Examination of Witnesses (Questions 300
WEDNESDAY 24 APRIL 2002
300. Could I have an answer to the point I raised?
(Mr Brown) Yes. The major guarantees of course given
by Government, as you know, are the London Underground, the Channel
Tunnel Rail Link, Railtrack in Administration and Network Rail.
Our reporting of these I think is more transparent than all other
countries that I know of and have looked at and, therefore, our
reporting standards in the UK are way ahead of those used by other
countries. If we can give you a note on this I am happy to do
301. Rather than just wait for a note, Chancellor,
I would like to get some impression, some feel for what you think
the scale of these liabilities might be. Do you think they are
five billion pounds, ten billion pounds, 20 billion pounds, 40
billion pounds? I noted for example, if you turn to your section
on the Private Finance Initiative, PFI, page 229, and if you combine
that with the forecast you have of further PFI projects that are
likely to come that we are talking here about £44 billion
of off balance sheet finance. This is effectively, much of it,
public finance, it is finance conducted by the private sector
but a contingent liability, and, underwritten by the Government
which does not yet appear in any accounts. I wondered what proportion
of that you thought would be prudent to write in as a contingent
(Mr Brown) I do not believe that we are operating
a policy that is different from that operated by previous governments.
302. Maybe we got it wrong, Chancellor, but
I am asking you about yours.
(Mr Brown) The question is are we doing something
that is unusual or doing something that is a break with tradition.
I do not believe that what we are doing is a break with the tradition
of previous governments in this regard. As I said, the major guarantees
which people will know about are the London Underground, and of
course we are setting in place very tough arrangements as regards
the role of the private sector in this; the Channel Tunnel Rail
Link where deeds of guarantee and the obligations of London &
Continental Railways given by Government are available for all
to see; Railtrack in Administration and of course we hope that
Railtrack will be out of administration soon and we have seen
proposals put forward and responded to in that effect. These are
the major liabilities. Departmental accounts will in each case
detail their own liabilities and contingent liabilities. Departmental
contingent liabilities, including guarantees above £100,000,
are listed annually in supplementary statements to the Consolidated
Fund and the National Audit Fund accounts. So what we do is quite
in keeping with what has been done as a practice by previous governments
and is completely consistent. Can I say, also, that we publish
onward looking, forward looking estimates of the effect on the
public accounts and I think we publish estimates right up to 2030.
303. Could you refer me to the page for that,
(Mr Balls) Annex A, page 145, which was an innovation
of this Government which on the basis of cautious assumptions
sets out the fiscal position up to 2032 and shows on the basis
of cautious assumptions over the next 30 years we meet our fiscal
304. I have not yet found the annex you are
(Mr Balls) Page 145.
(Mr Brown) It is called A, Illustrative Long Term
305. Oh, yes, I have read that. You have got
the list roughly right, Chancellor, but you have not put a number
on it. What we really want to know and I think what the public
want to know is by how much is tax or borrowing going to have
to rise in future years as a consequence of the emergence of some
of these contingent liabilities which the taxpayer will eventually
have to pay for? Clearly you cannot give an exact number but you
have not written in anything at all. You are smiling now, of course
I would not expect you to come forward with an exact number but
I would expect you to have some feel for what should be written
in. Because in the absence of any indication at all the public
will be right to conclude that these accounts are not a fair representation
of the liabilities of the Government, that they understate the
amount by which tax and borrowing will have to rise, is that not
(Mr Brown) Yes. I just read out what the European
Commission and Council said about how we dealt with the problems
of pensions and they praised us for having a better system of
dealing with that than other countries. As far as the individual
industries that I have talked about, companies that I have talked
about, public sector reporting is subject to the same standards
as the private sector and there is close independent scrutiny
of what we do in all these areas by a number of bodies, including
the National Audit Office, Public Accounts Committee and I think
you know yourself, having been an advisor to a previous government,
that we are doing exactly what previous governments have done
and doing it in a consistent way. I do believe that we are operating
in every way according to the rules. You are assuming that a contingent
liability becomes automatically a liability, that is not the case.
306. I am asking you to give a feel for what
I should take account of.
(Mr Brown) Equally, just to repeat the answer that
I gave to Mr Plaskitt, because it is relevant here, the margin
that we have won for ourselves by cutting debt very substantially,
far below the 44 per cent that we inherited, to 31 to 32 per cent
allows us to say that we can deal with eventualities as they arise.
We have cut debt by something in the order of a third. We paid
off £37 billion of debt last year and therefore we are in
a position to deal with difficulties as they arise but I do emphasise
that we are not operating a policy which is in any way different
from that pursued by a previous government.
307. One last question, Chancellor. You did
say at the beginning of that answer that you thought that your
practice and accounting practices here were consistent with private
sector practice. In the light of the Enron scandal, do you not
think that with a huge off balance sheet finance taking place
there, that is exactly what the Government should avoid? Do you
not think that what people are going to conclude is that this
looks a bit like Enron economics?
(Mr Brown) Perhaps I should add, the best of public
sector reporting and consistent with the best of private sector
Chairman: On tax receipts and expenditure,
308. Chancellor, is the tax burden higher this
year than the tax burden you inherited in 1997?
(Mr Brown) The tax burden is falling this year and
it is falling in the coming year. I am very happy to read out
the figures to you. I am just going to get them for you.
309. Can you read the whole sequence? Next year,
the year after, the year after that. I will do it for you. In
this year, 2002-03, it is 36.7 per cent, it rises to 37.6 per
cent in 2003-04, the year after that it goes up to 38.1 per cent,
the year after that it goes up to 38.3 per cent, so the tax burden
is rising, is it not?
(Mr Brown) The figures are as read out but you will
see in these figures that the tax burden actually falls this year
and falls in the coming year and then rises as a result of something
that I announced in the House of Commons last week that I think
everybody knows about. There is no secret about that, that is
a rise in taxation to pay for the development of our public services
and to pay for our health services.
310. It goes up next year, it goes up the year
after that and it goes up the year after that and this year that
we are in compared with 1996-97 it is higher, is it not?
(Mr Brown) Can I just read out the figures so everybody
knows. 2000-01 37.7, falling 2001-02that is the year just
finishedto 37, falling again this year to next year 36.7,
rising for the reason that everybody knows, a rise in National
Insurance which I announced to the House of Commons just last
week by one per cent to 37.6, and I may say that all these figures
up to 2003-04 are lower than the estimate for taxation that we
inherited from the previous Conservative Government which was
37.9 per cent by the end of the five year period when they left
311. You inherited a tax burden of 35 per cent.
(Mr Brown) We have managed the public finances and
the tax revenues prudently.
312. You inherited a tax burden of 35 per cent,
did you not?
(Mr Brown) Sorry?
313. You inherited a tax burden of 35 per cent?
(Mr Brown) We inherited figures
314. That is Table C23.
(Mr Brown) The figures that we inherited were a tax
burden which was going to rise from 35.8 to 36.2.
315. Chancellor, I find it extraordinary that
you cannot even read things out from your own Red Book.
(Mr Brown) You asked me what were the figures.
316. It is extraordinary.
(Mr Brown) You asked me, Mr Ruffley, and let me finish
this answer. Mr Ruffley asked me to say what was the tax burden
317. Thirty five.
(Mr Brown) The figures that were in the last Budget
before we came to office were a tax burden rising from 35.8 under
the Conservatives, if they had continued in office, to 36.2, 36.5,
37.0, 37.5 to 37.9, higher than any figure in the tax burden that
I published up to 2003-04. So the Conservative tax burden was
higher than what we have done.
318. Can I read your own figures and those who
are interested can look at it on page 237. The actual outturn
in the year that Kenneth Clarke left office was 35 per cent.
(Mr Brown) They published figures for the next five
319. Can I move on and ask you of the tax increases
you have introduced since coming into office, what proportion
of those have been your policy changes?
(Mr Brown) It is impossible to do that because of
the changes in the behaviour of the economy, the changes in the
labour market, the changes in the international events. What people
do know is that the decision we announced last week to raise extra
funds for the National Health Service and the public services
will mean that National Insurance will rise by one per cent for
both employers and employees and that is a decision to raise money
for the public services.
1 See Appendix 8. Back