Examination of Witnesses(Questions 120-139)|
WEDNESDAY 17 JULY 2002
120. I am just having a look at these figures.
Take me through them, because the net cash requirement for education
in the final provision is £23.520 billionas I see
it. You put me right. Top of page 6.
(Mr Sharples) This is looking at individual votes
and requests for resources which do not quite match the Departmental
121. Just bear with me, as a simple man from
Scotland and Yorkshire. As I understand it, this vote heading
would say "We made £23.5 available to education as a
net cash requirement, but in the spending provisional outturn
the net cash requirement was only £19.6", which suggests
a bit more than is being suggested.
(Mr Sharples) I cannot immediately explain the logic
122. It is all right. This is what happens when
you get documents in the middle of the hearing.
(Mr Macpherson) I think I can explain it. It comes
back to me. This is because the original estimates, I think, precede
the point at which employment was hived off the old Department
for Education and Employment and it became the Department for
Education and Skills, and Employment was shunted off to form the
DWP. I think it might be helpful if we provided you with a note3.
123. Just to come back to this, looking at the
capital spend, you said it was £1 billion, this table you
have drawn our attention says very clearly it is £2 billion
and it shows an underspending on the capital budget in the Department
for Education of about 14 per cent, in the DTI almost 19 per cent,
and in Home Office services 20 per cent.
(Mr Sharples) This comes back to the point that I
was trying to explain earlier, that the final DEL shown in the
second column of these tables sums to more than the control limit
we apply across departments.
124. Mr Sharples, we are not having that. You
have made a great play at this Committee today of how these underspends
do not matter because you have got end-year flexibility so that
you can carry the money forward. That is precisely how the final
DEL figures are arrived at.
(Mr Sharples) The final DEL figures include the draw
down of end-year flexibility. I am sorry this is a little bit
archaic but I will do my best to explain it. At the beginning
of the year, each department has a stock of end-year flexibility,
which is the sum of the money that has been carried forward from
the previous year plus any unused money from earlier years. That
figure is set out in the last table of this document and that
is available for the department to draw down during the year.
During the year the department decides how much of that it thinks
it needs to use and it comes to Parliament and seeks a supplementary
estimate to draw down part of the end-year flexibility. That then
becomes added to its departmental expenditure limit and after
going through all the supplementaries you end up with a total
which is shown in that middle column of the tables there. The
final outturn then can be compared with the departmental total.
The point is that departments are able to manage their budgets
more flexibly now that we have changed the rules to allow carry
over of unspent provision and thus manage their programmes, taking
one year with another, to ensure that services are delivered effectively.
125. So the Department for Education and Skills,
looking at the new table, has carried forward £426 million
on its capital budget from last year into this year so it is all
right. The Department of Trade and Industry has carried forward
over £400 million of capital investment from last year into
this year and that is all right. It does undermine the credibility
of these huge increases in capital spending that you have planned
in, does it not?
(Mr Sharples) I do not think it does undermine the
credibility because I come back to the point that what we are
planning for is the total and the total has been delivered. We
planned to spend £212.5 billion last year on spending within
DEL and in the end we spent £212.4 billion. That is a shortfall
of 0.05 per cent
126. It is capital budget I am talking about.
(Mr Sharples) Okay.
127. It is the capital budget. There is a different
(Mr Sharples) I am just emphasising that we planned
for a total and we come out spending in line with that total.
As I said earlier, there is a small shortfall, round about a billion
on the total of capital spending against our plans for the year.
The figures that you were pointing to quite rightly in the table
there are a different concept. They are spending by individual
departments against their individual totals once they have drawn
down end year flexibility and added it to their budgets. The point
is, if you like, that we allow a degree of over programming in
our budgets. We allow departments to operate at totals which are
slightly higher than the total that we operate to.
128. How much of the increase in planned capital
investment in the next three years represents an element of over
(Mr Sharples) It does not because those are our plans
and that is what we expect to deliver. That is equivalent to the
plan we had last year of £212.5 which is exactly what we
did deliver. £212.4 was the outturn. We spent last year exactly
to within 0.1 of a per cent. We spent last year exactly what we
proposed to spend, what we planned to spend, which gives us confidence
that when looking forward and looking at the plans for forward
years that we will spend the plans which have been set out.
(Mr Macpherson) As I said earlier, I think we are
entering far more of steady state on end year flexibility. It
is far more likely that these sums will be spent. Conceivably
if departments were to get such a grip on their public spending
and have even more ambitious plans than they have now they could
overspend on plans set out here and they could do so legitimately
because of the stock of end year flexibility which they have on
129. Could I just follow that on. In the light
of the discussions we have been having for the last almost an
hour, I want to come back to table 1.3 and this 39 per cent increase
in the transport allocation. I believe you said most of that was
(Mr Sharples) That is right.
130. It is a 39 per cent increase in the first
year of the new review period. In the light of what we have just
been talking about and the evidence in the outturn document we
have now got, it is a simple question really, are you absolutely
confident that 39 per cent spending will be done in that year?
(Mr Sharples) Can I say two things. The first is that
I think those figures are subject to a bit of distortion because
funding for the Underground is not fully accounted for in the
base line figure for spending this year. It is expected that there
will have to be some additional spend this year which is not in
those numbers whereas the spending on the Underground in future
years is accounted for in these numbers. So there is a slight
distortion which exaggerates the apparent growth rate.
131. How much does that account for?
(Mr Sharples) Certainly that will reduce the apparent
growth rate, I cannot give you a precise figure but we will be
happy to come back to you on that. Is there an overall growth
rate planned in transport spending between this year and next
year, yes there is and it is quite large, as is in line with the
transport plan, and fulfilling the plans that the Government set
out at the time of the last spending review.
132. Has there been any previous year in which
a departmentlet us just take Transporthas ever delivered
an increase in the capital spend of that sort of magnitude? Has
it done it before in recent history?
(Mr Sharples) I do not think it would be wise to put
too much weight on the figure you quoted earlier because I think
it is almost certainly subject to this distortion I mentioned.
133. It is in the document. If it is not worth
much, I do not know why it is in there. It is there, it goes from
7.66 to 10.69, I make that 39 per cent.
(Mr Sharples) I think it would be more relevant to
look at the table, if I can point you to the table on page 169,
which sets out the breakdown of the budgets into resource and
capital. You will see there that the increase in capital spend
for transport, looking at the bottom half of the table which is
the capital element, transport spend goes up from 2.9 this year
to 3.4 next year. Now that is an increase but more like, I think,
16-17 per cent rather than the 33 per cent you quoted earlier.
134. So where is all the rest of that money
(Mr Sharples) Well, if you look up at the top of the
table on the resource line, there is a larger increase there between
this year and next year and that will be distorted by the fact
that this year's figures do not yet fully reflect the costs of
135. In other words we have to do a lot more
digging for the small print than we have in here to understand
what some of these tables mean. To be honest, someone could look
at table 1.3 on page 16 and look at the transport line and reasonably
conclude that its expenditure would rise by 39 per cent between
2002-03 and 2003-04. You are actually saying that is not true?
(Mr Sharples) What I am saying is it is subject to
a distortion which I mentioned just now which I believe is explained
in the transport chapter of the document. You are absolutely right,
there is an ambitious underlying growth in capital spending that
is being planned here. As I said earlier, that is something that
the Government is strongly committed to: raising capital spend
to deliver better infrastructure, better transport services in
rail and the other services.
(Mr Macpherson) I think the targets are extremely
useful both in terms of resourcing but also in terms of the Department
focusing on what it should be there for. Only a few years ago
departments did not have any targets and my guess is that large
amounts of the Civil Service really were not totally clear what
they were supposed to be delivering in terms of outcomes. That
has really changed. In terms of the 2010 targets, I think actually
they are useful. Child poverty is a very good example. The Prime
Minister announced in 1998 or 1999 that his ambition was to abolish
child poverty within a generation. Now that sounds like a
136. Sound bite.
(Mr Macpherson) It sounds like a sound bite but it
is not. Because we followed that up with a detailed commitment
to halve child poverty by 2010 and there is a firm commitment
in the PSA to reduce it by a quarter byI cannot remember
offhand what the date is but it is 2004 I think.
137. We got a figure today which suggested rather
than meeting your target you were only a third of the way on child
poverty. Are you challenging that target? Are you challenging
(Mr Macpherson) My recollection is that the data is
published with a lag.
138. Not very comforting to the children who
are not reached, is it?
(Mr Macpherson) I can confirm that large amounts of
resources have been allocated towards children and in my previous
job, actually, I worked on this and certainly when I left it I
think something like £6 billion extra had been targeted towards
children through the tax and benefit system which was having a
significant effect on poverty.
139. I went through the Education Annual Report
following the 2000 spending review and they had a number of targets
which they openly in their Annual Report said they failed to meet.
What would you have done with that in the Treasury? What would
that have done? Would it have rung bells? Would it have meant
(Mr Macpherson) We take targets very seriously.
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