Examination of Witnesses(Questions 100-119)|
WEDNESDAY 17 JULY 2002
100. Why is it that the Government deflator
is a larger figure than that?
(Mr Macpherson) The Government deflator is a measure
which is very much in its infancy, and the Office for National
Statistics, quite rightly, are trying to develop better measures
of output than those used historically. It may be helpful if I
explain just how the Government deflator is estimated. What happens
is that you divide the level of spending on public services by
an estimate of output, which then gives you the answer of what
the deflator is. Now, the Office for National Statistics, as I
say, have embarked on a very ambitious programme of measuring
output and I think they are making progress. However, I do have
some doubts at this stage as to whether the measure of output
is the best yet. For example, one way
101. You will accept, on the basis
(Mr Macpherson) Please can I explain this, because
I think it is quite relevant. At the moment the measures of output
do not seem to measure quality as effectively as we would like.
An example of that is measures of education output, calculated
in terms of pupil years taught. So, for example, let us say a
teacher was teaching exactly the same number of lessons but, in
one case, he or she was teaching a class of 50 compared to a class
of 25. According to this measure, output would be twice as high
in the class which had 50 pupils in it. It is conceivable that
quality could be maintained in that environment, but I have my
102. That is very interesting, but that is an
issue, no doubt, that you are pursuing with the ONS.
(Mr Macpherson) Indeed it is.
103. On the basis of their present figures,
cost relative to output is rising a lot faster than 2.5 per cent,
is it not?
(Mr Macpherson) I am not at all certain that it is.
It is very striking, looking at the average earnings figures which
were published this morning, that public sector earnings are now
rising in line with those in the private sector, at a rate of
around 3.8 per cent. So it does not require a huge amount of efficiency
savings from those 3.8 per cent earnings increases to result in
a cost increase of 2.5 per cent.
Chairman: My colleague, George Mudie,
has just come hot-foot from the Vote Office.
104. This was not in the Vote Office until the
next day, and that would be after the story appeared in the paper.
It does make interesting reading. There is a suggestion, as a
politician looking down these headings, it might have taken the
gilt off the gingerbread if the opposition had that paper with
the other papers, because underspends would be offset against
these great statements. So why was it not released
(Mr Macpherson) As we said, we will write about what
happened, because Adam's and my understanding was that it had
been placed in the Vote Office on the day.
105. It was not due in the Vote Office, Mr Macpherson,
by their list, till 2.30 the following afternoon, and it was slipped
in at 11.30I presume following press reports on the education
budget; the press had obviously gone on the website and discovered
its existence, printed it and saw it was released. However, it
was not due until Tuesday afternoon. To bring a Spending Review
statement out which slipped an important paper like that out a
day later asks a lot of questions, Mr Macpherson.
(Mr Macpherson) You are quite right to pose the question
and we will give you an answer when we have found out what happened
our end. I should reinforce the point that actually the outturn
figures are not wildly different at all from those we published
in the budget, so I do not think there is any sort of sense that
we were trying to conceal anything; a lot of this is fairly old
news. We will certainly come back to you.
Mr Mudie: It is not old news at all.
It is the latest Provisional Outturn and it differs from the previous
year's figures in a meaningful way. If you ask Mr Howard if he
thought it was old news or would have been useful on Monday, in
view of his performance, he would have bitten your arm off to
get that statement!
106. This is supposed to be Parliament, not
a chorus line.
(Mr Sharples) I am sorry we cannot give you a full
answer on this at this stage because we do not deal with the distribution
of the documents directly, but we will find out what happened
and give you a full answer.
107. One question, coming back to Mr Cousins'
questions: you have identified in the total underspend, of the
£2.8 billion, £1 billion was departmental and the rest
was depreciation, local authority and public corporations. Can
you give us a breakdown of the remaining £1.8 billion. How
does it distribute between those three?
(Mr Sharples) I cannot give you precise figures on
that at that stage, but we would be happy to give you a note on
Dr Palmer: That would be great. If you
have any identification of particular reasons why one of the corporations
postponed a major investment, that would be helpful too.
108. Any other questions? Could I just ask,
the press notice claims DEL spending will rise by £24 billion
in 2003-04, 40 billion in 2004-05 and £61 billion in 2005-06.
Do you think the press notice made it clear that it was stating
that these were changes compared to 2002-03 rather than year-on-year?
What we have calculated is that for year-on-year public sector
net investment, the rises in spending are £23.8 billion,
£16.3 billion and £21.2 billion rather than what was
put in the press notice.
(Mr Sharples) You are absolutely right that the first
run of figures that you quoted are changes from the spending this
year, in 2002-03. That presentation has been used consistently
and, I hope, is explained very clearly in all the different documents
and statements that have been made.
109. But the headline figures are £24 billion,
£40 billion, £61 billion, whereas, really, what they
are in terms of year-on-year are £23.8, £16.3 and £21.2.
You can see how some people would feel, maybe, a little bit cheated
by looking at that and then finding out what the real figures
(Mr Sharples) As I say, I think in every presentation
we have been very careful to say that in three year's time we
will be spending £61 billion more than we are spending this
year. That seems to us to be the clearest way of explaining what
is happening and the overall increase in spending on public services
within Departmental Expenditure Limits. Of course, you are absolutely
right there are many different ways of explaining what can be
quite a complicated run of figures, but we hope we have been clear
and we hope we have been consistent.
110. I think there is going to be a fear that
you have not been as clear and transparent as you could be. Again,
if you could take that back. It is important.
(Mr Macpherson) One thing I would say is that we have
really tried very hard to provide a lot more tables and information
in as clear a way as possible. I think the annexe at the end is
significantly longer than in 2000, but clearly we can always improve
111. Can I just say, ChairmanI am trying
desperately hard with thisthis does not seem to separately
identify the capital budget, does it?
(Mr Macpherson) Yes, it does. I think Table 1A on
page 4 sets out the provisional capital outturn.
(Mr Sharples) Table 1 is the resource outturnthat
is current spendingthe second table shows the same figures
on the capital budget.
112. This is purely the departmental budget;
it does not include the additional information that we have asked
(Mr Sharples) This showsfor those of you who
have this document in front of youin the middle column
the Final DEL. That is the final provision once you have added
in the end-year flexibility entitlement that has been drawn down
through estimates. The last column shows the provisional outturn,
which is the best current estimate of the outturn, which can be
compared with that final provision. It is, of course, only a provisional
estimate because this will be subject to confirmation when the
departments' accounts for this year are audited in the autumn.
113. It shows a substantial underspending on
DTI, does it not?
(Mr Sharples) There is an underspend on DTI, yes.
114. What is the percentage?
(Mr Sharples) I do not have the percentage immediately
to hand, I am sorry, but it can be calculated if anyone has a
115. If I told you it was 20 per cent would
you be surprised?
(Mr Sharples) I would be surprised if it was that
high but anyone with a calculator should be able to confirm this.
116. Mr Sharples, I just want to clarify the
Government's attitude once more to this underspend that we have
got in education last year, which we have just discussed. I draw
your attention to that well-established vehicle of Government
communication The Sun which says "Miss Morris, the
Education Secretary, was furious yesterday when she learned that
£1.2 billion earmarked for education last year is still sitting
in the bank awaiting projects to be finalised". There seems
to be an impression coming across from one part of the Government
that something has gone wrong here and we should be concerned
that this money has not been spent, but the Treasury's attitude
seems to be that this is no bad thing, just good management of
resources. Which is, actually, the view of the Government?
(Mr Sharples) The point I was making earlier was a
general point about underspending. Of course ministers are concerned
to ensure that spending which is planned, which is intended to
deliver improved services, is flowing through effectively to delivery.
117. Is the Government happy or unhappy that
there was a £1.2 billion underspend in education last year?
(Mr Sharples) We want to see the spending which has
been planned for education flowing through to deliver the improvements
in schools and colleges that the budgets were intended to
118. So the Chancellor would share the fact
that Miss Morris was furioushe would have a similar view?
(Mr Sharples) I am sorry, I cannot comment on the
Chancellor's view. He will be talking to you tomorrow.
119. What about your view?
(Mr Sharples) My view, as I say, is that ministers
will want to ensure that the money that they have put into budget
in order to deliver improvements in public services is being managed
effectively and flowing through to deliver those service improvements.
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