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

29 MARCH 2006

  Q300  Kerry McCarthy: I do not quite see how, if passenger numbers have gone up by 35%, you can say it has had an impact on behaviour. It is not stopping people from taking flights.

  Mr Neale: You need to look at the counterfactual situation, ie what the level of air travel would have been without an air passenger duty.

  Q301  Chairman: How do you do that? Do you just think of a number and double it?

  Mr Neale: You can base it on surveys of people's behaviour.

  Q302  Chairman: Have you done that?

  Mr Neale: There is quite a sophisticated audit process to ensure that the numbers we give are robust in terms of the reductions in emissions, yes. The point I am making on transport and aviation in particular is that we see bringing aviation within the EU Emissions Trading Scheme as the most effective way of bearing on incentives and behaviour.

  Q303  Kerry McCarthy: I accept that is important. I would like to pick up on the statement in the Red Book that the freeze in the air passenger duty for the fifth year in succession is linked to the volatility of the oil market. I am not aware of much evidence that the fluctuations in fuel prices are having much of an impact on the price of air flights. Would freezing the air passenger duty have an impact in the big scheme of things? Would it make much difference?

  Mr Neale: The underlining rise in oil prices has certainly had an impact on the cost of aviation and that in itself has an impact on people's behaviour and propensity to consume.

  Q304  Kerry McCarthy: It is certainly not having a downward impact on the number of people taking flights as compared to the number of people who would have been doing so anyway.

  Mr Neale: The point is that the cost of air travel has risen as a result of the rise in oil prices and that will have had an impact on people's behaviour.

  Chairman: I think you need to brush up on your answers for tomorrow with the Chancellor coming.

  Q305  Mr Gauke: I want to ask about trusts and inheritance tax. There is widespread concern within the legal profession about the proposals for taxing trusts. What were your estimates of the number of wills that will be affected by your proposals?

  Mr Neale: We do not have an estimate of the number of wills that will be affected. What we do have is an estimate of the number of trusts that will be affected.

  Q306  Mr Gauke: What I am hearing is that there are an awful lot of wills that are going to have to be reviewed as a consequence of this and it is something that the Treasury does not seem to have expected. You appear to be creating a tax incentive for beneficiaries to control family trusts at the age of 18 as opposed to 25. Was that a deliberate intention or is that something that has arisen as a consequence of your proposals?

  Mr Neale: The purpose of this measure is to ensure that trusts remain available for the wholly legitimate purpose of protecting the interests of vulnerable people including children, but as in a whole range of other contexts, voting and so on, we regard childhood as ending at age 18.

  Q307  Mr Gauke: So it would not be wholly legitimate to have a trust that came into effect for the beneficiaries at 25?

  Mr Neale: From 2008, a trust that enabled people to benefit at the age of 25 would come within the new tax measures.

  Q308  Mr Gauke: When we had John Whiting here he commented on the fact that you have been consulting since December 2003 on modernising the tax regime for trusts and yet there has not been a word of these proposals and he described that as "outrageous". Why was there no consultation on this?

  Mr Neale: I do not agree with that because we do not generally consult on Budget measures where there is a potential behavioural impact and the risk of forestalling, and that would certainly have been the case in this case.

  Q309  Chairman: Could you give us an estimated number of the trusts that are affected by these changes?

  Mr Neale: We estimate that there are about 100,000 discretionary trusts and only a small minority of those are accumulation and maintenance trusts of the kind that are caught by this Budget measure. Of   that small minority of accumulation and maintenance trusts, only those containing assets above the inheritance tax threshold will be caught, so it is a minority of a minority.

  Q310  Chairman: The consultation you have set up on the independence of the Office of National Statistics is set to close by 14 June. What is your expected timetable after that point for publishing a White Paper, a drift bill and a bill?

  Mr Cunliffe: Our ambition is to have a bill introduced in the autumn, if there is room for it in the Government's programme and we would respond to the consultation probably after the summer break and before the instruction of a bill.

  Q311  Chairman: One point that has been made to us is about the work done by statisticians in government departments themselves where there was a question mark over the effectiveness of the authority of the ONS if there is still a separation between these statisticians.

  Mr Cunliffe: We took a decision to maintain the decentralised nature of statistics in the UK. It goes back a long way and it has a lot of benefits. National Statistics which are produced in departments will need to conform and will be audited by the new body. If a National Statistic is produced in the department, it will come under the new body and it will check it for quality and rigger and conformity with the Code.

  Q312  Jim Cousins: Will the length of the trade cycle be one of the issues covered by the Independent Statistics Commission?

  Mr Cunliffe: I think the trade statistics will certainly come under the Commission.

  Q313  Jim Cousins: No, it was the trade cycle I was referring to, not flows of goods in and out of the country. For example, in your own presentation earlier you referred to a half cycle and then another half cycle in the trade cycle. Will the trade cycle be something that is independently evaluated by the Statistics Commission?

  Mr Cunliffe: The forecasts of the economic cycle are based on statistics and those statistics will come under the new body, but the Treasury remains responsible for its own forecasts. The ONS is not a forecasting body. Checking ex post on the date of cycle is something that we have asked the NAO to do and they will audit. The ONS will be responsible for the statistics on which we make forecasts but they will not become a forecasting body, nor would the new statistics board.

  Q314  Chairman: You have promised us a few pieces of information.

  Mr Cunliffe: I may be able to answer one question now. Mr Fallon asked about Scottish Water and whether it was included in the privatisation proceeds. The answer is that the NAO audited assumption is only to include in those proceeds privatisations where sales have been announced. The second point is that the issue of Scottish Water is a matter wholly for the Scottish Executive. As far as I know there has been no announcement and so it is not included in the figures.

  Q315  Mr Fallon: So it remains true that there have been no discussions between the Treasury and the Scottish Executive?

  Mr Cunliffe: It is entirely a matter for the Scottish Executive.

  Q316  Mr Fallon: Does it remain true that there have been no discussions between the Treasury and the Scottish Executive?

  Mr Cunliffe: Scottish Water is entirely a matter for the Scottish Executive.

  Q317  Chairman: That means that if Scottish Water was at some stage being considered for privatisation or going to be privatised then it would be the Scottish Executive announcing that and the proceeds would go to the Scottish Executive, would it not?

  Mr Cunliffe: All this table shows is privatisation receipts from the public sector generally.

  Q318  Chairman: Could you answer my question specifically?

  Mr Cunliffe: As to where the receipts will go?

  Q319  Chairman: Yes.

  Mr Cunliffe: We will have to give you a further note on that. My guess is they will go to the Scottish Executive.

  Chairman: Thank you very much for your time. It has been a very helpful session.