Overall expenditure trends

7. Although the Treasury is an important and powerful Department of State, its budget is small by comparison with most Government departments. The total expenditure within Departmental Expenditure Limits (DEL) of the Treasury Group—which includes the DMO, the OGC, the coinage and grants awarded to the Statistics Commission and four Parliamentary bodies[9]—in 2006-07 was £202 million, less than 0.25% of expenditure within DEL by the Department of Health in the same year, and little more than one tenth of the expenditure of a relatively small department such as the Foreign and Commonwealth Office.[10]

8. Although relatively low in comparison with most departments, the Treasury Group's expenditure within DEL is currently at high levels compared with both the recent past and the near future. Mr Macpherson told the Sub-Committee in October 2006 that, at the turn of the decade, "there was a deliberate decision to increase the size of the Treasury, partly reflecting a period of vacancies, partly reflecting a new, bigger workload".[11] The Treasury Group's DEL budget has risen from £134 million in 2001-02 to £228 million in 2007-08.[12]

9. This period of budgetary expansion is intended to be at an end. In January 2007, the Treasury's Board set out a vision for the Department as "a smaller organisation" which would be "agile, prioritising its resources, streamlining processes and working flexibly across traditional boundaries".[13] At the time of the 2006 Budget, the Treasury finalised a spending settlement for the Comprehensive Spending Review period which will see the Treasury's DEL budget fall by 5% a year on average in real terms in 2008-09, 2009-10 and 2010-11.[14] The Group's DEL budget is projected to fall to £208 million by 2010-11.[15] Mr Macpherson emphasised that "the Treasury is going to get a whole lot smaller in the coming period", but was confident that "we can do that whilst continuing to maintain the same level of service, if not improve it".[16] He went on to say of the settlement:

I think there is probably just about enough fat. I would be quite worried if you came back to us next year and said, 'Actually, Parliament decided that we had to have a 10% reduction', I would start worrying. This is an ambitious target, I think we can deliver it, but the risks would increase if you went much further faster.[17]

Under-spending and End-Year Flexibility

10. In recent years, the initial limits on Treasury Group DEL spending arising from Spending Review settlements have not proved over-ambitious, insofar as there have been significant under-spends reported for each year since 2002-03 in the Treasury Group's Resource Accounts, as shown in Table 2.

11. Mr Macpherson acknowledged that the Treasury Group had shown "a tendency to under-spend".[23] He drew attention to the importance of accounting adjustments, including impairments and early redundancy costs, in explaining some of the under-spends.[24] In October 2006, Ms Mary Keegan, then the Treasury's Finance Director, explained that the largest under-spend, in 2004-05, had been largely due to revaluation of the Treasury's property and the sale of part of the former Treasury building to HMRC.[25]

12. Mr Macpherson said that the Treasury was working intensively both to improve forecasting of expenditure and to encourage parts of the Group to spend the money allocated to them.[26] The Treasury's departmental annual report published in June 2007 indicated that the Group planned to spend its DEL allocation of £228 million in full,[27] but in November 2007 Mr Macpherson told the Sub-Committee that he expected another under-spend in 2007-08.[28]

13. As part of the new regime for planning and controlling public expenditure introduced in 1998, Government departments are allowed to carry forward resources and capital not used at the end of the financial year for use in future years under the system of End-Year Flexibility (EYF).[29] Partly in consequence of the successive under-spends that we have noted, the Treasury has built up a very substantial stock of DEL EYF. The Treasury's total DEL EYF stock carried forward from 2006-07 to 2007-08 amounts to £238,726,000, comprised of £58,798,000 saved from administration costs, £115,416,000 from other resources and £64,512,000 from capital.[30] The Treasury's DEL EYF stock exceeds its annual DEL budget, and—as a proportion of annual DEL expenditure—is more than that of most Government departments, as Table 3 demonstrates.

Sources: Column 2: HM Treasury, Public Expenditure 2006-2007 Provisional Outturn, July 2007, Cm 7156, Table 6, pp 14-15; Column 3: our calculations, based on HMT - HMT DAR 2007, Table 7.2, p.88; HMRC - HMRC DAR 2007, Annex E, Table 1, p. 66; and other source needed

14. The Treasury told us in November 2007 that it had no plans to draw down any EYF stock in 2007-08.[31] Any use of EYF would increase the Treasury's DEL.[32] The Treasury Group's DEL totals include expenditure on the Civil List. Expenditure for Her Majesty The Queen's Civil List has been fixed at £7.9 million a year until 31 December 2010.[33] Mr Macpherson told us in December 2007 that some of the EYF stock might be utilised in 2010-11 to fund the effects of the Civil List renegotiation in the event that it could not be accommodated within 2010-11 DEL provision.[34] Such an increase is unlikely to make significant inroads into EYF stock exceeding £238 million. Significant under-spends in successive years have seen the Treasury Group build up exceptionally large stocks of End-Year Flexibility, exceeding the Group's annual budget within Departmental Expenditure Limits. On the assumption that the Treasury will wish to set an example to other departments through continued restraint on Departmental Expenditure Limits expenditure in the period covered by the Comprehensive Spending Review, there appear to be few prospects for this stock to be deployed to a significant extent for the Group's expenditure within Departmental Expenditure Limits. We recommend that, in its response to this Report, the Government state whether there are any circumstances in which the Treasury Group's Departmental Expenditure Limits End-Year Flexibility stock might be used for purposes other than expenditure within the Group's Departmental Expenditure Limits.

The Gershon efficiency programme in the Treasury Group

15. The Treasury Group's under-spending against the limits set in the 2004 Spending Review has, by its own account, been enabled in part by the efficiency measures introduced since that Spending Review in response to the Gershon review.[35] The Sub-Committee conducted an inquiry into the efficiency programme in the Chancellor's departments in mid-2007, and we reported on that subject in July.[36] The Treasury Group was set a target for monetary savings with an annual value of £18.7 million by 2007-08, of which £11.9 million was to come from the Treasury, £5.8 million from OGC and OGCbuying.solutions and £1 million from the DMO. The target was adjusted in June 2006, with £1 million of the Treasury target and £0.5 million of the OGC target reallocated to a combined target of £1.5 million savings from Group Shared Services (GSS).[37] By September 2007, the Treasury had reported savings of £10.4 million, nearly meeting its revised target of £10.9 million. The OGC and DMO had met their final targets, and OGCbuying.solutions had exceeded its target. All savings were reported as "final".[38]

16. The GSS programme seeks to merge the Treasury and OGC teams dealing with information services and facilities, human resources, internal audit, and finance and procurement. On 1 April 2007, 68 OGC corporate service staff transferred to GSS.[39] The aim is to reduce spending on these areas by 20%,[40] and Mr Macpherson told the Sub-Committee in November 2007 that the GSS programme had already "driven out quite substantial savings across the Group".[41] By the end of September 2007, savings with an annual value of £2 million had been reported, against an initial target of £1.5 million by the end of 2007-08.[42] Further savings resulting from the GSS programme are expected beyond 2007-08.[43]

17. The Treasury Group has also achieved efficiency savings through the rationalisation of its estate, most notably the decision to vacate the OGC's headquarters in Trevelyan House, Great Peter Street, and move OGC staff to the Treasury's building at 1 Horse Guards Road. Mr Macpherson said that this move had not only delivered large savings, but had also resulted in improved communication between the OGC and the Treasury.[44]

18. The OGC has recently undertaken a programme of restructuring, following the launch of Transforming Government Procurement in January 2007. The OGC has a target to reduce its workforce to 250 by April 2008 under the efficiency programme.[45] In response to our Report on the Efficiency programme in the Chancellor's departments, the Government stated that its policy for the location of posts in the new OGC would be based on the business need of the location of individual posts, market availability and value for money.[46] OGCbuying.solutions has relocated 22 posts from London: 15 to Liverpool and 7 to Norwich. The Treasury itself has relocated 10 posts from London to Norwich, 5 posts as part of Group Shared Services.[47]

19. We note that the Government excluded OGCbuying.solutions from the calculations for headcount reductions under the efficiency programme due to its Trading Fund status and role as an enabler of wider efficiency savings across Government. As we stated in our Report on the efficiency programme, we believe that there is a risk that the practice of excluding certain categories of staff increases from the calculations for headcount reductions detracts from the overall credibility of the headcount statistics.[48] OGCbuying.solutions' role or status does not provide sufficient justification for its exclusion from the calculations for headcount reductions. We therefore reiterate our view that there is a risk that the practice of excluding certain categories of staff increases from calculations of headcount reductions for the purposes of the efficiency programme detracts from the overall credibility of the headcount statistics.

20. As part of the Gershon efficiency programme, the Treasury was set a target to reduce its staff by 150.[49] The baseline from which progress against this target is measured is now 1,371, following a series of adjustments to reflect staff transfers.[50] When Mr Macpherson gave oral evidence in mid-November, the Treasury's headcount was 1,165, so that a reduction of 206 posts had already been achieved.[51] Mr Macpherson told the Sub-Committee that he had no plans to fill vacant posts and bring the staff complement up to that baseline, choosing rather to carry the vacancies forward in anticipation of the further savings needed in the period beyond 1 April 2008.[52] There would be no incentive to fill the vacant posts to assist in meeting subsequent efficiency targets in the welcome absence of formal headcount reduction targets from 2008-09 onwards.[53]

Efficiency in the Treasury Group, 2008-09 to 2010-11

21. In December 2007, the Treasury published a Delivery Agreement for the efficiency savings that the Treasury Group plans to make between 2008-09 and 2010-11. The Group is committed to delivering £30 million of savings over that period, equivalent to a nominal saving of 4.1% of the Group's DEL expenditure per annum.[54] The document provides a savings target for each of the three years.[55] Five main methods of achieving the savings are identified:

• A restructuring of the Treasury's directorates to release savings and reduce headcount;
• Further development of Group Shared Services;
• Further rationalisation of the Treasury estate;
• A reduction in the OGC headcount; and
• A refinement of the DMO's procedures to increase automation and reduce support costs.[56]

Most of the savings are due to come from within the Group's administration budget, reflecting the possibility that expenditure on some demand-led programmes might increase.[57]

22. The Value for Money Delivery Agreements across Government are a new feature of the efficiency programme for the period from 2008-09 to 2010-11, intended to give further detail about individual departmental efficiency programmes,[58] and thus with the potential to address concerns expressed by us previously relating to lack of clarity about baselines, measurement methodologies and service quality.[59] In view of the extent to which Value for Money Delivery Agreements were portrayed by the Government as a new departure in reporting on efficiency, we view the Treasury Group's own document as disappointing. There are three weaknesses in particular that need to be addressed.

23. First, the Treasury's Delivery Agreement fails to provide any breakdown of the targeted efficiency savings between the methods of achieving those savings that have been identified, even though comparable information on the division of the savings target between organisations within the Treasury Group and by workstream within the Treasury itself is available in relation to the Gershon efficiency programme.[60] We recommend that, in its response to this Report, the Government set out the efficiency targets for each organisation within the Treasury Group and for further savings from estate rationalisation and Group Shared Services for each year over the period from 2008-09 to 2010-11.

24. Second, the document fails adequately to deal with the issue of measuring service quality. As we noted earlier, Mr Macpherson told the Sub-Committee that he was confident that the Treasury could cope with the proposed budgetary reduction "whilst continuing to maintain the same level of service, if not improve it".[61] The Delivery Agreement acknowledges the risk that

Pressure of CSR07 reductions leads to loss of talent, and failure to recruit and retain in the future appropriately skilled workforce, with a detrimental impact on Treasury Group performance.[62]

However, there is no indication as to how such a detrimental impact would be measured. We recommend that the Government, in its response to this Report, state how it proposes that the quality of service of the Treasury Group during the period from 2008-09 to 2010-11 be measured, and whether there are arrangements in place to identify whether efficiency savings have led to any detrimental effects on quality of performance.

25. Finally, the issue of external challenge is not tackled in the Delivery Agreement. Prior to 1 April 2007, the OGC oversaw the efficiency programme across Government, and was in a position to provide external challenge relating to the efficiency performance of the Treasury itself. In the future, the responsibility for challenging departments about their efficiency programmes will fall to the Treasury itself, a matter that we consider more generally in the next chapter.[63] The Delivery Agreement appears to envisage monitoring of the Treasury Group's efficiency programme only from within the Treasury.[64] Even if formal responsibility for general oversight of the efficiency programme across Government is separate from management of the Treasury's own programme, we consider it unsatisfactory that the role of oversight and challenge be undertaken from within the same organisation. We recommend that the Government put in place arrangements for the Cabinet Office to perform the role of challenge and oversight in relation to the Treasury Group's own efficiency programme.

The Royal Mint

BACKGROUND

26. The Royal Mint is a trading fund and executive agency which employs around 800 people, based in Llantrisant, Wales. The Chancellor of the Exchequer is the Master of the Mint. The Royal Mint Board comprises a non-executive chairman, three non-executive directors, the chief executive/Deputy Master and five executive directors. As a trading fund, the Royal Mint operates on commercial lines and is legally required to manage its funded operations so that the revenue of the fund is sufficient to meet its outgoings and that any operating loss in one year is made good in subsequent years. The Royal Mint's relationship with the Treasury is more complex than that between the Treasury and many of the other Chancellor's departments. The Treasury is both the Mint's owner and one of its main customers, for UK circulating coins. Our predecessors last reported on the work of the Royal Mint in 2001, and the Sub-Committee has subsequently scrutinised its work through regular evidence sessions.[65] On 6 June 2007, the Treasury announced that Andrew Stafford would replace David Barrass as Chief Executive; David Barrass having been interim Chief Executive since 16 January 2006.[66] Andrew Stafford commenced his role on 15 October 2007. We took evidence from Mr Stafford and Mr Barrass on 10 October.[67]

ROYAL MINT'S OVERALL FINANCIAL PERFORMANCE

27. In June 2007, the Royal Mint published results for the 2006-07 financial year which reported an operating profit before exceptional items of £8.7 million, an increase of £7.6 million on the previous year and, its highest operating profit for nine years. Retained profit for that year was reported at approximately £1.2 million compared to a loss of £1.6 million in 2005-06. This significant improvement was achieved after charging £6.4 million of exceptional items, which related to the implementation of the business improvement programme. Mr Barrass told us that the Royal Mint was now "an organisation that is absolutely fit for purpose",[68] which had re-established its position as the world's leading exporting Mint.[69]

28. As shown in Table 4 below, the Royal Mint made a profit of £1,238,000 last year; a significant contrast to the losses made in the previous two years.

[1]: The average rate of return on net assets is calculated by expressing profit as a percentage of average net assets. Profit for this calculation is taken as the retained profit plus long-term loan interest. Net assets are taken as the average of the opening and closing balance sheet capital employed plus long-term loans outstanding.

[2] Target set by Treasury

Mr Barrass attributed the improvement in part to the introduction of more efficient working practices and lower operating costs. He told us that it "been very hard work"[71] to return the Royal Mint to a profitable organisation, but that the organisation "had moved to … a very commercial, vibrant Royal Mint".[72] The operational performance and financial savings due to the restructuring programme should aid profitability in the coming financial period.[73]

29. The Royal Mint appears on course to continue its recent turnaround; Mr Barrass told the Sub-Committee that he expected the Mint's profit in 2007-08 "to do better than last year".[74] He was also confident that the Mint was in a strong position to recover previous losses in the next two years, stating that "we really are cooking on gas down there".[75] The Royal Mint exceeded its Average Rate of Return [ARR] target (3% of average net assets) set by the Treasury for 2006-07, by 0.1%. We note that in the next financial year the target rate will increase to 7.2%. The Royal Mint's Annual Report states that "due to the hedging policy of the Royal Mint the full impact of these metal price rises has yet to be realised"[76], and that such rises would be likely to increase the Mint's working capital requirements by £5 million.[77] Mr Barrass told the Sub-Committee that the ARR target for 2007-08 was a "good challenging target" and that he was confident that the Royal Mint would "over achieve against that quite substantially".[78] The Exchequer Secretary told the Sub-Committee that the "Royal Mint is in a much healthier position now than it has been in for some years".[79] We recognise that considerable work has been undertaken in the last year to enable the Royal Mint to improve its financial performance and congratulate all those concerned. We note that more work will need to be done to enable the Mint to meet its Average Rate of Return target set by the Treasury for 2007-08.

BETTER WORKING PROGRAMME

30. In August 2006, the Royal Mint announced a Better Working Programme as part of a wider effort to make long-term improvements to the performance of the organisation; an initiative aimed at modernising the organisation structure and reviewing many of the Mint's working methods. The Programme identified opportunities to increase productivity in all areas of the business. The Mint implemented initiatives to improve sales performance and purchase behaviour, and to increase output.[80] The Programme, led by Mr Barrass, incorporated significant staff input and union co-operation.[81] The programme resulted in a reduction in the number of employees; we note that all reductions were achieved wholly on a voluntary basis. Mr Barrass was pleased to report that "the real good news from a social perspective is that there were no compulsory redundancies, we had the unions with us all the way through".[82]

31. The new structure increased the focus on the individual business units. The changes also focused on the development of the Royal Mint brand, as a valuable world class brand. [83] Mr Barrass told us that the Royal Mint brand was immensely powerful: "it was almost a sleeping giant two years ago before we did the branding work that we have done". [84]

STAFF TURNOVER

32. During 2006-07, there was considerable change to the Mint's Board membership and governance structures. Four board level posts within the Mint changed staff during the year, with a new (interim) Director of Finance, Director of Marketing, Director of Collector Coin Sales and Chairman being appointed. The interim Chief Executive (who remained in post throughout 2006-07) and interim Director of Finance were due to leave in 2007-08.[85] In addition to the appointment of a new Non-Executive Chairman in March 2007, the terms of office of two Non-Executive Directors, who acted as the Chairmen of the Audit Committee and Remuneration Committee respectively, came to an end in March 2007.[86] Mr Barrass told us that the changes in the senior management team, some the result of retirement, had been "a huge opportunity".[87] The Royal Mint employed interim managers—"guys who are very talented, very skilled"[88]—to support Mr Barrass in the turn-around.

33. As a result of the Better Working Programme, seventy-two permanent staff left the Royal Mint either through early retirement or voluntary redundancy. Mr Barrass told the Sub-Committee that there had not been a target to reduce the headcount, the programme had "looked at every process that goes on in the Royal Mint and we addressed each one individually and looked at how we could improve that process; and in some places we were able to cut out total workflows that had been there 20, 25 years and were no longer adding any value to the Royal Mint and eliminate them".[89] The Exchequer Secretary concluded that "great efficiencies have been made".[90]

34. The Comptroller and Auditor General raised concerns in his report on the Royal Mint's accounts for 2006-07 that "significant staff turnover at senior levels, in particular during a time of business transformation, carries with it risks in terms of governance and control".[91] That report further noted that the Mint continued to face challenges in cementing its improved operational performance and finalising the senior management team. We were told that a permanent management team had not been established in order to allow the new Chief Executive, Mr Stafford, the opportunity of "replacing those guys in a structured way over the next perhaps six or nine months and bring on board the team that he wants to work with".[92] A permanent management team will provide stability for the Mint going forward.

CIRCULATING COIN AND COLLECTOR COIN BUSINESS

35. The Mint reported that it continued to meet the obligations of its contract with HM Treasury to supply domestic United Kingdom coin. 2006-2007 saw a 12% increase in demand to 1.6 billion coins. The enhanced flexibility within the organisation meant the additional volumes were accommodated effectively. Mr Barrass told the Sub-Committee that:

The nature of the circulating business is that it is a tender-driven operation and overseas monetary authorities will come into the worldwide market maybe for a six-month period, buy hundreds of millions of coins and then we will not see them for two years … So, if you look back over the years on our accounts, you will see that overseas UK mix going up and down depending on which tenders have come to the market.[93]

36. The Circulating Coin business also improved its profitability with a contribution of £7.3 million, a 78% increase on the 2005-06 results. Mr Barrass said that he had "moved the philosophy of the Mint away from a volume-driven manufacturer to a profit-making manufacturer".[94] The Collector Coin business had a very successful year with significant growth in both the business to customer and wholesale market areas. Profitability increased by 129% compared with 2005-06 figures, generating a £9.7 million contribution compared to £4.3 million in 2005-06.

SERVICE LEVEL AGREEMENT

37. The Treasury contracts with the Royal Mint as a customer, under a Service Level Agreement, for the manufacture and distribution of United Kingdom circulating coin. The Comptroller and Auditor General has consistently commented, in his annual report on Royal Mint's Accounts, that the outcome of negotiations over the Service Level Agreement would be important for the Mint's future profitability.[95] The Treasury worked with the Mint in 2005 to identify improvements in the arrangements for the production and distribution of UK circulating coinage.[96] The Treasury noted that the manufacturing price set under the service level agreement would affect the value of efficiencies counted under the core Treasury's programme workstream, which might therefore not reach its originally planned level, but the core Treasury's overall contribution was met.[97] The largest factor in the negotiations on the Service Level Agreement, resulting in an increase of £11.5 million in the Estimate, was metal prices.[98]

38. The new Service Level Agreement with the Royal Mint was agreed in October 2007 and covers the period April 2006 to March 2009.[99] Mr Barrass told the Sub-Committee that the Mint had taken a long time to negotiate the new contract because it wanted to "bring all aspects of that contract in line with the way we do business with third party customers" and that he believed that "it would be wrong to look at that contract as simply a price-driven contract".[100] The main change in the new agreement is for the cost of the coinage to be paid on manufacture rather than on issue. This arrangement will bring the Treasury in line with the Mint's other customers. The Service Level Agreement also covered an agreement that the Mint would pay a royalty fee for the right to produce UK collector coins. The Exchequer Secretary told the Sub-Committee that the Treasury was confident that it would be able to make most of the required £2.9 million efficiency programme savings from the renegotiation of SLA.[101] We note that the new Service Level Agreement is intended to enable the Treasury to achieve £2.9 million programme-based efficiency savings and we will return to this issue in the Autumn to see if these savings are achieved.

FUTURE PROSPECTS FOR VESTING THE MINT AS A GOVERNMENT-OWNED COMPANY

39. In December 2004, the Chancellor of the Exchequer announced an intention that the Royal Mint's business operations would be vested in a Companies Act company, wholly owned by Government. The Mint's 2006-07 report stated that work on vesting was well-advanced, but had been placed on hold pending the recruitment of the new Chief Executive and the next stage in the Royal Mint's strategic development.[102] The Sub-Committee discussed progress towards vesting the Mint in 2006 with Mr Barrass. He was clear that the Mint at that time was not operating on a suitably profitable basis:

The vesting process will take the Royal Mint from a trading fund status to a wholly owned government limited company status and ... to exist they have to be ... financially viable and to have a financially viable future. Clearly, coming off the back of two years' losses and quite a lot of cash consumption, it would have been crazy to vest at that time until we have got the business on a sustainable, profitable basis.[103]

40. Mr Barrass explained that vesting the company was critical to the development of a commercially viable mint as it would "allow us to react much more quickly to market forces, it will allow us to take much quicker commercial decisions".[104] He said that whilst the Royal Mint had previously not been in a position to be vested, its recent success had placed it "in a position where we can drive straight through that gate".[105] We welcome the Mint's ambition to develop its business by establishing itself as a corporate entity separate from Government, and we agree that it will benefit from a standard company governance framework. The Mint is clearly in its strongest and most viable position for some time and we look to its new Chief Executive to take the vesting process forward successfully.

Financial reporting

41. In reporting on its own performance in 2006-07, the Treasury for the first time combined its departmental annual report and its Resource Accounts in a single document. This is part of a pilot project to bring financial data and explanatory text together.[106] We agreed to this pilot on the understanding that the publication of the combined document would not be delayed beyond mid-June.[107] The combined document contains a useful discussion of the different sets of financial information available,[108] and facilitates some rationalisation of material, so that, for example, reporting of expenditure by objectives is contained within the Resource Accounts and not repeated within the departmental report.[109] One consequence of the merger of the separate documents has been the disappearance of separate chapters on the OGC and the DMO. We discuss the adequacy of separate reporting by the OGC later in this Report.[110] Provided that adequate arrangements are put or remain in place for reporting on the performance of the Office of Government Commerce and the Debt Management Office, and subject to the response to the specific recommendations in the remainder of this chapter, we view the pilot for combining the resource accounts and the departmental annual report of the Treasury Group as offering an opportunity for continued improvement in the quality of financial reporting by the Group in future.

42. In its 2005-06 departmental annual report, the Treasury published for the first time a table allocating its resource budget by objective.[111] That table included a planned allocation of resources by objective for what was then the coming year—2006-07—but the equivalent table in the Treasury's 2006-07 document does not include planned spending by objective in 2007-08, an omission that might be related to the rationalisation of material between the departmental annual report and the resource accounts.[112] Mr Macpherson told the Sub-Committee that the Treasury's own financial reporting had become "pretty good" over the preceding seven years or so, having been "pretty poor" previously.[113] A Financial Management Review Update for the Treasury Group in 2006 recognised that "there is more to do to improve links between targets, performance goals, risks and financial budgets".[114] Ms Louise Tulett, the Treasury's Director of Finance, Procurement and Operations, told the Sub-Committee that

in our own internal business planning we are trying to make much stronger links between resource allocation and the outcome-based internal objectives. We are trying to get away from just having an organisational approach and looking more at the outcome focus … We align our resources to our objectives.[115]

We are disappointed that the Treasury's annual report and accounts for 2006-07 do not include forward plans for expenditure linked to objectives comparable to the information provided in the departmental report for 2005-06. We recommend that such information for the period 2008-09 to 2010-11 be included within the annual report and accounts for 2007-08. The Treasury's capacity to include such plans and then to report on performance in relation to such plans will be an important indicator of the extent of the Treasury's success in seeking to raise the standards of its own financial management and reporting.

43. The Treasury Group's Resource Accounts for 2006-07 include overall figures on staff costs,[116] as well as information on the range of total remuneration of individual members of senior management.[117] Mr Macpherson confirmed that, as a matter of policy, the proportion of pay made in the form of bonuses was increasing over time.[118] The Sub-Committee asked Treasury witnesses why separate information was not available about bonus payments as a proportion of total pay in the Resource Accounts. The Treasury subsequently provided a table distinguishing base pay costs from bonuses, together with information on the bonuses paid to senior management, and Mr Macpherson agreed to consider whether such information could be included in future reports.[119] The information provided by the Treasury demonstrates that, in relation to the Treasury itself, bonus payments are not rising at an unexpected rate, but this is a matter we expect to continue to monitor. We recommend that information on bonus payments as a proportion of total Treasury Group remuneration, divided between organisations, and on bonus payments to individual members of the Executive Board be included in future reports and accounts.

44. In the Treasury's 2006 Departmental Report, a significant range of information was provided about the Group's staff by grade, including information on the Group's success in increasing the numbers of women at the most senior levels.[120] None of the equivalent information on staffing by grade appears in the 2006-07 Annual Report and Accounts. We recommend that the Treasury reinstate information on staffing by grade, including the gender and diversity of staffing by grade, in future Reports and Accounts.

10   HC (2006-07) 518, Table 7.3, p 90. Comparative expenditure totals within DEL are taken from HM Treasury, Public Expenditure Statistical Analyses 2007, April 2007, Cm 7091, Table 1.12, p 21 Back

11   HC (2005-06) 1659-i, Q 7 Back

12   HC (2006-07) 518, Table 7.3, p 90 Back

13   Ibid., para 1.13, p 24. For the timing of the vision, see Capability Review of HM Treasury, p 5. Back

14   Budget 2006, Box 6.3, p 136 Back

15   HC (2006-07) 518, Table 7.3, p 90 Back

16   Q 201 Back

17   Q 225 Back

18   HM Treasury Resource Accounts 2002-03 [HC 999 July 2003] Summary of resource outturn -p 17 Back

19   HM Treasury Resource Accounts 2003-04 [HC 920 July 2004] Summary of resource outturn -p 17 Back

20   HM Treasury Resource Accounts 2004-05 [HC 93 June 2005] Summary of resource outturn -p 18 Back

21   HM Treasury Resource Accounts 2005-06 [HC 1344 June 2006] Statement of Parliamentary Supply -p 38 Back

22   HM Treasury Resource Accounts 2006-07 [HC 518 June 2007] Statement of Parliamentary Supply -p 117 Back

23   Q 194 Back

24   Qq 194, 200 Back

25   HC (2005-06) 1659-i, Q 95 Back

26   Q 194 Back

27   HC (2006-07) 518, para 7.7, p 86 Back

28   Q 199 Back

29   Treasury Committee, Second Report of Session 2005-06, The 2005 Pre-Budget Report, HC 739, para 65 Back

30   HM Treasury, Public Expenditure 2006-2007 Provisional Outturn, July 2007, Cm 7156, Table 6, p 15 Back

31   Ev 78 Back

32   Ibid. Back

33   HC (2006-07) 518, para 7.26, p 93 Back

34   Ev 81 Back

35   HC (2006-07) 518, para 7.7, p 86 Back

36   Treasury Committee, Eighth Report of Session 2006-07, The efficiency programme in the Chancellor's departments, HC 483 Back

37   HC (2006-07) 483-I, para 112 and Table 8 Back

38   Cm 7256, Table 1, p 32. Savings under the Gershon efficiency programme can be classified as final, interim or preliminary. Back

39   HC (2006-07) 518, paras 6.56-6.57, p 81 Back

40   Capability Review of HM Treasury, p 24 Back

41   Q 199 Back

42   Cm 7256, Table 1, p 32 Back

43   HC (2006-07) 518, para 7.62, p 99 Back

44   Ibid., para 6.58, p 81; Q 204 Back

45   Treasury Committee, First Special Report of 2007-08, Government response to Committee's Eighth Report of Session 2006-07, HC 62, para 19 Back

46   Ibid. Back

47   Ibid. Back

48   Treasury Committee, Eighth Report, The efficiency programme in the Chancellor's departments, HC 483-I, 23 July 2007, para 121 Back

49   HC (2006-07) 483-I, Table 9 Back

50   Q 188; HC (2006-07) 483-I, para 117 Back

51   Qq , 188-189 Back

52   Qq 199, 218 Back

53   Treasury Committee, First Report of Session 2007-08, The 2007 Comprehensive Spending Review, HC 55, para 27 Back

54   HM Treasury Value for Money Delivery Agreement, para 1.7, p 4 Back

55   Ibid., Table 1, p 7 Back

56   Ibid., para 1.9, p 5 Back

57   Ibid. Back

58   HC (2007-08) 55, para 21 Back

59   Treasury Committee, Sixth Report of 2006-07, The 2007 Comprehensive Spending Review: prospects and processes, HC 279, para 64 Back

60   See, for example, Cm 7256, paras B.4-B.13, pp 33-34 Back

61   See paragraph 9. Back

62   HM Treasury Value for Money Delivery Agreement, Table 2, p 13 Back

63   See paragraphs 45-61.  Back

64   HM Treasury Value for Money Delivery Agreement, paras 3.3-3.5, 4.2, pp 11, 13 Back

65   Treasury Committee, Eighth Report, Session 2000-01, Royal Mint, HC 239 Back

66   HMT Press Release 2007-93, 10 September 2007 Back

67   Qq 1-88. Back

68   Q 6 Back

69   Q 66 Back

70   Based on data from Annual Report, pp 12-13. Back

71   Q 27 Back

72   Ibid. Back

73   Q 31 Back

74   Q 55 Back

75   Royal Mint, Annual Report 2006-07, Chairman's Statement, p 3 Back

76   Ibid., p 10 Back

77   Ibid.  Back

78   Q 59 Back

79   Q 622 Back

80   Letter from the Financial Secretary to the Treasury to the Committee Chairman, 25 October 2006 Back

81   Ibid. Back

82   Q 38 Back

83   Royal Mint Annual Report 2006-07, Chairman's Statement, p 3 Back

84   Q 66 Back

85   Report by the Comptroller and Auditor General on the Accounts, contained within the Royal Mint Annual Report 2006-07, p 40 Back

86   Ibid. Back

87   Q 28 Back

88   Report by the Comptroller and Auditor General on the Accounts, contained within the Royal Mint Annual Report 2006-07, p 40 Back

89   Q 37 Back

90   Q 622 Back

91   Ibid. Back

92   Q 28  Back

93   Q 47 Back

94   Report by the Comptroller and Auditor General on the Accounts, contained within the Royal Mint Annual Report 2006-07, p 40 Back

95   Ibid., p 31 Back

96   HM Treasury, Efficiency Technical Note 2005, extract from Table 2, p 6 Back

97   HC (2006-07) 483-ii, para 13 Back

98   Letter from Permanent Secretary to the Treasury, to the Sub-Committee, on the 2006-07 Spring Supplementary Estimate, 16 April 2007, p 2 Back

99   Ev 81 Back

100   Q 24 Back

101   Q 621 Back

102   Royal Mint, Annual Report 2006-07, p 9 Back

103   HC (2006-07) 1679-I, Qq 27-29, 68 Back

104   Ibid. Back

105   Q 79 Back

106   Ev 73-74, HC (2006-07) 518, Context, p 7 Back

107   Ev 74-75 Back

108   HC (2006-07) 518, para 7.9 and Table 7.1, p 87 Back

109   Ibid., p 120 Back

110   See paragraphs 69. Back

111   HM Treasury, Departmental Report 2006, May 2006, Cm 6830, Table 2a, p 98; HC (2005-06) 1659-i, Q 97 Back

112   HC (2006-07) 518, p 120 Back

113   Q 229 Back

114   Capability Review of HM Treasury, p 24 Back

115   Q 210 Back

116   HC (2006-07) 518, p 117 Back

117   Ibid., pp 107-110 Back

118   Q 170 Back

119   Qq 169-175; Ev 81-82 Back

120   Cm 6830, pp 57-59 Back