1.  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. (Paragraph 14)

2.  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. (Paragraph 19)

3.  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. (Paragraph 22)

4.  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. (Paragraph 23)

5.  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. (Paragraph 24)

6.  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. (Paragraph 25)

7.  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. (Paragraph 29)

8.  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. (Paragraph 38)

9.  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. (Paragraph 40)

10.  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. (Paragraph 41)

11.  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. (Paragraph 42)

12.  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. (Paragraph 43)

13.   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. (Paragraph 44)

14.  The Treasury's roles in allocating and controlling public spending and in acting as a guardian of propriety and economy in public services mean that it will never be universally popular amongst other Government departments and other stakeholders. While we would not wish the Treasury to become too inhibited in performing its role at the centre of Government, we welcome the steps that the Treasury is taking in response to the call in the Capability Review for "greater inclusiveness and humility" in the Treasury's dealings with others. We recommend that a summary of the results of the annual surveys of stakeholder opinion and the Treasury's response to stakeholders be published in the Treasury's annual reports. We further recommend that a summary of quantitative evidence from the survey conducted as part of the Capability Review be published in the Government's response to this Report, to serve as a baseline for measuring progress in the subsequent, annual surveys. We recommend that the Treasury take steps to address concerns expressed in the Capability Review to bolster the depth and breadth of their officials' practical experience. (Paragraph 48)

15.  We are not convinced that the Treasury's Public Spending Directorate is suitably placed to play an effective role in supporting and challenging departmental efficiency programmes. It is not evident that a role in questioning the validity of claimed efficiency savings is compatible with the task of ensuring that public spending limits are adhered to. The Capability Review of the Treasury demonstrates that our uncertainty is shared by others. We recommend that the Treasury clarify its own role in relation to the efficiency programme for the period from 2008 to 2011 in a swift response to this Report. (Paragraph 51)

16.  We welcome progress by the Treasury, other Government departments and the National Audit Office towards the objective of laying all Resource Accounts before the House of Commons before the Summer recess. We look forward to further progress on the quality of such Accounts measured by the number of qualified Accounts. (Paragraph 53)

17.  We expect the Government, in its response to this Report, to explain why the Treasury's objective for the appointment of professionally-qualified Finance Directors in all departments by December 2006 was not met. We further recommend that a relevant accountancy qualification be described as an essential criterion in all future advertisements for posts of departmental Finance Directors. (Paragraph 54)

18.  We recommend that the Treasury identify a method of measuring its success in its own role in supporting improvements in financial management across Government, such as the annual survey of stakeholder opinion, and report on performance against that measure in future department annual reports. (Paragraph 55)

19.  We are disappointed by the absence of any meaningful information in Delivery Agreements accompanying the new Public Service Agreements for the period from 2008-09 to 2010-11 about linkages between delivery against outcome indicators and the resources to be applied to each Public Service Agreement. This indicates that there is still some considerable room for improvement in financial and performance management within Government. We recommend that the Treasury set itself a target to ensure that the Public Service Agreements finalised as part of the next Spending Review in 2009 or 2010 include a clear statement about the resources to be allocated across Government to the delivery of each Agreement. (Paragraph 57)

20.  We will continue to examine the implications of the implementation of International Financial Reporting Standards for Government accounting and for the national accounts. (Paragraph 60)

21.  We welcome the Government's positive response to our recommendation relating to improved alignment of parliamentary authorisation of public expenditure and the planning and control processes for such expenditure within Government. We look forward to examining progress of this "line of sight" initiative as it develops and, as part of this examination, we expect to consider whether the proposed timetable for implementation could be expedited. (Paragraph 61)

22.  We view the failure of the Office of Government Commerce to publish an annual report in 2006-07 as unacceptable. We expect the Office to report on its performance on an annual basis in future. (Paragraph 69)

23.  We are concerned that the current arrangements for highlighting a project assessed by a Gateway review as "double red" fail to address the wider ranging issues regarding the continued failure of the Government properly to manage such a project. In response to this Report, we expect the Government to set out how projects that receive a "Double-red" Gateway Review will formally be held to account. (Paragraph 75)

24.  Whilst we recognise that Gateway Reviews have been used as corrective instrument to realign a failing project, we would like to know what pre-emptive action the Government takes to ensure that risk management is properly utilised in the planning of projects subject to a Gateway Review. We will return to this issue in the Autumn. (Paragraph 76)

25.  We accept that a number of the outcomes set out in the Treasury's Public Service Agreements for the period from 2004 to 2008 and in its Departmental Strategic Objectives for the period from 2008 to 2011 are not subject to easy measurement. We also accept that the Treasury's own direct influence in relation to some of its international objectives will be necessarily limited. However, this reinforces the importance of external scrutiny and audit of Treasury performance. We note that the Treasury proposes to monitor its performance in influencing the policy debate and the international structures it uses to make progress on its objectives by taking as its milestones the outcomes of specified key events. We recommend that the Treasury arrange for independent monitoring to be included within assessments of those key international events relevant to the Treasury's international objectives. We further recommend that the Government clarify, in its response to this Report, whether data sources used for the purposes of measuring performance in relation to Departmental Strategic Objectives will be the subject of audit by the National Audit Office. (Paragraph 89)

26.  We recommend that, in its response to this Report, the Government confirm that progress in relation to the Treasury's PSA 6 target for regional growth will be measured in relation to the economic cycle which the Government expects to have concluded in 2007. We further recommend that, in reporting on the ending of that cycle, the Government includes an analysis of the economic cycle in each region of England as well as for the United Kingdom as a whole. (Paragraph 91)

27.  We recommend that the Government, in its response to this Report, set out its provisional analysis of the work currently being undertaken to analyse the reasons for low take-up of the childcare element of tax credit and the reasons for regional differences in take up. (Paragraph 94)

28.  We welcome the consultation that the Treasury has initiated with this Committee in relation to its Departmental Strategic Objectives for the period from 1 April 2008 to 31 March 2011, which we trust will serve as a precedent for the continued future development of the performance management framework. We welcome the inclusion of a performance indicator for the Treasury's work on supporting stable financial markets. We recommend that the Government, in its response to this Report, set out the timetable for the commissioning of a first assessment of UK financial stability and risk management against international comparisons. We further recommend that all such assessments be commissioned from an organisation outside Government, such as the International Monetary Fund, and be published. (Paragraph 96)

29.  We recommend that the Government clarify, in its response to this Report, whether it is committed to maintaining net public sector debt below 40% of GDP in each and every year of the economic cycle that is expected to have begun in 2007. (Paragraph 97)

30.  We are concerned that eight out of ten areas assessed under the Capability Review of HMRC require development. We expect HMRC to resolve these issues and we will scrutinise HMRC's progress in the autumn. (Paragraph 101)

31.  We recommend that in all future departmental accounts the payments of bonuses be listed alongside other remuneration. Whilst we accept that a rise in staff bonuses can be party attributed to pay assimilation that occurred as a result of the merger of Inland Revenue and Her Majesty's Customs and Excise, we ask the Government to explain why, in a year of poor performance and ongoing headcount reductions, Senior Civil Service grade staff have received on average a 60% increase in their bonus payments. (Paragraph 110)

32.  The considerable reduction in Missing Trader Intra Community Fraud has not had a marked effect on the VAT loss figures. We recommend that the Government, in its response to this Report, explain how it has evaluated its 'success' in tackling MTIC fraud. We further recommended that the Government explain in that response why there has been slippage on the reduction of VAT losses and how it intends to improve its performance in this area. (Paragraph 113)

33.  We recommend that the Government, in its response to this Report, explain why the Self-Assessment filing rate has decreased if "significant resource" has been put into it, and clarify what other activities the Self-Assessment resource has been focused on. We further recommend that the Government explain what effect the online system crash in late January 2008 will have on HMRC's assessment of performance against this PSA target in the 2008 Departmental Annual Report. (Paragraph 118)

34.  We are concerned that the current VAT gap, the direct tax and National Insurance underpayments, and the deterioration in the Self-Assessment filing performance may be linked to the headcount reduction under the efficiency programme. We expect the Government response to this Report to provide further evidence of the Government's position if the Government continues to maintain that this is not the case. We also recommend that the Government response explain how the Government will ensure that any further efficiency savings are not made at the cost of further deterioration in HMRC's performance. (Paragraph 119)

35.  We remain concerned that HMRC's headcount reductions, office closures and consequent move towards contact centres have proved a source of frustration to customers. We recommend that the Government, in its response to this Report, provide further information on the reasons for the slippage on PSA 5, and ask HMRC to publish the evaluation that it commissioned detailing the level of customer satisfaction with the new contact centres. (Paragraph 121)

36.  We note that HMRC plans to take no further action to improve performance under PSA 6 and therefore suggest that the description is changed from "very challenging" to "impossible", because it is clear that HMRC will fail to achieve the target. (Paragraph 122)

37.  We recommend that the Government, in its response to this Report, explain why the target for 50% of VAT returns to be filed online has been postponed until 2010. Furthermore, the last three years have seen an increase to only 12% of VAT returns filed online, therefore we expect HMRC's plans to ensure that the 50% target is reached by this later date. (Paragraph 123)

38.  There have been considerable problems with delays in VAT registration for small businesses. We have repeatedly been assured that the headcount reductions and efficiency programme as a whole would not cause a decline in the quality of HMRC's services. We ask the Government to explain why there has been a deterioration of service in relation to VAT registrations and what measures it will take to bring HMRC back on course. (Paragraph 128)

39.  We recommend that the Government, in its response to this Report, explain why HMRC's 2007 Departmental Annual Report assesses PSA8 as "On course" when the Department has not reached the halfway point to achieve the March 2008 target and does not appear to have improved upon the 2006-07 Autumn Performance Report results when the same target was viewed as suffering from "Slippage". (Paragraph 130)

40.  We are concerned that five years after the introduction of tax credits, the number of complaints referred to the Adjudicator's office has significantly increased. We expect HMRC to make significant improvements to their administration of tax credits as a matter of urgency. (Paragraph 135)

41.  We welcome HMRC decision to revise code of practice 26 following our concerns raised in our Report in the administration of tax credits. We expect HMRC to continue to work closely with the Adjudicator to ensure that all tax credit guidance is clear and fair. (Paragraph 139)

42.  We regret the failure of HM Revenue & Customs to consult this Committee about its new Departmental Strategic Objectives and the accompanying outcome indicators. We expect to assess the changes to HMRC's performance management framework when fuller information is available. (Paragraph 144)