This memorandum responds to the Sub-Committee's requests at the hearing on 9 January 2008.

How many staff in the Chancellor's departments are earning less than £6.50 an hour? [Q523]

  There are no staff earning less than £6.50 per hour in the Treasury Group (HM Treasury, Office of Government Commerce, OGCbuying.solutions, and the Debt Management Office) or the Government Actuary's Department.

From the figures, the number of permanent staff decreased by over 4,000 in a year but the cost of those staff that were left has increased by £29 million. Is that related in any way to what you were saying previously about the issue of bonuses and such? [Q533]

  HMRC's 2005-06 Accounts (HC1159) and 2006-07 Accounts (HC626) show that the average total number of full-time equivalent persons permanently employed in the core Department reduced from 90,829 to 86,436, and that the costs for these staff increased from £2,586.8 million to £2,616.1 million in those years.

  In 2006-07, alongside the normal pay increases for staff, HMRC undertook a pay assimilation exercise to align the pay and grading structures inherited from the Inland Revenue and HM Customs and Excise. 2006-07 was therefore also the first year of paying bonuses as a part of the new HMRC pay arrangements.

  While the loss of around 4,000 permanent staff during 2006-07 partly reduced the impact of this pay increase, 2,340 of them did not leave HMRC until the second half of the year, so that the overall savings were less than the full cost of the pay settlement.

Do you know how many senior officers have prior banking experience? [Q540]

—  Nicholas Macpherson, Permanent Secretary, worked on the Barings Bank crisis and resolution, as Principal Private Secretary to the Rt Hon Kenneth Clarke QC MP, in 1995.

Managing Directors

—  John Kingman, Second Permanent Secretary, and Managing Director of Public Services and Growth, was an Executive Director of the European Investment Bank from 2003-06. He also wrote extensively on banking sector issues for the Financial Times Lex column.

—  Stephen Pickford, Managing Director of International Finance, was an Executive Director of the World Bank from 1998-2001 and has been a Director of the European Investment Back since 2007.

Financial Services/Northern Rock team

  Experience in the Financial Services/Northern Rock Team includes:

—  a Senior Civil Servant who worked for three years in the City for Natwest and Prudential Groups (including a period working for Egg) and as a consultant for HBOS Group 2;

—  a Senior Civil Servant who worked for two years as an economist in fund management, plus 12 years as an economist covering fixed income and currency markets in investment banking.

  Staff experience in the broader International Finance and Macroeconomics and Fiscal Policy Directorates includes:

—  a former Managing Director of the Deutsche Bank Group;

—  a current Alternate Director of the European Bank for Reconstruction and Development;

—  a Qualified Chartered Accountant with over 15 years of post-qualification banking experience prior to joining the Treasury, including five years as Finance Director of Close Brothers Ltd. [8]

How many cases will be affected by new COP 26? To what extent will it be retrospective where people have been locked into argument or dispute with the Department? [Q581]

  HMRC will apply the revised COP 26 to new disputed cases from the end of January and any disputed cases in the pipeline at the introduction of this change.

  There were approximately 370,000 disputed overpayments in 2006-07. HMRC's current monitoring suggests that under 5% of cases were attributable to official error, of which a large majority of cases had their overpayments remitted. The changes are likely to increase the percentage of official error cases which will be remitted; they will also benefit those experiencing hardship, and those with exceptional circumstances which meant that they could not meet their responsibilities under the revised code.

Will up-to-date figures be reported adequately to Parliament as the safeguarding of the borders moves from HMRC into a new Border Agency? [Qq 585-6]

  HMRC recognises the vital importance of putting in place robust and effective performance management and reporting mechanisms, both in HMRC and in the UK Border Agency (UKBA) as part of the work of creating the new agency. Two programmes have been set up to manage the transition: the first is a joint programme structure with Border and Immigration Agency colleagues to design new operating procedures at the border, together with associated organisational designs, powers, human resource procedures, information services and estates strategies. The second is an HMRC programme that will assess and manage the implications of the frontier work moving from HMRC. This will put in place the mechanisms—including operating agreements—necessary to ensure that the Government's fiscal and economic objectives to which UKBA will contribute are delivered satisfactorily in the future by UKBA. One of the programme workstreams will be looking specifically at the governance framework required for performance management and reporting.

The Minister was explaining that there was about £500 odd million of savings. I wonder if she might send the Committee a copy of that breakdown explaining that calculation [Q536]

  The 2004 Spending Review set HMRC a financial target to position itself to achieve total annual efficiency savings of £507 million by the end of 2007-08. This financial target was to be realised from a combination of:

—  savings arising from the release of staff; and

—  savings from estates, procurement and other efficiency initiatives, such as reduction in bank charges.

  As at 1 December 2007, HMRC had exceeded the target with total financial savings of £533 million.

  The £507 million target included:

—  £363 million expected financial savings arising from the gross reduction of 16,000 full-time equivalent posts;

—  £106 million non-headcount savings;

—  £38 million adjustment for inflation to 2007-08 prices (using HM Treasury rates).

  HMRC's 2004 Spending Review settlement took account of these expected financial savings, which would be recycled within the Department's budget. The savings were intended to cover the cost of redeploying 3,500 posts to front-line areas, absorption of pay and price increases, existing policy commitments and enabling investment in transition to the new integrated Department.

  The majority of the £507 million target was therefore based on savings arising from staffing reductions. As set out in HMRC's Efficiency Technical Note (published December 2005), staff savings have been calculated using an appropriate average salary (including superannuation, national insurance contributions, and where applicable, allowances for additional/flexible attendance), but excluding general administration expenditure and accommodation costs. This was weighted to take account of the Departmental population by grade. This methodology was tested and reviewed in the summer of 2007 and an average salary of £27,120 was agreed with HM Treasury in September 2007.

a  Staff reductions are measured from a 1 April 2004 baseline, whereas the starting point for calculating the financial savings is 1 April 2005

Does it worry you that scarcely anyone in the Treasury has experience in the Treasury prior to 1997? [Q545]

  There are 245 members of staff that have more than 10 years experience at HM Treasury.

  This represents 21.3% of total staff, and includes 20 staff at Senior Civil Service grades (37.7% of all SCS staff).

How many child tax credit overpayment cases have there been where the computer has failed to cope with the case in question? I also have cases where, because the computer has failed, manual control has been put in and that has failed as well. How many of those are there? [Q578]

  There are currently around 25,000 live manual payment cases. HMRC is actively reviewing these cases and looking to carry out corrective action to enable system payment to be restored as soon as this can be safely achieved.

  We are not aware of any cases which cannot be paid by the manual process if system payments cannot be made and there is tax credit entitlement. There are some cases which were previously paid manually have now reverted to system payment or are no longer paid due to nil entitlement.

Can you assure me that those contracts (for Security Guards) prevent very casual employment of people on security guarding duties? [Q596]

  HMRC takes the vetting of outsourced security guarding very seriously. There is an established process in place for vetting security guards across the estate and although the process varies slightly depending on the Private Finance Initiative (PFI) service provider, they all pick up the key security check requirements which would preclude casual employment.

  The Department's own Security and Business Continuity staff carry out Counter Terrorist Clearance (CTC) checks on all guards employed: these checks include background details of the applicant and their family as well as a criminal record check. In addition to this, residency checks are made, as well as references sought from previous employers.

  The security companies that HMRC's estate partner, Mapeley, employ must ensure that their staff receive the appropriate Security Industry Authority (SIA) training in order to obtain the necessary accreditation which will enable them to work within the security industry: guards must be fully SIA accredited to work on an HMRC site.

  Holders of non-British passports are screened in line with the requirements of the Asylum and Immigration Act 1996 which places a duty on employers to ensure that there is a lawful entitlement to live and work in the UK.

  HMRC has taken up the Home Office's advice to seek further expert assistance in this sensitive area. All of the security records and checks of the Department's PFI providers are subject to scrutiny from HMRC's Internal Audit unit. Finally, each provider has their own audit programme, which is regularly monitored by HMRC Estate Management.

We were told by the Permanent Secretary that the service level agreement was in place from October but the then Chief Executive told us it was actually in place from April 2007. Which of those two is correct? [Q620]

  The Service Level Agreement with the Royal Mint was agreed in October 2007, but was retrospectively applied from April 2007.

OGC question on version control: was any record at all kept of the earlier versions? [Qq 561-4]

  It is standard practice across all Gateway reviews that no records of earlier versions are kept.

  Working copies of Gateway reports are destroyed prior to the production of the final Gateway report to the Senior Responsible Owner (SRO) of the project being reviewed. This "version control" is to ensure that there is no confusion created between notes made during work-in-progress and the final Gateway report. Two copies of the final Gateway report are held, one by the SRO and another by OGC, electronically, and kept on file permanently.

  Since the working copies of the Gateway reports are destroyed before the production of the final report on the last day of a review, documents will have been destroyed before the last day of reviews for the Identity Card Programme and the NHS.

January 2008