MR JON CUNLIFFE, MR MARK NEALE, MS SARAH MULLEN AND MR CHRIS MARTIN

29 MARCH 2006

  Q240  Kerry McCarthy: Is there a danger that it will be published just before Parliament goes on its summer recess?

  Ms Mullen: We have not got a date yet.

  Q241  Kerry McCarthy: Is that a factor you are trying to build in, that there will be an opportunity for parliamentary scrutiny?

  Mr Cunliffe: We and ministers always take Parliament into account.

  Q242  Kerry McCarthy: Will you be publishing the PSAs for consultation prior to the outcome of the CSR?

  Ms Mullen: The PSA framework has been an important feature of our public spending framework since 1998 and that will certainly be the case for the CSR. We obviously want to, as part of the CSR, take the opportunity to look at what the framework has delivered and how we can evolve it further through the CSR, but yes, at a later stage in the process departments will be consulting on their own PSA targets and they will be published alongside the outcome of the CSR in the usual way.

  Q243  Kerry McCarthy: On education spending, the Institute of Fiscal Studies have done some calculations and, in order to meet the pledge to match spend on state school education to the average private sector spend, school spending would need to increase by the equivalent of £17 billion and would need to increase at a rate of 5.3% a year if the target is to be reached by 2013.

  Ms Mullen: I do not think it is for me to comment on the IFS analysis. What I can tell you is what the Chancellor announced and what he announced was a long-term pledge that we would move towards providing levels of funding for the state sector per pupil the same as the levels of today's funding in the independent sector, so that is broadly about £5,000 at the end of the CSR period, I think, so we are moving towards £8,000 per pupil.

  Q244  Kerry McCarthy: But a calculation has been done and you have projections that if you meet these by 2010, it would involve X amount of increase in expenditure, and if it was going to increase by 2015—

  Ms Mullen: The Chancellor did not actually announce a timescale for that pledge, but he did say that it would depend on wider factors like affordability and demographics, but, as a first step, what he did announce was that we would be moving through the CSR period to spend the same level on capital per pupil as in the independent sector and that will mean that the capital budget for education will increase from about £6.4 billion at the end of the SR04 period to £8 billion at the end of the CSR period.

  Q245  Kerry McCarthy: But there are no actual forward projections done at the moment as to what sort of scale of increase in spend you would be looking at?

  Ms Mullen: I do not think that would be helpful given that it is a long-term pledge and there is no timescale set for that.

  Q246  Kerry McCarthy: In terms of the spending settlements, I think the DWP, HMRC, the Treasury and the Cabinet Office have announced tight spending settlements. Do you expect other departments to follow suit before the CSR?

  Ms Mullen: We did announce in the Budget that the departments that you mentioned would have settlements which will be minus 5% real per annum. We also announced that the Home Office settlement would be set at flat real against its 2007-08 baseline. Our planning assumption is that the other departments will be settled as part of the Spending Review in 2007. I cannot speculate as to whether other departments might reach a settlement before then, but the planning assumption is that the majority of departments will be settled at the end of the spending review in 2007.

  Q247  Kerry McCarthy: So it is only the four departments that have announced the settlement already plus the Home Office which has the increase?

  Ms Mullen: Yes.

  Q248  Kerry McCarthy: Sorry, I didn't quite catch all of that. Did you say that the Home Office budget will increase in real terms?

  Ms Mullen: It will stay flat in real terms from 2007-08 through the CSR period.

  Q249  Mr Gauke: This is just a very quick question on the education pledge, the long-term pledge. Can I press you on whether there is an assumed timescale for this. I understand that Ed Balls has been going round telling the lobby that it is going to be met in 2020, but I do not know whether that is something you are aware of and whether you actually do have an assumption on education.

  Ms Mullen: I cannot comment on that. All I can tell you is what the Chancellor announced in the Budget and there was no timescale attached to that long-term pledge other than the particular funding provided for capital.

  Q250  Mr Love: Turning to Civil Service workforce, pay and other issues, in its recent study on efficiency, the National Audit Office suggested that a headcount reduction should only be reported "if it can be demonstrated that costs have not simply been transferred from one activity to another". Have you complied with that recommendation?

  Ms Mullen: Just generally on the report by the NAO, we very much welcome it as a positive contribution to the efficiency programme. I think there was lots that was positive in there and indeed the recognition of the unprecedented scale and ambition of the programme was welcome. The NAO did raise a number of issues that we want to take account of going forward and indeed will want to work closely with them going forward to address. Those issues did include ones like ensuring that we have measures to satisfy ourselves that quality of services had not been affected, and that is certainly something that we want to work on going forward. Now, all of the efficiency initiatives in the programme will have quality measures attached to them and some need further work and that is where the OGC and the departments concerned will be concentrating their efforts.

  Q251  Mr Love: Sorry to stop you, but I am not quite sure whether you have actually taken on board this particular recommendation. Are you saying to us that you are in discussions with the NAO about implementing that particular recommendation?

  Ms Mullen: I think we will want to take on board all of the good advice that the NAO have given us in the report.

  Q252  Mr Love: In the response to our report on the Pre-Budget Report, you confirmed that departments are allowed to use different starting dates when reporting staff reductions. Does that mean that there might be a change in the target of 84,000 headcount reductions in the timescale of April 2004 and April 2008?

  Ms Mullen: No, the target is the target as announced in SRO4. For a minority of departments who actually implemented efficiency and modernisation earlier than SRO4, and I am thinking in particular of DWP here, then we have agreed with them that they can start with an earlier baseline, but that is taken into account in the 84,000 and in the reporting going forward.

  Q253  Mr Love: This may be a slightly wider question for Mr Cunliffe, but Gershon in his original report said that the 2% efficiency savings were the maximum that could be achieved and anything greater would impact on the quality of service. In the Budget speech, the Chancellor indicated that a number of departments, including the Treasury, were looking for 5% efficiency savings. Is that likely to have a similar impact on services from those departments?

  Mr Cunliffe: If I can speak for the Treasury, there are four of us here rather than the usual five, so maybe that is—

  Q254  Chairman: Is that an efficiency saving!

  Mr Cunliffe: We were confident in the Treasury that we could meet that target over a period, because we have some time to get used to it, without compromising quality of service.

  Mr Neale: If I could come in on DWP and HMRC, these settlements were reached with the departments concerned—

  Q255  Mr Love: We were reassured about that.

  Mr Neale:— and we are very confident that it will be possible to deliver the efficiency savings presupposed by these settlements without an adverse impact on the quality of service.

  Q256  Mr Love: How much does that depend on this modernisation fund?

  Mr Neale: The modernisation fund is a very, very helpful one and it is part of the reason that the settlements were attractive to the departments, because they will have access to a fund of around £800 million to invest in their businesses.

  Q257  Mr Love: Can I turn to the single pay gateway, as it is called. We were told by one of our expert witnesses that it is the biggest recentralisation of pay negotiations since the early 1990s and then there have been various comments in relation to local pay by the introduction of the gateway. How do you respond to the suggestion that there is a tension between better Treasury control implied by this new gateway arrangement and the so-called development of local pay arrangements which are supposed to be a priority?

  Ms Mullen: I do not think there is a tension. The Government is still very committed to regional and local pay flexibility, and I think we provided a note to the Committee at the time of the PBR about that.[2] I should also note that the pay gateway is not a Treasury body, but it is actually made up of officials from across Whitehall who have an interest in pay. I do not think there is a tension in that it is perfectly possible to have localised and regionalised pay, but at the same time ensure that at central government level you are co-ordinating your advice to pay review bodies and overseeing the guidance on pay remits, for example.

  Q258 Mr Love: Let me quote from the report just briefly, or it is actually an article in relation to regional pay policy at odds with the Treasury and it says, "there has also been a tension between delegated bargaining and central control . . . That could now be exacerbated given that the Government's policy for more local pay flexibility runs counter to a widening of the vetting procedure introduced by the gateway". You do not think there is any validity in that argument?

  Ms Mullen: No, I think the two are consistent.

  Q259  Mr Love: Can I move on to public sector pensions. The Chancellor came before us on the Pre-Budget Report and talked about the sector-by-sector negotiations around about the framework agreement. Are you still confident that those negotiations will deliver the 2% saving to the public sector wage bill that the Treasury has been seeking?

  Ms Mullen: Yes, the framework that was set out in October 2005, and which set the context for the individual negotiations, was that the cost envelope would be respected, so we do still fully expect to recoup the level of savings set out in the original proposal.