
and individual MPs to have rather more information and rather
more scrutiny of the accounts and spending plans. That would require
more resources. I do not know whether you as the Chancellor would
be keen to see that.
(Mr Brown) That is a matter for Parliament itself.
If Parliament decides, as it has in the past, that it wants to
reform the Select Committee system and it wants to reform the
way the Public Accounts Committee works, that is a matter for
Parliament. If Parliament wishes to vote additional resources
for that to happen that is again a matter for Parliament.
377. What I asked you was for you to express
a view on it.
(Mr Brown) I support parliamentary scrutiny. I support
the maximum parliamentary debate possible on these issues. This
is a matter for which you should not criticise the Treasury. It
is a matter where you ought to be looking at how you could improve
or make suggestions for improving parliamentary procedures. It
is a matter in the end for Parliament itself.
378. With respect, Chancellor, the Liaison Committee,
which is an all-party committee, has produced a report and put
that forward. I am asking you whether you would look at those
reform proposals seriously to assist this Committee and other
Committees to do their scrutiny job, which you said you supported,
(Mr Brown) Of course I am happy to look at it. I just
stress to you that if Parliament wants a greater role in these
matters it is a matter for Parliament to look at it in detail.
Mr Davey: We have and we are looking
for your response, Chancellor.
Sir Michael Spicer
379. Can I just be quite clear, having chaired
that Sub-Committee, exactly what you are saying, Chancellor? Would
you support something similar to the Congressional Budget Office
that they have in the United States to look at Treasury matters?
(Mr Brown) I did not realise that you had recommended
that. Is it your recommendation?