Treasury Committee 

Oral evidence: The work of the Treasury, HC 206

Wednesday 24 January 2024

Ordered by the House of Commons to be published on 24 January 2024.

Watch the meeting

Members present: Harriett Baldwin (Chair); Thérèse Coffey; Dame Angela Eagle; Stephen Hammond; Drew Hendry; and Danny Kruger.

Questions 227 to 352

Witnesses

I: Beth Russell, Second Permanent Secretary, HM Treasury; Cat Little, Head of the Government Finance Function and Second Permanent Secretary, HM Treasury; Anna Caffyn, Finance Director, HM Treasury; James Bowler CB, Permanent Secretary, HM Treasury.

Examination of witnesses

Witnesses: Beth Russell, Cat Little, Anna Caffyn and James Bowler.

Q227       Chair: Welcome to the Treasury Committee evidence session on the work of the Treasury. Can I start by asking our witnesses to introduce themselves?

James Bowler: I am James Bowler, Permanent Secretary of the Treasury.

Cat Little: I am Cat Little, Second Permanent Secretary at the Treasury.

Beth Russell: I am Beth Russell, Second Permanent Secretary at the Treasury.

Anna Caffyn: I am Anna Caffyn, finance director of the Treasury.

Q228       Chair: Beth, I believe you could not come down from Darlington to be with us today, but we have you on remote; I hope that is clear to everyone watching. I want to start, James, by asking about how busy things must be at the Treasury, given that you had a fiscal event at the end of November and now you have another one at the beginning of March. Have you ever come across anything quite that rapid before?

James Bowler: It is busy. It is not massively different from the drumbeat of Autumn Statement, pre-Budget reports of Conservative Governments and Labour Governments before, followed by a Spring Budget, so that is not hugely different. The Budget is on 6 March. I think that some Budgets have been even earlier than that, but fiscal-event-wise it is a busy time for the Treasury. Lest I forget, it is a busy time for the Treasury in financial services, international and tax spend more generally too.

Q229       Chair: When we had the Chancellor in front of us after the last Autumn Statement, he agreed that the tax system is too complicated. He wanted to see a simpler tax system and yet he has chosen not to keep the Office of Tax Simplification that was abolished under Chancellor Kwarteng. We received a Written Ministerial Statement last week from the Financial Secretary about some very modest simplification moves that have been made since November. Can we expect this coming Budget to be one where there is a great deal more simplification in the tax system?

James Bowler: I might ask my colleague, Beth Russell, who leads on tax, to enhance my statement. First, we think that the tax system is too complicated. Secondly, we want to simplify it.

In terms of modest, we have abolished class 2 NICs. We have got rid of the lifetime allowance. Those are relatively substantial simplifications. It is certainly the case in the advice we will put to Ministers that, if they are thinking about tax, they should think about simplifying it. The message we get from the personal side and particularly the business side is that they want simplification, clarity and stability, to a certain extent. Beth, do you want to add anything?

Q230       Chair: Beth, could you elaborate? Are your officials therefore working on a suite of simplifications for this coming Budget?

Beth Russell: Yes, that is right. In the absence of the Office of Tax Simplification, within the Treasury we have very much had a dedicated workstream for every fiscal event on simplification options that go to Ministers. We are also looking in every fiscal event to have a challenge session internally in the Treasury to think about the impact of the measures from a simplification perspective. As well, as James said, we talk to a lot of people outside about all the ideas and suggestions and bugbears of theirs. All of that goes to Ministers and they then decide what to do.

Q231       Chair: One thing that is a feature of the current tax system that is certainly not something we would say you have simplified very much is the higher-income child benefit charge. We have had evidence during the sessions that we held on the Office of Tax Simplification of some of the high marginal thresholds and complexities that are now capturing more and more of our constituents.

When it was first brought in, £50,000 was probably more than twice the median rate of income, but now is capturing more and more families. It is also the case that we have had evidence from others that more and more people are finding themselves affected by things like the tax-free cut-off point. We have heard about that particularly in our inquiry into sexism in the City. Can we assume on this Committee that that is one of the areas of simplification that you are working on with Ministers in advance of the Budget?

Beth Russell: It is definitely right that we recognise those problems with both with the high-income child benefit charge and what happens at the £100,000 income level, where you start to get the personal allowance removed. Those policies were introduced originally because, although Ministers, from a tax policy perspective, want to lower marginal rates and remove distortions in the tax system, there are other objectives that they were thinking about as well, in terms of making sure that support, child benefit, for example, or tax-free childcare, as you mentioned, is targeted towards those who need it most. They decided to do that through the tax system. They are definitely areas that we are looking at. I think that the Chancellor said that the other day that, with regard to the high‑income child benefit charge.

On that, it is very difficult. There is not currently a system elsewhere in Government to enable us to administer the kind of targeting we would want on household income, which is why Ministers decided to use the tax system when it was first introduced. As you say, that creates unfairness in the way that it operates. We in HMRC are doing our best to think about how to mitigate that as much as much as possible. In order to do it differently, you would either have to remove the charge—that obviously is very expensive and regressive—or we would have to build a new system in Government to be able to target it on a household basis.

Q232       Chair: Moving on to a different subject altogether, again in the November Autumn Statement, when the international development official development assistance target was not reinstated, the Chancellor told us that this was taken as an active decision because some of the criteria that would allow that, or it had been said to Parliament would allow that, had been met, in terms of some of the forward numbers, and yet the Chancellor chose not to reinstate the 0.7% obligation in the current budget and, importantly, in the years ahead, whereas before it had been scored. James, I wonder whether you could take us through that conversation as it happened at the Treasury, in terms of it used to be scored and then it got taken out of being scored altogether.

James Bowler: I might ask my colleague, Cat Little, for the details. As you say, the Government said that they will return to 0.7% of ODA when the fiscal situation allows. They set—I think that they have been endorsed by Parliament—two fiscal tests as to when that will be. That is that debt is falling and that the current budget is balanced. That is currently forecast to be in 2027-28 and that is outside the current allocations of spending by department. That is the main reason why it is difficult to clarify exactly what is being spent where.

Q233       Chair: It used to be put into the scorecard, did it not, Cat?

Cat Little: There have been occasions in in the past. The International Development Act requires us to review it every year and to set out in which years the fiscal tests have been met. The discussion that we have had is around the significant volatility with ODA spending at the moment.

As this Committee knows very well, there are lots of demands on the ODA budget, especially with the increase in funding for refugees. Given we have a lot of pressures on that budget, our view is that we should provide the funding a year in advance of when the fiscal tests are met. Every year Ministers can review that and decide whether they want to continue with that approach.

Q234       Chair: Including that spending on refugees, where would we be at the moment in this fiscal year in terms of a percentage of GDP?

Cat Little: The final outturn figures will be reported in the spring. It is normally after the year-end. As you know, we have given a further £2.7 billion to ODA over the two years of the final two periods of the SR. It would be wrong for me to set out what my prediction of that would be, given the volatility in expenditure.

Q235       Chair: Would you agree that it is between 0.5% and 0.7%?

Cat Little: Yes. I would expect it to be slightly higher than 0.5%, given that £2.7 billion is a significant top-up that we provided. We also know that the improvements in GNI meant that some of the savings that the FCDO needed to make this year have not needed to be made. I would expect for the final outturn to be slightly above 0.5%.

Q236       Chair: You are comfortable that the Treasury is not breaking the law, the International Development Act, at the moment in terms of its communications with Parliament.

Cat Little: Absolutely, yes. We of course take that very seriously. We work very closely with the FCDO. There is the annual reporting that we do on a prospective basis through the FCDO annual report and accounts. We also do the outturn reporting to Parliament. I know that the Minister for International Aid has also set out his expectations to the Foreign Affairs Committee.

Q237       Drew Hendry: Good afternoon. I want to ask about your work on “buy now, pay later” schemes and the regulation or not of that. Debt charities have warned this Committee that they are seeing increased use of these schemes and that users are much more likely to be in financial distress. Do you accept that there is a risk that these unregulated schemes pose to consumers?

James Bowler: We are highly alive to all that and obviously we have a sophisticated regulatory system. It is the Government position to bring “buy now, pay later” within regulation. We have published some draft legislation that we have consulted upon. That has had quite a strong response, including from the charitable side of things that you are talking to.

Ministers are looking at two things. They are looking at how they should do this proportionately. It is a pretty complicated situation. They are also looking at how it fits with existing consumer protection. It is worth saying, if it is by any way of reassurance, that these schemes are not totally without regulation as we are at the moment. They are subject to a whole set of restrictions on advertising, on consumer rights and on consumer protection.

Q238       Drew Hendry: I am grateful for you outlining that and I will come back to the work that you are doing on the consultation shortly. The question I asked was whether you accept that it poses a risk.

James Bowler: Yes, I accept that there can be a risk if people build up more debt than they can afford. I do not think that that, in and of itself, means that they are a bad thing.

Q239       Drew Hendry: A witness told us that there is less friction in using a “buy now, pay later” agreement than there is in using a debit card. Surely that cannot be right.

James Bowler: I am not sure I would necessarily agree with that. I am not disagreeing with the premise of your point.

Q240       Drew Hendry: From the Treasury's work on the draft “buy now, pay later” legislation, do you have any indication of how robust the public's understanding is that this is really a form of credit agreement?

James Bowler: We have a whole host of really detailed data and information on the whole scheme that has come from the consultation. We have stats, facts and everything else. We ourselves know very clearly where we are. The architecture here would be that, if the draft legislation goes ahead, we would set the framework for the system being regulated and the FCA would then set out how that would be the case. The FCA is obviously very experienced in delivering that across the whole range of financial services.

Q241       Drew Hendry: You have accepted that there is a risk to people there. The Money and Pensions Service has told us that 50% of people seeking advice through the services it funds have a diagnosed mental illness. Is enough being done to protect people who are vulnerable users of “buy now, pay later” schemes in these circumstances?

James Bowler: It is helpful to hear those statistics. That is precisely why the Government have put forward draft legislation that would potentially regulate this system. It is reasonable for you to say, “What happens next?” That situation is with Ministers now, but you can see that it is the Government’s proposition with that draft legislation to consider the issue.

Q242       Drew Hendry: The consultation you have undertaken to close the exemption that means that some “buy now, pay later” services are not regulated closed in April 2023. Why have we not seen the results of that?

James Bowler: We had a very strong response to the consultation on both the business and the wider side of it. We have been working through it. It is a complicated set of affairs to be able to consider how you would regulate this sector, particularly proportionately and within existing consumer rights regulation. As you will find with all financial services regulation, it takes a little bit of time to make sure that you are able to understand exactly how you can do that proportionately.

Q243       Drew Hendry: I understand that you need to do things right. I understand that. There clearly is an accepted risk. There is a high percentage of people who might be vulnerable to these schemes. Surely there must be some indication of when we will see action. Can we get a response from you on when that might be planned to happen?

James Bowler: I do not have a date, I am afraid. It is with Ministers now for a response.

Q244       Drew Hendry: Would it be something that you could come back to us on to tell us when?

James Bowler: I can certainly update you.

Q245       Drew Hendry: That would be really good. It clearly is a great risk to people at the moment. Have you received much industry lobbying on the draft “buy now, pay later” legislation?

James Bowler: We have certainly had, as we want, all sides of the debate on the legislation. It would be wrong to characterise it, as I think is public knowledge, that the industry is dead set against any regulation. There is obviously a broad church as there is anywhere.

Q246       Drew Hendry: You said “dead set against”. I take it that it is against the legislation.

James Bowler: Some parts of the industry actually have welcomed the prospect of regulations; that is the point I am making. To your point, we have done draft legislation, consulted on it and, as you might expect, yes, we get views, but that is how we do consultations.

Q247       Drew Hendry: Taking that into account, how have you balanced those consumer needs that we discussed earlier with the needs of the industry?

James Bowler: That is entirely how we are we are doing it in our design phase and that is what we are doing. We are hearing from all sides. I could also say absolutely that the very strong response we have heard has not solely been from industry, far from it. It has been from all sides. It is literally our job to present that to Ministers and set out options and proportionate ways of doing things. It is Ministers’ jobs to decide where they want to be and that is the process we are in at the moment.

Q248       Drew Hendry: Is that described in the draft consultation that we will see at some point?

James Bowler: We have set out the draft legislation, so that is there and in the public domain. We have consulted on it.

Drew Hendry: Sorry, I meant to say “consultation”.

James Bowler: You are rightly asking, having consulted, when we will finalise the response.

Drew Hendry: Yes, and what we will see in that, but you will come back on that. Let me change subject now, because I want to ask you a few questions about the loan charge situation.

Q249       Chair: Also, if I might just make the following slightly cheeky observation, is it possible that the “buy now, pay later” regulations are one of those policies that exist in the Treasury and perhaps do not get past one particular Minister, but then a new Minister arrives and that policy gets brought forward to that new Minister? Would you say that that would characterise this particular policy? You could not possibly comment.

James Bowler: The Chancellor has oversight of everything the Treasury does. It is certainly the case that Ministers have changed and Ministers might have different views on a policy. That is as it should be.

Q250       Drew Hendry: That was a worthy addition. I would certainly be keen to see what kind of speed and attention is being given to this subject.

On the subject of the loan charge, which I just warned you that I was going to raise with you, some people appear to have received extremely poor-quality advice, which may have led them into using schemes such as disguised remuneration, who were then caught out by the loan charge. How prevalent is this? Have you ever considered lowering the loan charge or tax payable by people who were caught out in these situations?

James Bowler: I might ask my colleague, Beth Russell, to come in on the statistics. To give you an overview, it is certainly the case that it is regrettable that people have been promoted and brought into these schemes. This has been subject to a Supreme Court ruling and an independent inquiry. HMRC, which has given evidence if not here then elsewhere, is now trying to deal sensitively and flexibly with people in that situation. As to the actual statistics, my colleague, Beth Russell, might be better placed to answer.

Beth Russell: There obviously has been a lot of focus on the loan charge and I believe that it is something like 50,000 people who are subject to the loan charge subsequent to the recommendations that Lord Morse made in his independent review. Obviously that is a really significant set of issues for those people affected. I think that, as a proportion of the entire taxpayer population, it is 99.8% of people who are not using these schemes.

For the ones who have done, I know that HMRC is working really hard to try to address all of those issues as carefully as it can. It is a really difficult set of circumstances. People did not pay the tax that they should have paid, but HMRC is trying to look at as much flexibility as it can to help people repay, alongside looking at how we can do more on the promoters of these schemes, who are really culpable for what they have done.

Q251       Drew Hendry: Thank you for that answer. We know that very little is being done against the promoters of these schemes, if anything at all, just now. Given the potential issues around poor-quality tax advice that is raised in cases now subject to the loan charge, should tax advice be regulated in a similar way to legal or financial advice services?

Beth Russell: Let me pick up your first point. It is not quite true to say that nothing is being done on promoters. HMRC has issued lots of stop notices since they came into force to close down schemes. It has prosecuted some promoters, including one directly related to disguised remuneration. In the most recent couple of Finance Bills, we have given HMRC extra powers to deal with promoters. There is obviously a lot more to do but it is doing something there.

On the regulation point, it is something that HMRC has looked at and talked about. There is not a specific plan on that at this point. Where Ministers are particularly looking is about the regulation of umbrella companies. There was a recent consultation on that and that is part of the landscape here.

Q252       Drew Hendry: Beth, have you made an assessment of the impact of regulating tax advice? What would be the pros and cons then?

Beth Russell: It is something that you would primarily have to talk to HMRC about because it has done the work on this. It is something that we could perhaps write to you about. Apologies; I do not have lots of information that I can give you on that now. It picks up some of the points James was making in the earlier answer about regulation. We would have to make sure that it was done in a in a proportionate way and look at all the implications.

Q253       Drew Hendry: Talking about that proportionality and treatment of people, are you confident that HMRC is treating people fairly in loan charge cases or where people have requested a settlement?

Beth Russell: I am confident that Jim Harra, as the chief executive and Permanent Secretary of HMRC, is totally focused on making sure that HMRC is doing what it can in these circumstances, which, as I said earlier, we totally recognise are really difficult for people. There is a lot of flexibility in in the framework within which HMRC operates to give people time to pay. It has made various commitments about what it will and will not do.

I know that there is a lot of work going on. One issue being raised has been about the letters that people have received. A lot of work is going on to make sure that those are discussed in advance and cleared with people like the Low Incomes Tax Reform Group. Particularly in light of the debate last week, it is something that we are talking to HMRC a lot about. I know that the new Financial Secretary is also doing that.

Q254       Drew Hendry: I have one last question. Beth, you said earlier that much more has to be done. Do you have any plans to tackle bad actors setting up schemes?

Beth Russell: Again, that would be primarily a question for HMRC. It is obviously looking all the time at how it can use the powers that it has to tackle promoters and shut down these schemes. It has something called stop notices, which means that it can tell promoters to close down the schemes and go after the promoters themselves.

Q255       Drew Hendry: Working on the premise that more must be done, there must have been some discussions between you and HMRC on this issue, surely.

Beth Russell: Yes, which is why we have given it extra powers in the recent Finance Bill to do more on promoters. We expect it to be using those powers as much as it can.

Q256       Chair: James, do you want to come in on that?

James Bowler: I do not want to give the impression that we are satisfied with any form of tax avoidance. It is absolutely the case that we want to correct that at source. If you look back over the last decade or more at what the Government have done in various guises, there is initiative after initiative to crack down on tax avoidance. I actually think that we have been really rather successful, but it is the case that there is a continuation of promoters and we want to do significantly more. I wanted to make sure that you were not left with any different impression from that.

Q257       Dame Angela Eagle: We have seen many Budget leaks in the last period, up to and including so many things that virtually the whole Budget has been out before it has been given to the House of Commons. Are you personally happy with the way that the approach to Budgets has gone in the last few years?

James Bowler: I am not happy with any unauthorised leak of information that may come from the Treasury or anywhere else on a Budget. These can be market-sensitive bits of information and they should not be out in a way that might not be orderly for the markets. Also, you announce policy to Parliament first.

Over the last two fiscal events, or the last several fiscal events, there has been widespread speculation about the content of those fiscal events. There always has been. That speculation does not seem to have been very accurate recently. In the recent Autumn Statement it was all about inheritance tax. I would differentiate between actual leaks of Budget information, which I take very seriously, and generic speculation of people who assert that they know what is in a fiscal event.

Q258       Dame Angela Eagle: I was thinking more about the organised press activities of the Chancellor and Government Departments ahead of the actual Budget, rather than the usual speculation about what might be in any particular event that you have just referred to. There is much more of that now than there ever used to be. It is getting to be ridiculous. The Speaker is not very pleased with it.

James Bowler: I would reiterate that you make announcements to Parliament first and you do not leak market-sensitive information. I would say that it is acceptable for Ministers, in the proper function, to have a run‑in to a particular fiscal event where they might make announcements. If they do that, they should do it properly.

The example before the Autumn Statement was that, as part of measures on the wider labour market side, DWP, which we have done a lot of joint work with, made some announcements before the Budget. That was done accompanied by a Written Ministerial Statement to Parliament. That is the right way of doing it.

Q259       Dame Angela Eagle: So we should have pre-Budget announcements? I do not have an objection to post-Budget announcements.

James Bowler: Post-Budget announcements are normally a bit worrying.

Q260       Dame Angela Eagle: It is a very rare weekend before the Budget where most of it is not there in the newspapers, briefed by the Government. Are you happy with that?

James Bowler: As I said, I am not happy with any unauthorised leaks, particularly of any market-sensitive information. If the Government of the day want to have a series of announcements before Budgets or fiscal events, they should do so in the proper way, which is to make the announcements concurrently with Parliament, offering written or oral statements. Particularly for market-sensitive information and information around the economy or tax, those can and should be done within the Budget because you need to see the wider context within which some of these announcements are being made.

It is the case that the nature of how we do a fiscal event is to announce 100 or 200-plus policies all in an hour and a half at the Budget. There is a lot of interest in that leading up to it, so it will be the case that the Chancellor is asked and is expected to appear before the media as he goes into that, but there are there are pretty strict rules and understandings. As to my personal engagement, you absolutely have it. I remind Ministers but I also remind the entire Department about the need to handle market‑sensitive information securely.

Q261       Dame Angela Eagle: Hugh Dalton would have been very surprised at the extent to which all of this goes on now.

James Bowler: I understand the reference.

Q262       Dame Angela Eagle: When is the OBR forecast going to be available to the Department for the forthcoming Budget?

James Bowler: The nature of how you go about an OBR forecast is that we are required under our memorandum of understanding to give the OBR 10 weeks’ notice of a Budget. We did that for this Budget on 27 December. We wrote to the OBR saying that we intend to have a Budget on 6 March, which I think is exactly 10 weeks. The OBR and the Treasury then agree a forecast cycle. How it works is that you will get an economic forecast from the OBR followed by a fiscal forecast and then that is repeated. That process is under way for this Budget already.

Q263       Dame Angela Eagle: Has the OBR forecast arrived at the Treasury yet? I am not asking you what is in it; I am just asking you whether it has arrived.

James Bowler: The first economic forecast has, yes.

Q264       Dame Angela Eagle: How comfortable are you with the suggestion that the Chancellor will max out by using any headroom that there might be for tax cuts?

James Bowler: How comfortable am I with it?

Dame Angela Eagle: Yes. He said it himself.

James Bowler: I do not think that he has quite said that. The Chancellor has set out the fiscal rules. They are his to determine. They are the OBR’s to judge. The Chancellor and Cabinet need to describe what the Government are going to do against those fiscal rules.

In terms of headroom, it is certainly the case that, the bigger the headroom you have, the more room for manoeuvre you have between forecast changes, errors and whatever you have. Ministers have to balance achieving the fiscal rules that they want to do against all the other things they want to do. That is, rightfully, the process that sets it out and those are the choices there. I should say that, in the Autumn Statement, borrowing was lower than it was predicted before, debt was lower than it was predicted before and headroom was higher than it was predicted before at the Budget.

Q265       Dame Angela Eagle: I think it was £6 billion of headroom, which is the tiniest it has ever been prior to the fiscal event.

James Bowler: I think that it was at the Budget and then it went up slightly. I am not disagreeing.

Q266       Dame Angela Eagle: I think that the financial statement doubled it to £12 billion or something, which is still a very tiny amount.

James Bowler: It relatively is a tiny amount. It is the case that it means that, if things change, Ministers will have to plot what they do more tightly. These are the trade-offs Ministers have to make in doing it. The way we do it in the UK is that we have a very independent judgment of that, as it should be, with the OBR.

Q267       Dame Angela Eagle: What are your observations about what the head of the OBR told a House of Lords Committee in the last couple of days—that basically the fiscal forecast was a work of fiction because there has been no comprehensive spending review going forwards and we are working on an annual basis? Therefore, he was implying to the House of Lords that the theoretical room that the Chancellor has for any tax cuts is actually based on a work of fiction because there has been no spending review.

James Bowler: I do not agree with what the excellent head of the OBR said and I do not agree with the language he used. There is nothing new here. You set out your spending. You set out your spending plans. We have three-year spending plans. They are due to finish in just over a year’s time and then you have an assumption as to what spending will be thereafter. That is not new. Nothing has changed in that, so I do not particularly recognise that there is anything different here.

It is very good that we have multi-year spending plans. As you go through a multi-year spending plan, as you get further towards the end of it, the closer you get to setting new plans. It is the case that, in just over a year's time, that runs out, but I do not think that is new.

Q268       Dame Angela Eagle: Let me just quote exactly what he said. He said, “Some people have referred to that as a work of fiction. That is probably generous, given that someone has bothered to write a work of fiction, whereas the Government have not even bothered to write down their departmental spending plans underpinning their plans for public services”. He said that he was disappointed last November when he was asked to provide a forecast to be published alongside the Autumn Statement without being given any detail from the Chancellor about Whitehall’s departmental budgets apart from a headline figure that showed them conveniently falling over the five-year period. He has a point, has he not?

James Bowler: I do not agree with that and I do not agree with the language used. The point I am making is that that makes out that there is some kind of novelty to the situation, whereas this is exactly how it has always been. You have detailed spending plans, in this case up until April 2025, and then you have an assumption thereafter. That is no different to how it has been ever since the inception of the OBR. The idea that there is some kind of revelation here is the thing I am surprised by.

Q269       Dame Angela Eagle: There have been three-year comprehensive spending reviews with more detail than is available at the moment. Of course, there was also the Kwasi Kwarteng Budget where there was no forecast attached at all because everything was done on an even bigger fantasy.

James Bowler: I do not think that is particularly relevant to the spending assumption. I will reiterate my point. There is not much more to say here. The point to make is that nothing has changed from how this is always done.

On the detail, let me tell you that this Parliament day-to-day spending is due to grow at over 3% in real terms. The proposal set out in the spending assumption for the next Parliament is that day-to-day spending will grow at 1% in real terms. That means that spending, while growing as a percentage of the economy over this Parliament, is due to gradually fall as a percentage of the economy in the next Parliament. That is not massively different to what many countries around the world will face after large spending through Covid and energy support.

Those details are set out and those assumptions are there for everyone to see. Alongside that, the reality of going from higher to a lower assumption on day-to-day spending is that the Government have been public and clear about what they want to do on productivity and efficiency in order to help deliver that with the minimum impact on frontline public services. I can happily set out more detail on that if it helps.

Q270       Dame Angela Eagle: I am sure that time will tell on that one. I want to ask about sanctions and the enforcement of financial sanctions. How do you think that the Office of Financial Sanctions Implementation is actually performing? Do you think that it has enough resource to shift from reactive to proactive in order to be more effective?

James Bowler: My colleague might want to add more detail to this. I want to pay tribute to the work of the Office of Financial Sanctions Implementation in the Treasury. The resource has gone up from 40 people in 2022 to 135 people now, so a huge increase. It is the case that, in terms of offering licensing, there has been a backlog. That backlog is now sustainable and was brought under control just before the end of the year, so I pay tribute to the work that has gone on to do that. We needed to put some surge resource in to help that out, but it is the case that that is now on a sustainable footing.

As you say, that allows more resources not just to implement what we have done but to focus on enforcement. Obviously, behind this is the need to hugely ramp up our operations in response to the plus £20 billion of Russian assets frozen since the start of the Ukraine war.

Q271       Dame Angela Eagle: Is that just here or is that overall by all of the allies?

James Bowler: In the UK we have frozen £22 billion of Russian assets.

Q272       Dame Angela Eagle: Have you had any particular victories in preventing the attempt to evade sanctions? Although it has affected the Russian economy, they are managing and they are rewiring, which implies that, not only do we need to keep agile in order to pursue them, but we need to be constantly on guard to do the proper enforcement.

James Bowler: That is a very reasonable description of exactly where we need to be. They have detected—Cat might tell me—I think some 400 suspected breaches. There are a whole set of legal cases that take time to go through the courts.

In terms of the impact on Russia and its rewiring, as you say, this is not a single event. It is something that we need to keep coming back to and back to. It is the case that Russian oil export revenue is down by 22%, I think, over the last year, which I think you can put down to that. How we have moved in lockstep with the US, the EU and others here is also really important, and I think we can be particularly proud of it. It is only by taking action together that we can have the biggest effect.

Q273       Dame Angela Eagle: You want to say something, Cat. You are bursting to say something.

Cat Little: Yes, I want to add a little bit more detail. It is an area I oversee and I am really proud of the work, as James said, that we have done here. On the detail of suspected breaches, in 2021-22 we had around 147 suspected breaches. Because we have ramped up staffing and had extra surge resource across Government come to support us, we now have the 473 suspected breaches that we are actively targeting. That gives you a sense of the scale of how we have shifted from dealing with licensing and our operational caseload into much more preventative active work.

Q274       Dame Angela Eagle: Do you have an issue with the transparency of beneficial owners and being able to chase companies that are set up? We know how secret some of this can be. Russian assets can go global and be quite difficult to trace. Are there changes, in terms of transparency, in this area that you think would help that we ought to be negotiating globally?

Cat Little: The key to this is, as you imply, partnership with global allies. Quite often, these assets are nested within structures that have multiple layers with international partners. We are doing a huge amount of work together with other allies to improve on what we do. However, from a UK sanctions perspective, we cover about 98% of the trade between the UK and Russia now, so we have been able to identify and take action on the vast majority of activity that we can identify.

Q275       Dame Angela Eagle: Do you think that UK financial services understand their responsibilities with respect to all of this? Have you been getting the correct form of co-operation largely? Are you worried about any areas?

Cat Little: We have very close co-operation with financial services. From the experience we have had to date, although it is complex, we have now been doing this at scale for a couple of years and it has vastly improved over time as we have dealt with more complex cases. I do not have any concerns at this stage.

Q276       Chair: It is probably the fault of this Committee’s report, called Fuel Duty: Fiscal forecast fiction, that put some of those words into the mouth of the chief executive of the Office for Budget Responsibility. That is merely speculation on my part. In any forward look, there are some assumptions that are more plausible than others. I think that I heard you say that the number put in the public domain for departmental spending is real terms increases of 1% on average.

James Bowler: That is correct for day-to-day spending.

Chair: That seems a reasonably plausible scenario.

James Bowler: On the Committee’s intervention on fuel duty, it is worth saying that the OBR now presents its forecasts adjusting for that, so there is transparency there at least.

Chair: It does. We chalk that up as a win for this Committee, definitely.

Q277       Stephen Hammond: Good afternoon and thank you for coming to give evidence. The shareholding in what is now NatWest has been reduced significantly over the last 10 years down to just under 38%.

James Bowler: It is 36%.

Stephen Hammond: Sorry; I thought it was 37.87% at the moment.

James Bowler: I think that it is 36%.

Q278       Stephen Hammond: We will not quibble about the 2%, although that may be quite a lot of money.

The Autumn Statement said that you were going to explore options to have a retail sale or potential retail sale within the next 12 months, which brings forward three or four questions. It was always stated policy to have it done in 2025-26 and this is bringing it a year forward. What is the rationale for the year forward? Given that you state that share sales will only be under supportive market conditions, could you define what you believe supportive market conditions to be and why you expect to see them earlier than you were previously?

James Bowler: Those are a very good set of questions. Let me try.

Stephen Hammond: I have a number of others.

James Bowler: Oh gosh. I will make a clarification to start with. The assumption and the policy is that we will have disposed of our shareholding in NatWest by 2025-26. The retail sale would be one of four ways in which we would try to try to achieve that. It is not the case that we are bringing, therefore, the fact that we will have achieved a complete sale of NatWest forward by a year. We are adding one more way of doing it to help us achieve that goal. It is worth saying that.

Q279       Stephen Hammond: That is helpful to know. Can I just ask the question about what supportive market conditions are?

James Bowler: It is probably worth saying that the three other ways that we sell NatWest shares are a block sale to market investors, a trading plan, which is a sort of daily sale of shares, and a buyback by NatWest itself. It is our requirement to protect the taxpayer. We do this when it represents sensible market conditions of value for money. That is judged on a whole set of criteria. We have a whole set of advisers that advise us against that. The part of the Treasury that does this is UKGI, which looks after our shareholding in it. I cannot point to one statistic.

Q280       Stephen Hammond: Might it be possible for you to write to the Committee and outline what supportive market conditions are?

James Bowler: Yes, I certainly can.

Stephen Hammond: That is quite important.

James Bowler: It is.

Q281       Stephen Hammond: At least two of the other three methods you have described will also require supportive market conditions.

James Bowler: That is correct, yes. I certainly can and I will. The point I would make is that it is a suite of indicators that link where NatWest is to the wider market at any particular time. If NatWest’s share price was falling dramatically compared to its peers, that would be something to be taken into account and vice versa. That would be one method, but why don’t I set it out in more detail for you?

Q282       Stephen Hammond: That would be very helpful. You have just outlined that a retail sale is only one of four methods that might happen. You have not used a retail sale for bank disposals before. In fact, you have not used a retail sale for any disposal for at least a decade. Is that right?

James Bowler: We proposed and announced the retail sale of Lloyds shares in 2016 and that was subject, rightly, to market conditions and value for money. The Brexit referendum happened mid-sale and then that disturbed the markets and the sale did not go ahead.

Q283       Stephen Hammond: The NatWest price at lunchtime today was 213p. Normally, when you see these sorts of large‑scale retail offers you would expect there to be a discount. I am not asking you for a definitive number, but do you have a sense of percentage range of discount that will enable you to clear the amount? Presumably you would be offering at least 8% or 10% of the shares.

James Bowler: I recognise the way you would potentially do a retail sale and I understand what you are saying there. There is experience right back to privatisations and other things in how you would go ahead. I am not going to give you a range on a potential discount at this stage. We are in the design discovery phase of what we would do. We and UKGI are being advised on that. We will take a view as to what any discount that might be needed should be. Ministers will then take a view against market conditions and value for money as to whether to go ahead. I take the framework that you are painting, but I do not have a range or a number to give you.

Q284       Stephen Hammond: That will only be available as and when you make the decision.

James Bowler: Yes, exactly.

Q285       Stephen Hammond: In terms of retail disposals, have you considered that for any other Government assets, for instance debt?

James Bowler: I do not think that there are any live proposals for retail sales, so no, there is no current plan for that, unless I am unaware.

Q286       Chair: What about national savings?

James Bowler: Were we to move it into the private sector in some form, but there are no plans for that as I speak.

Q287       Stephen Hammond: Finally, before I move on, on the comment from the Autumn Statement that you are exploring options, if we meet in September or October, we will know much more clearly whether you intend to do that in 2024-25 or not.

James Bowler: Yes. As you say, the announcement was referring to over the course of the next 12 months. This time next year we should have either done it or not.

Q288       Stephen Hammond: I will move on, if I may, to the Edinburgh reforms. Our Chair, on 8 December, was widely quoted about the Edinburgh reforms as saying, “The lack of progress or economic impact has left them feeling like a damp squib”.

James Bowler: I preferred “vital step towards addressing examples of over-zealous regulation”.

Q289       Stephen Hammond: In terms of overzealous regulation, we are all keen to see proper regulation and not overzealous regulation. Do you not think that perhaps you have been overstating the progress that has been made?

James Bowler: I read the Committee’s report with interest and it seemed to me that different parts of the Committee were perhaps emphasising different things; we both did slightly different quotes there. I do not think that it has been a damp squib, no, not at all. Let me give you one example. The changes to Solvency II should allow the insurance industry to invest up £100 billion more in productive assets. That is a huge change.

Q290       Chair: It has not happened yet.

James Bowler: We now expect it to happen because of the Edinburgh reforms. I take the point, but that is a historic change and will make a difference to our repeated attempts to increase the supply side of the economy. In other areas, such as on ring-fencing, we are proceeding proportionately. We did the Skeoch review into that. That recommended that we do not get rid of ring-fencing but we update it and get rid of the overzealous elements of that. We are proceeding on that.

Q291       Stephen Hammond: That is important as well, because it would potentially release access to capital for a number of small corporates if the ring-fencing was changed.

James Bowler: Yes, that is right.

Q292       Stephen Hammond: You are right. I had it down on my notes to ask you. You said that it is proceeding. What does “proceeding” actually mean?

Chair: It means that it is not happening.

James Bowler: You will hear from me a lot with financial services regulation that you make a statement, there is potentially a review and then there is a consultation. Everyone says, “When are you actually getting on with it?”

Q293       Stephen Hammond: The review has happened and the Skeoch consultation has happened.

James Bowler: I take your point. The answer is that we are now in a position to move forward with those proposals. I would defend what might seem a frustrating process as just the sheer importance of getting this right. While industry sometimes wants us to go quicker, they also want us to consult widely and properly. Of course, we are talking about a set of changes we made after the financial crisis in 2007-08. We are talking about a set of long-term changes.

Q294       Stephen Hammond: We all recognise why they were put in place in 2007‑08 because of activities of varied retail banks in the wholesale market and the investment banking market. The only problem over a period of time now that has been sorted out, and capital ratios have been sorted out, has been, as you know, that ring-fencing has potentially decreased the amount of capital available to finance for industry. I take your point that it is progressing. I guess that I am asking whether that is 2024, 2025 or 2026.

James Bowler: The proposals are out there and we are now due to implement them, so sooner rather than later.

Q295       Stephen Hammond: On the same theme, I guess, in response to our Chair’s comment, the new EST said that judging reforms on a year-long basis was misguided. What is the timescale that we should be judging them on?

James Bowler: These are a set of long-term reforms and it is right that it takes a little bit of time to get them in place. I commend the current Chancellor in this regard. Quite a lot of what we are doing is long-term supply-side changes in the economy, including the changes we have made on the labour market, to business investment and on financial services. Although you might not get an instant return, it is putting the United Kingdom in a better place, particularly on the supply side of the economy.

The moves we are making on the financial services, Mansion House and pensions reform will not be instant. It will not be the case that the insurance industry will swap £100 billion into longer-term assets instantly, but they are the right changes to make. We have set out the framework and are very keen to progress. I do not think that it is the case that these are distant in their impact, but the Economic Secretary is right to make a point that they sometimes cannot be instant.

Q296       Stephen Hammond: In terms of the Financial Services and Markets Act, there has been quite a lot of pushback on trying to put accountability systems in place for regulators, which has frustrated many in this place, as you are aware. There are a number of people who think that, if you are going to give a regulator greater power, there should be greater accountability and transparency. Can you set out what your view is on that?

James Bowler: My view is where we have ended up in that the Act, which is to give a growth and competitiveness objective to both the PRA and the FCA and ask them to report on that. As you say, we have changed the model, after leaving the European Union, of how we how we regulate that. It is right that the regulators should be free to get on with it, but the Treasury still takes a very close interest in what we do. We feed in Ministers’ or our own views. You can see that actually in the Solvency II debate. I think that we got to a good outcome.

Q297       Stephen Hammond: In the specific element, for instance in the secondary objective, which one accepts has to be a secondary objective but nonetheless should be there, it is widely perceived, and I suspect acknowledged, that the regulators were very unhappy about that being put in place and made attempts to frustrate any accountability. Do you think that what is in the Act is strong enough? How are you going to police that or give advice to Ministers?

James Bowler: We have very good relations with the PRA and FCA. They are incredibly ably led. Those secondary things are in the legislation and I do not think that the regulators are pushing back against that. We are now in a world of making them work, reporting against them and making sure that growth is at the centre of what we are trying to achieve. That is a challenge for the Chancellor in everything the Treasury does. Stability is a key part of growth but also that the regulators pay due mind to that. I do not think that they are trying to push back on that. It is now an Act of Parliament so it is all about delivering it now.

Q298       Stephen Hammond: Finally, you mentioned the Mansion House Compact a moment ago. I cannot remember exactly now. Are there seven members of it at the moment, or 15?

Beth Russell: It is 11.

Q299       Stephen Hammond: Thank you. How quickly do you expect to see more members signing up for that? Potentially, in terms of supply side and growth, it is a highly important and significant move.

Beth Russell: It is something that we are having ongoing conversations on. It sits alongside some other things that we, DWP and others are doing in terms of consolidating the pensions market and looking to make it easier for people to manage their pensions over their lifetime and get more funding into scale-up companies. We will be providing an update at every fiscal event as we come to it, but we would hope to see more signatories if we can. That is an ongoing conversation.

Q300       Dr Coffey: I think that it is fair to say that your predecessors were really reluctant to do the Solvency II reforms. The regulatory bodies were absolutely reluctant and really did not want to do them at all until they were forced to. We now have the regulations through or the Financial Services and Markets Act has happened.

I guess the concern—you have heard it already from two colleagues—is that it is slow. I think that it will continue to be slow unless a real rocket comes from your leadership in getting this moving. It is necessary to get the investment.

James Bowler: That is noted. On your premise, the Solvency II reforms were always coming. It was a question of where they situated. That was the debate. It is sort of unfair. Do you mean the regulators rather than my predecessors?

Q301       Dr Coffey: No, I mean your predecessors. The previous Second Permanent Secretary basically told finance companies at a meeting with some Cabinet Ministers that they were not allowed to raise Solvency II reforms.

James Bowler: I am not aware of that. In my year-plus, it has been very much part of the proceedings.

Dr Coffey: That is why I am saying that it is not you.

James Bowler: We have had a very constructive relationship in doing this, particularly with the PRA and Sam Woods. We have a proposal and the PRA is very actively now doing that. We are now implementing this, so I do not think that there is acres of time still to come. If that was the past, the future is bright.

Let us go to the end result. The end result is that the insurance industry itself has said that these changes will allow it to put £100 billion more into productive assets. The Treasury is not in any way, shape or form reluctant or unwilling for that to happen. It is a huge part of what we are trying to achieve in capital markets more generally. The Chancellor has been at the forefront of that, as has Treasury officialdom. There is not some great stand-off between Treasury and the Bank of England or anything here. We work very well together and it is about delivering on that.

Q302       Dr Coffey: Building on that, the proof will be in the pudding when this actually happens. It is about the pace. Something I am going to bring up later is about opportunity cost and the lack of progress and pace. It does not mean going at breakneck speed, but if we do not get that investment going, there will still be strains on all the other aspects of financial priorities of delivery. We are seeing it left, right and centre. My concern is that it still feels quite pedestrian progress in this regard.

James Bowler: I am not sure that is entirely true or fair. It is the case that there is a large amount of consultation at any one time on financial services change. That is because of the need to get it right. At the moment, a combination of last year’s Act and the 31 changes in the Edinburgh reforms spawned a big year of consultation that can be seen as us being in permanent consultation mode, but the point is taken. There is no reluctance to get going on this, and I do take your point on haste and speed.

Q303       Dr Coffey: Of the Edinburgh reforms, the 31 you have mentioned, including Solvency II going through there, which are the top three that will make the most economic impact into the growth of this country?

James Bowler: I would say Solvency II, ring-fencing and the changes in pensions. You put me on the spot a bit there, but I thought I would try to have a go at answering. I would say, of the 31, we feel we delivered 22 of them, if that gives you a sense of progress and pace.

Q304       Chair: We thought you were quite generous in marking your own homework.

James Bowler: The Chancellor said he would give you your thing, and you came back and said, “Some of them require more process”, so that is not unreasonable.

Q305       Dr Coffey: Can I also say that I am very pleased that the pension stuff is finally happening? Again, there has been a lot of resistance on this. I am not saying from the four people here, but there has been a more cautious approach into that.

James Bowler: We are very much driving that. You will know that from your Department for Work and Pensions changes. The Treasury is very much driving that. You will also know that you need to proceed with care in how you tell the pensions industry what it needs to do.

Dr Coffey: It is rigorous.

James Bowler: The one thing I would say about Mansion House is the level of support for the direction of travel, which is rare from industry, Government, regulators and wider afield. We are in a good place to push forward.

Q306       Danny Kruger: The famous Treasury orthodoxy—

James Bowler: That is me.

Danny Kruger: Is it? That is what I want to find out. First, before we get into what it is, do you think there should be such a thing? Do you think the Treasury should have a corporate view, an official doctrine, on what creates prosperity?

James Bowler: I do not really recognise that there is some doctrine that the Treasury lives by. I really do not. By the way, there is a recent Institute for Government report on this, which I will happily discuss. The Treasury is in a very important place as part of Government, as all finance ministries are. That decides the allocation of resources. That is an important place to be. It can sometimes be conflated that that comes with an orthodoxy, particularly in a world where you have to be the Department that says no as well as yes. People want to say that you are doing that for some perhaps orthodox reasons. I do not really see it like that.

The one thing I would say is the events of autumn 2022, when the markets reacted to the then UK fiscal stance, is a reminder of why that part of what the Treasury does is really important. We are a Department of 2,000 people and we do an array of things. We do them really well and we do them increasingly alongside and with other Government Departments, not by ourselves. I am happy to answer all sorts of elements of that.

Q307       Danny Kruger: I appreciate that. I would quite like to understand what you think is the overall corporate view on some of the big questions, which are essentially political. They are what we debate in Parliament and what Ministers are appointed to take responsibility for, over fiscal policy most obviously, tax and spend levels, but also rates of immigration, the labour market and the whole question around geographic growth.

My understanding of what we might or might not call the Treasury orthodoxy has been that you have a spatially blind attitude to growth. Is that the case? There seems to be a focus on growth, full stop, rather than GDP per head. These are, in a sense, choices that Government have to make. They have to come down on one side or the other on these questions.

The objection to the Treasury orthodoxy is that these are regarded as political questions, whereas it is believed, with some fairness, that corporately the Treasury does take a view on these things and certainly gives that indication, not least the recent one in terms of the suggestion that what would drive growth would be high rates of immigration. Tax cuts would not really do it, but stimulating foreign investment and skills would. Your job is to provide advice. This draws on a well of wisdom in the building, which you would hope is coherent, rather than being random. Can you perhaps just unpack a bit more what you do think about some of these questions?

James Bowler: Certainly, that is a great question. There are lots of aspects to it. Quite a lot of this comes from a challenge that the Treasury is an economics and finance ministry. Often many of those things derive from an assertion that the finance ministry will ultimately have its way at the expense of the economics ministry. That leads to some short-termism rather than long-termism and a focus on fiscal discipline rather than growth. I will certainly come to your tax cuts point.

The best way of saying this is, “Look at what we do”. I would point to the recent fiscal events that we have done. This is the Treasury as an economics ministry very much at the fore. In the recent Autumn Statement, to your point about the Treasury’s view on tax cuts, we have had a very significant reduction in capital allowances to try to stimulate business investment. That reduction in capital allowances costs about £10 billion a year. It comes with a view that it will stimulate £14 billion in business investment. It comes, by the way, as part of a whole slew of policies to try to improve business investment, including the ones we have just discussed.

On the reduction in employee national insurance, the view is that will increase labour supply by some 28,000 people. That is an OBR judgment. Again, that comes in a whole set of policies to try to increase labour supply.

I give you those two examples because they are really good examples that push back on the idea that there is some kind of orthodoxy saying, “Why would we do tax cuts? The only way to growth is a different one”, or indeed that ultimately we are only interested in fiscal discipline or not growth at all. I am measured on our performance by three indicators, one of which is that we level up the economy, ensuring strong employment and productivity across the regions, to give you a view on the spatial aspect of that. Beth’s existence in Darlington is part of trying to do that.

Q308       Danny Kruger: Thank you; that is helpful, James. Can I just press you quickly on GDP versus GDP per head? Is this a distinction that you regard as important? Which matters more?

James Bowler: It is certainly a distinction that is important. We look at both.

Q309       Danny Kruger: Have you had from Ministers an indication that GDP per head should be prioritised and that we should be seeking to grow people’s personal income rather than focus solely on national income?

James Bowler: Where macro meets micro here—the Treasury does both—the focus is very clearly on growth. Growth would obviously affect total GDP and GDP per head. Why are you interested in growth? It is a single, sustainable way to increase people’s wealth and wellbeing and standard of living. To do that, you would want to increase productivity.

Why also would you be interested in improving growth? It is also the way to grow the tax base sustainably, which can allow you to afford public spending in the country without having to change rates and all the rest of it. We hear that very clearly and very regularly from the Chancellor. It is a message that all of us are delivering in what we do, in everything the Treasury does. The Treasury is a growth Department. It is not that one part of it is a growth Department, so that permeates through economics, fiscal, tax spend, international and financial services. I take it more as how micro goes into macro.

Q310       Danny Kruger: The objection to a solely GDP focus is that it justifies and in fact encourages a very high rate of migration, which has other detrimental effects, and it militates against the levelling-up agenda, because we might be growing a lot but, if we are only growing in the south‑east and the financial sector, we are not improving prosperity across the country.

James Bowler: We are certainly not south-east focused.

Q311       Danny Kruger: I appreciate that, especially with Beth there. Can I come on to this? First in 1997 and then in 2010, successive Governments carved off significant areas of policy-making responsibility, first to the Bank of England on monetary policy and then to the OBR, essentially giving an independent body a very significant influence over fiscal policy.

Let us come first to monetary policy. How do you regard its success or otherwise? Feel free, other colleagues, to answer this and give James a break. What do you think of the record of the Bank of England on monetary policy in the years since it got its notional independence, and particularly since 2008? Do you think the Treasury could have done a better job if it had retained that responsibility to set interest rates directly?

James Bowler: I will try to answer your question. It is the right thing to do. The Treasury would not have done a better job. The Bank of England has been through a particularly tricky time, with a very large spike in inflation, by any historical standard, over recent years. It is worth bearing in mind that it is not alone in that. You should look at that against other central banks around the world. I am incredibly supportive of what it has done. It is right that we have independent monetary policy. That is good for the stability of the country.

It is not for me to comment on monetary policy and nor do we. I am sure if you had the Bank here they would say there are things that they want to contemplate. They have Ben Bernanke looking at how they do forecasting, for example. I am not going to get into it, other than saying, on the big picture, that I agree with the frameworks. I am not going to get into too much commentary on that.

Q312       Danny Kruger: Leaving monetary policy aside, do you share the Bank’s and the Governor’s rather bullish assumption that what is going on in the Red Sea at the moment is not going to have a major inflationary impact?

James Bowler: The Treasury is very focused on the economic impact of what is going on in the Red Sea. It is looking at the market responses to that. As you look at the oil price market, as we speak, you do not see a major change, but I would be in a watching brief on that rather than a forecasting one.

Q313       Danny Kruger: My next question or two will be on fiscal policy. Turning to the OBR, again, I would be interested to know whether you think that its job could have been done better if the OBR did not exist and it remained a Treasury function to make fiscal forecasts. My understanding is that, in the course of five weeks last October, it adjusted its forecasts on the Chancellor’s fiscal headroom from a £27 billion blackhole to a £32 billion surplus or headroom. That is a £60 billion shift in what it thought the Chancellor had to play with. As we have heard, it is hard for the OBR to do its job if the Treasury does not provide sufficient information in terms of spending forecasts.

Nevertheless, the Chancellor is depending on advice that seems to be way out repeatedly. Is this the right arrangement we have? Is there something wrong with the model they are using or the personalities there? Is it the structure of having some independent body in the first place? Why are we so dependent on an independent body to mark your homework?

James Bowler: It is a big question. I have been around for a while now, so I have seen the Treasury do this and I have seen the OBR do it. It is better that the OBR does it. The proposal of an independent forecaster is a deeply sensible one. It is one that brings stability and transparency, but also credibility, as the Bank of England does. These are to be cherished for the UK. I would make that point, full stop. It is sensible that forecasts are made outside of political change. Obviously, it is a reform brought in under this Government.

The second part of your question goes to the nature of forecasting. Forecasts are always wrong, but that does not make them not useful. The way that the OBR does it is very transparent. The OBR is clear annually about the extent to which its forecast panned out the way that it said and why that was not the case. That is a very sensible part of transparency. It is right that it sets that out.

I will not comment on, and I am not sure I recognise, the figures you quoted from within last autumn, but it is worth saying that when, last autumn, interest rate expectations changed and inflation expectations changed, forecasts changed. That is one of the key challenges for whoever does forecasting with how you set your stance to the future. You will want to look at all sorts of ways of making sure that you do that. You are hearing that I am very supportive of the institutions.

Q314       Danny Kruger: I understand Labour wants to strengthen the OBR, giving it even greater powers of oversight. Do you think there is more that can be done to give it a greater role and improve its ability?

James Bowler: I am focusing on the work of the Government of the day. If I am right, the Opposition proposal is that you would not make fiscal changes without a forecast.

Q315       Danny Kruger: Lastly from me, I have just a quick question on central bank digital currency. We have talked to the Bank a fair bit about that when it has been in front of us. Are you able to update us on where the response to the consultation is, because that is a joint Bank and Treasury project? I really have a very simple question. Again, if other colleagues want to answer, anyone who has the best answer, please give it. What is the CBDC for? What problem is it going to solve?

James Bowler: Can I just be very pleased that you have asked that first question, given I have had to answer to versions about consultations before? The consultation comes out tomorrow. At last, I have some clarity on consultations.

Dr Coffey: That is not a leak.

James Bowler: That is not a leak.

Dame Angela Eagle: Unless it comes out tonight.

James Bowler: Now it probably will not come out tomorrow.

Chair: Thank you, Danny, for asking.

James Bowler: What is it for? It is to keep track with the reality of how we all purchase, save and do our work with our goods. Your report said that we should proceed with caution. The Government are proceeding with caution. There are a number of issues around privacy, financial inclusion, whether there are limits, monetary policy and interest. The consultation is out on that and you will hear more about it tomorrow. This is about being a modern economy that recognises how our citizens want to do business, but it throws up a number of challenges that you would want to overcome before you decided to proceed. We are still in that phase of looking at those challenges.

Q316       Dame Angela Eagle: I want to ask about the gender impact assessments that are meant to be accompanying Budgets and do not. Why is there no progress on including them with fiscal events? Is it something that you actually prepare for Ministers? Does it exist as part of ministerial advice, as the Equality Act says it should?

Beth Russell: Yes, we do provide equalities assessments in our internal advice to Ministers. The specific question about gender distributional analysis I know has been raised. It is something that we have looked at several times. As you know, we do publish quite a lot of overall distributional analysis and have been challenged on whether we could do more by particular characteristics, particularly gender. We have always concluded that it is just really difficult to do, because you have to base it on such a number of assumptions about where the benefit of different measures go to a household where there is obviously more than one adult in the household. Therefore, it is just not robust enough to publish.

It is obviously something we will keep looking at, but that has been the conclusion so far. We do not do that internally either. We do not do that kind of modelling, because it is not robust enough.

Q317       Dame Angela Eagle: What advice do you give to Ministers on gender impact assessments then?

Beth Russell: We would look at any analysis on whether we think that a measure would relatively support or not from a gender perspective. For example, on the national insurance cut, we would give advice that the benefit of that cut would be felt in line with the population who pay national insurance, which happens to be a bit more male, for example. We would give that kind of advice.

Q318       Dame Angela Eagle: Do you agree that there are many aspects of fiscal policy that do have differential effects on different groups in society, especially women, who are 51% of the population? We are not talking about a minority here. We know that they are discriminated against in terms of being bunched in low-paid work and finding it difficult to get national insurance contributions records, not paying levels of income tax because their earnings are too low, and a range of things that the Women’s Budget Group, for example can point to for us all of the time.

Why can these not be recognised and published as part of the assessments of the policy decisions and decisions that are made in the Budget to assist those of us who are trying to assess what the effect will be? There are some obvious areas where particular decisions do not help women, or help men more than women.

Beth Russell: We absolutely try to reflect that in our internal advice. In terms of what we publish, as you know, we have the tax information and impact notes on tax measures, which do pick up some of those things. I know HMRC is always trying to improve those over time. We do not at the moment publish more than that. That would be a decision for Ministers. We would want to advise on how robust some of that analysis is.

Q319       Dame Angela Eagle: Obviously, it is desirable not to have all your policy advice published, but surely more can be published with respect to this, given that it is about 51% of the population and that the Equality Act itself requires it. Surely there should be some progress on trying to have a gender impact assessment that would be robust enough to put into the public domain.

Beth Russell: As I understand it, the equalities duty on us is to make sure that we provide advice on all of that internally, which is absolutely what we do and it is a really big focus of our work. I completely recognise your point on publishing more, but that would be a decision for Ministers rather than for us. As I said, some of that is more robust than other things.

Q320       Dr Coffey: You just mentioned forecasts are always wrong. You are right, but it is a scale of how wrong they are that is the impact. It is fair to say that the OBR has a different view to traditional Conservative thinking of dynamic tax rates leading to what happens then. I am not going to try to lift the entire curtain on this, but I recall in my time in DWP there was quite a lot of feisty back-and-forth with the OBR, never mind the Treasury.

One of the things that I am keen to understand, though, is the interaction that you have in how we get the OBR to learn. Some significant policies on immigration, for example, and attitude towards that directly lead to the OBR being willing to score certain amounts of money. It is all this scoring process that happens. How can we get that better learning from real experience?

The public may not realise this, and in fact lots in Parliament will not realise this, but it can lead to some quite weird back-and-forth, and in terms of believability. I know the Prime Minister, when he was Chancellor, made some personal choices that the OBR did not agree with. They were positive ones that actually helped DWP, but that was at the cost of not being able to do other elements.

James Bowler: We are making quite considerable progress here. Like you say, it is a complex set of things. Because it involved DWP, it is well worth looking at what we have done on labour supply with DWP over the last two fiscal events. That has a whole set of measures that we are taking, from tax and national insurance, through to childcare and welfare reform. That has the OBR taking a view on what the impact on that will be on the economy.

The important thing here is you are therefore seeing the dynamic effects of policy. It is not the case that we cut the national insurance employers’ rate and it makes no assumption. It assumes—Beth might correct me—28,000 more people in work. The £4 billion a year we are doing to expand on childcare sees a labour market response of both people increasing their hours and more people coming into the labour market, particularly women.

On the welfare changes, the OBR is taking a view, as part of the scoring exercise, on what it means if you make changes, in this case particularly in attempts to reduce inactivity.

This is happening. It is not happening as a fluke. It is happening by engaging with the OBR. The OBR, in fairness, is spending a lot of time, including last summer, in investing in its understanding of supply-side linkages, which it has have done. It has have increased its resources in that area. It is a very important feature of our engagement with it.

You are seeing a positive journey here. The way it works is we say, “This is our policy and we—HMRC on tax, the Department on spending—think these are the implications”. The OBR can say, “What is your evidence on that?” and it takes a judgment. You are increasingly seeing the Chancellor, in his Budget and Autumn Statement speeches, saying, “The OBR has said this”. As I mentioned, the changes to capital allowances are expected over the course of the forecast period to increase business investment by £14 billion.

Q321       Dr Coffey: I am aware of the dynamic and it is an iterative process. I am conscious of that, but I appreciate not everybody is. There are still some quite blunt things: “100,000 immigrants means this”. That is where there has been particular concern on what has really been happening, especially when they were so out of sync with how many immigrants came into the country. Is it about interaction or is it about challenging the OBR to learn from why its forecasts are so significantly different?

James Bowler: There are two aspects to my answer. It is not the case that there is some ready reckoner on immigration—far from it. Much of the challenge on immigration statistics is as much with the ONS as it is with the OBR. The OBR has to take a judgment on the impact of things like immigration on growth. It will want to consider, probably using the information it can glean from places like the ONS, economic activity as much as anything else. That is the first point.

On the forecast point, it is worth saying that I do not say glibly that forecasts are wrong—it sounds fun. Of course, it is very difficult to forecast exactly where the economy is going to be in 2008-09. You have to take a whole set of assumptions and they are very unlikely to all come to pass. By the way, the OBR does that forecasting as well, if not better, than everyone else; it is not the only one doing this, particularly internationally. What it does is it is transparent about what it gets right and what it does not get right, and it reports on that annually. You see that. Indeed, it was its own report that got recent press coverage on this aspect.

Q322       Dr Coffey: Can I go further then? The IFG did a report just recently on Treasury orthodoxy.

James Bowler: Yes. It is a perfectly reasonable report.

Q323       Dr Coffey: I will be open about this. I am really concerned about the lack of consideration of opportunity cost. I will start off by saying that I think the Treasury has been leading on levelling up. The DEC campus has been a really change, but also in terms of its enthusiasm. However, it did change DLUHC’s delegated authority limits. I do not know if that is because you want to be more involved in the decisions. Generally, that report gives pluses and minuses, but there is an impact in terms of the scrutiny of other Departments, and the reflection or suggestion, through their interviews, of tinkering and micromanagement.

Why are business case appraisals so slow? Why is it that clearing a very small amount of money requires so much involvement of the Treasury, sometimes for as little as £250,000, or indeed a business case for a small transport project? What is it that takes so long?

I believe, Cat, you said to Civil Service World that productivity is your favourite subject. You run the Government finance, the efficiency framework. Stewardship of public funds really matters. There are 150 pages of Green Book rules. In terms of getting stuff done, the stuff about the outcome delivery plans and how effective they really are, I had two different experiences, particularly in the Department I was in. One Department I was only there for seven weeks, so we did not really get into that, but that is an aside.

I am just concerned about whether we are treating finance directors and Permanent Secretaries of other Departments as grown-ups who can get on and make decisions. Tell me more about that, because one of the biggest challenges is opportunity cost not being considered.

Cat Little: I agree with a lot of what you have implied there. Our philosophy in the Treasury is very much to empower Departments wherever we can. Of course, we are trying to get the balance between rightfully what taxpayers would expect us to do in overseeing the overall spending framework, which is set out to Parliament, and making sure that people have the freedom to operate, to deliver and to get on with business.

Over the last three years, we have changed a lot of our approach to delegated approvals. We have nearly doubled most Government Departments’ approval levels. For example, the Ministry of Defence now has a £2 billion delegated approval level where they do not need to talk to us at all. We are basically implementing an earned autonomy approach. Every year we work with Permanent Secretaries and their finance directors, who are exceptional at managing finances on behalf of the Treasury. We assess their financial performance very robustly. Where they succeed, we give them further freedoms. Where we have concerns, we start to look at where the delegations are given. That is a proportionate and fair way to look at approvals.

On your point about business cases, our average turnaround is 28 days.

Q324       Dr Coffey: Is it really?

Cat Little: Yes, it really is. We measure and we performance-manage ourselves. It depends on the quality of the business cases that we receive. There is a huge variety of business cases that come across our desk. Some are multi-billion-pound whole-life-cost mega programmes, which obviously need a lot more scrutiny and a lot more time and expert input. Some are very small, as you say, and we try to take a proportionate approach to making sure that we proceed at pace and expediency.

Dr Coffey: I am genuinely astonished to hear the 28 days.

Q325       Chair: I am going to ask a few quick-fire questions, and then I am going to have to take a quick call at 4 pm and Angela will take the Chair. What has been the cost of the Bulb bailout to the taxpayer so far?

James Bowler: It is £240-something million. Beth might clarify.

Beth Russell: That is correct. It is £246 million. It is lower than we originally thought, because forecast energy prices have fallen substantially, which has changed the cost of the risk-sharing agreement that we agreed with Octopus Energy.

Q326       Chair: We are still sharing risk on that.

James Bowler: There is obviously a process with decisions for Ministers as to whether we recoup that.

Q327       Chair: The application deadline for the replacement for Sir Robert Stheeman as head of the Debt Management Office closed very recently. I wondered how many people had applied.

James Bowler: We got a good field externally and inside the public sector. The external thing is really important for the role, so we will now proceed to interview and recommendation. Robert is due to leave in the summer, so we will hopefully have plenty of time for that. I pay tribute to Robert, a superb official.

Chair: They are big shoes to fill.

James Bowler: It is important for succession that we do this in an orderly manner.

Q328       Chair: We are a big contributor to the IMF. One of the beefs or campaigns of this Committee is that the IMF is never prepared to come and give us on the record evidence, unlike yourselves, about its Article 4 reports on the UK economy and its forecasting assumptions. At least with the Office for Budget Responsibility, we get to ask detailed questions and tease out the answers. The Bank of England is regularly in here for accountability sessions. The International Monetary Fund just will not come and see us in public. I just wondered if you support our campaign that they should be more accountable to the British taxpayer.

James Bowler: I very much recognise it. We have in the past made that clear to the IMF, and I can renew our desire to make your feelings very clear to the IMF. It responds by saying it has some kind of rule.

Chair: We are a big shareholder.

James Bowler: I will take that away and make your views very clear to them.

[Dame Angela Eagle took the Chair]

Q329       Dr Coffey: My intention is to try to carry on with this business case and the accusation of tinkering and micromanagement. What is going to make the step change? The reason I am so shocked is that it has taken a long time for business cases to happen on hospitals and it is taking a long time to happen on quite small transport projects. A significant decision was made by the Prime Minister and the Chancellor last year to halt HS2, but there are still issues.

Tell me more about how you think the effectiveness of the Green Book rules is really helping or not. What is the quality? I do not know if you are prepared to publish the delegated authority limits. I do not know if they are public now. It is clear that DLUHC had its removed on capital funding. Help us understand that, because my experience being a Minister is that ultimately Treasury does control a lot of these things. 

Ultimately, of course, for what it is worth, it is quite easy to be a financial controller. It has always been harder to be more of a financial director, to get the growth in different elements like that. This is where I am really keen to understand how we are going to improve that, because, ultimately, delivery is delayed for really quite significant projects. That is what I am really concerned about. It is not a party-political matter. It is about how it affects our constituents.

Cat Little: I really agree with you. Time is money. Time is the most important thing that matters on any delivery programme or getting anything done in Government. It is our job to make sure that we work with Departments to expedite approvals wherever we can. There is a big difference between how we turn around business cases and the time it takes to go from policy concept development through to a final approval, funding in place and delivery.

Quite often, because of the big fiscal trade-offs and the financial trade-offs we have, sometimes we cannot make full commitments outside of spending review cycles. Quite often we work with Departments to give them enough money to be able to get to project inception, to get plans under way and to run pilots so that we can fully assess them within spending reviews.

I really agree with your premise about time. Everything that we have been doing with the commercial function on major programmes has been about accelerating project inception through to contracting, and making sure that time is one of the core factors; it is not necessarily always money. That might sound like a strange thing for someone from the Treasury to say, but quite often expediting time saves you money and delivers better VFM, for major programmes in particular.

Q330       Dr Coffey: Has the IPA helped accelerate any project?

Cat Little: Yes.

Q331       Dr Coffey: Can you give us an example?

Cat Little: As part of Project Speed and as part of the work we have taken on since the MPRG, we have worked with Government Departments to accelerate both approvals and the amount of time it takes to set up programmes from the start. I am trying to think of some good examples. I might have to write with some proper evidence, if that is okay, but certainly it has done.

Q332       Dr Coffey: I do not think you do publish delegated authority limits.

Cat Little: We do not at the moment.

Q333       Dr Coffey: You selectively announce a few things. Is there a reason why you are not prepared to be more transparent on that?

Cat Little: It is a very good question. It would be subject to ministerial approval to do that, but I am very happy to take that away and discuss it with our Ministers.

James Bowler: I say slightly mischievously that there is a set of Treasury limits, which tend to be significantly higher than a set of Cabinet Office limits, which are sometimes about, for example, digital programmes, which is sometimes lower. I would not want you to conflate the two.

Q334       Dr Coffey: Ideally, how many pages should there be of Green Book rules? It is under 150, is it not?

Cat Little: It is. It is supplemented by other guidance as well. We reviewed the Green Book back in 2020, very conscious of some of the criticisms and some of the concerns about it. I would like to think we took a lot of that on board back in that major review in 2020. We do not expect everyone to be an expert. That is why we have chunked down the chapters into the five bits of specialist expertise that we would like to see in the way in which Departments consider business cases. We do provide a huge amount of training and there is still quite a lot of difference between guidance, how it is interpreted and how it is used on the ground.

James Bowler: I am not sure I would characterise it as 150 pages of rules and bureaucracy. The whole purpose of the Green Book is to try to make sure that we all do a really good job in delivering the benefits of a project, and so that we do it really properly so that it will succeed. It is written and it is received mainly in that way, rather than page upon page of yet more things you have to do.

Cat Little: I should say, when we are chairing the Major Projects Review Group, which has significantly expanded because the Government major projects programme is now well over 250 major programmes, we are not there slavishly checking full compliance. We are making sure that the guidance has been applied in the right way for the programme.

Q335       Dr Coffey: You are right to say there is the ambition and the programmes under way there. Is there actually enough concrete to deliver everything from the major programme projects and all the other private sector investment we want to see? I think the answer, by the way, is no.

Cat Little: Certainly there are lots of different types of concrete. We are competitive within Government on the types of concrete that we want.

Q336       Dr Coffey: You do not want to use RAAC.

Cat Little: Indeed, we definitely do not want to be using RAAC. As you know from the new hospitals programme, it was very difficult to assure the supply chain for environmentally friendly concrete. There is definitely a challenge definitely, and it is our job to make sure we understand those challenges, we help prioritise and we do that on a consistent basis across Government.

Q337       Dr Coffey: You have just referred to spending reviews. The current one goes to 2025. What is the intention of the spending review we would expect to happen this autumn? What are the plans, given that there will be an election this year?

Cat Little: In terms of what type of spending review, how long it lasts for and what the priorities are, that will be for the Government of the day. As you say, it is absolutely normal practice for us to run a spending review in the calendar year before the financial year to which it pertains. That is just good financial management and there are some constraints about the timing. All of the questions about the type of SR will be for the Government of the day to consider.

Q338       Dr Coffey: How effective have outcome delivery plans really been?

Cat Little: As you know, the outcome delivery plans were first instigated in 2021. They were part of the public value framework, which was our attempt to say we should take good private sector business planning principles, apply them in a proportionate way to Government and be outcome-focused in the way in which we hold Departments, in the use of taxpayers’ funds, to account.

The ODPs themselves are the basis upon which we hold Departments to account for outcome delivery. We do that through two stock-takes led by the Cabinet Secretary every single year with input across the whole of Government. Departments have to report against their performance, using trajectories and simple language to explain to the public in their annual report and accounts how well they have performed. That includes us. You will know our performance from reading our annual report and accounts.

James Bowler: I totally agree with everything Cat has said. In terms of where the Treasury sits on this, we are huge advocates of linking spend to outcomes. We have repeatedly tried to do so. Outcome delivery plans are a sensible way of doing that. A lot of things are being changed but we would be very strong advocates of keeping that going in one way so that the public are not just hearing what inputs they get for any particular use of their tax. They are also considering what the outcomes are. It is really important we keep going on that linkage.

Q339       Dr Coffey: Can I switch tack? Do you know how much the Treasury retained from the apprenticeship levy that was not handed to DfE or to devolved Administrations in the last few years?

Anna Caffyn: I do not know, sorry.

James Bowler: I can tell you about the importance we give to our growing number of apprentices that we have in the Department, but I do not know the answer on the levy.

Dr Coffey: I meant overall.

James Bowler: You mean for the whole.

Dr Coffey: Yes, for the whole, not the Department.

Cat Little: You mean for the whole of Government.

Dr Coffey: No, not Government.

Cat Little: You mean for the whole of the levy.

Dr Coffey: Yes.

Cat Little: I do not know off the top of my head, but I can certainly write with that information.

Q340       Dr Coffey: The other couple of questions are to do with the Crown Estate relationship. The objective is to keep the value, if not increase the value, of the estate and make a good profit, which gets put in a consolidated fund. There have certainly been some concerns, which may have started to change, but I would be interested to hear your perspective or your objectives, in effect, that you have set. There is a lot of money to be made from the licensing, which has been made, particularly for offshore wind but also other energy projects as well.

I represent a community in Suffolk Coastal where there has been broader concern that the Crown Estate has milked as much money as possible in earlier rounds, which has then left the developers putting in the cheapest way possible to deliver, which is having an impact on the lives of the local communities. This has then subsequently led to some issues, such as the pylon stuff. There are no pylons affected in my constituency, as far as I am aware. It is not about that. Tell me more about how you get that balance right in generating this cash cow versus what then happens, because that is then a sunk cost for developers or other users of that estate.

James Bowler: The Crown Estate is a unique organisation. It has different parts to what it does. It has a retail side of it, which itself is changing, but it has this huge and vitally important element of owning the seabed. It is highly professional in how it has done that. The best answer to your point is that this is not just all about money. We are also trying to deliver on our net zero commitments, in which the Crown Estate has a huge role to play in terms of developing our already significant international advantage on offshore wind. It is doing that.

The nature of the organisation and the benefit of it is that, as you say, the money comes back to the consolidated fund, so it does not disappear, as it were. Let me put it this way: I would be supportive of it making sure that it does not leave developers with supernormal profits, as it were, and that it gets a good return on leasing the seabed. Because the money comes back into the consolidated fund, it is not the case that it escapes entirely from the system, but I am not alive to suggestions that that leaves the developers with fewer—

Dr Coffey: It has actually changed its approach on—

James Bowler: It is for the Government to be able to legislate in any way they want as to what they expect from offshore wind turbine developers more generally.

Q341       Dr Coffey: Who sets the financial objectives for the expected return of the Crown Estate? I assumed that was done by you.

James Bowler: Yes, we do.

Q342       Dr Coffey: Have there been any changes in that regard?

James Bowler: The objectives are to maximise the return on it, but there is an understanding, in our objectives, of net zero. I am not alive to any changes in that regard that will have changed things.

Q343       Dr Coffey: Can I give you an analogy? Gordon Brown, when he was Chancellor, got a lot of money for 3G licences. They did not leave that much money for 3G to be properly rolled out. I know there was a significant campaign about a decade ago by Back-Benchers to push the Treasury to say, “Do not get so much money out of licensing 4G that it then leaves the developers not enough money to properly roll out stuff?” I am putting the same analogy here: that if all the money gets sunk up front with a licence fee of some kind, a levy, that then leaves less money and you end up with people perhaps taking the sharpest corners because they do not make enough money out of it otherwise.

James Bowler: I note the point. It is more sophisticated than that. I do not know if there is any guarantee about where, if you reduce the price, all the money would go; it could go into profits, could it not? I take the point. I am not going to be able to satisfy you particularly on this. I am not close enough to the detail of how the licensing works, I am afraid.

Q344       Dr Coffey: In terms of questions to Parliament, I have recently asked some questions to HMRC to do with tax credits and similar. I get pointed back to statistics that are nine months old, still provisional and do not really help scrutinise. Why are we using that sort of information? I appreciate you are not HMRC, by the way. Why can we not get more information like that, because I know you have it? I know Government have it.

James Bowler: I will happily take that away. We try to answer our parliamentary questions both in a timely manner and in a high-quality manner. The more publicly available information, the better, but if you feel that HMRC is not getting up-to-date information, we will take that seriously and ask them to do so.

Q345       Dr Coffey: I have another question asking why they have only released statistics. There we go; we will see the answer to that. Can I ask about international accounting standards? TNFD is a new framework that has been put forward. The UK Government really supported the taskforce to do this, building on the success of TCFD. Can you tell me how we are pushing, promoting and wanting to accelerate TNFD to become basically the standard, and what sort of timeline we are ambitious for?

Cat Little: Yes, so we will work with both DBT and the International Accounting Standards Board to look at how we interpret and apply it to the UK in the usual way. We are very supportive and we will continue to push for full adoption. I should say that we, as a general rule, are one of the few countries in the world that fully comply with international accounting standards.

Q346       Dr Coffey: Only GlaxoSmithKline initially committed to doing it. Who else do you want to see this coming from?

Cat Little: We need to work with industry, to look at both timescales and adoption interpretations in the UK. That is normal practice. I am not close to the detail of which companies we are talking to.

Q347       Dr Coffey: The Chair touched earlier on international aid more generally. The international community complains about the world institutions, such as the World Bank, being slow and not getting the money out of the door. There is a lot of reform needed. Can you tell me a bit about how we are pushing that agenda at the G7, G20 and indeed World Bank meetings, to make sure that, frankly, we are seeing improvements that will increase prosperity around the world?

James Bowler: From a World Bank point of view, it is FCDO. From an IMF point of view, not only are we a shareholder and not only do our Ministers attend those meetings with the IMF, but we are also on the board of the IMF. The UK will have a role in how it is run and operational delivery, not just policy. Through those mechanisms we would be very keen that it is very effective.

Q348       Dr Coffey: The G7 and G20 do the rotas, which include finance, one of the two core tracks. I appreciate the Treasury may not sit on the board of the World Bank, but it is heavily involved.

James Bowler: Yes, absolutely.

Q349       Dr Coffey: Could you tell us more about that progress? There are other things, such as getting a minimum base rate for corporation tax and all the rest of it, but this is really about trying to get that G7 and G20 pushed on the reform.

Cat Little: As you are probably aware, we have a dedicated team who support our work with the G7 and the G20. We are constantly pushing for that sort of reform. That is why we attend every single meeting and we are very active in the international space.

Dr Coffey: I could probably go on for a while, but I will not.

Chair: You have had a good go.

Dr Coffey: I have had a reasonable amount.  It is really important in terms of how we get delivery across Government.

Q350       Chair: Costing Opposition policies may come across your desk in the not-too-distant future. Can you set out for us now what the rules about that are?

James Bowler: There is a set of guidance that is published, which sets out how this has tended to operate under successive Governments. I will happily send you that guidance.

Q351       Chair: It would be good to get a copy. Does that guidance also include transparency about the assumptions made, because often the costs of a policy can vary dramatically depending on the assumptions that are made? It is important if there is going to be some attempt to cost opposition policies that there is a transparency about the assumptions that are made.

James Bowler: Yes, it does just that. It sets out that Ministers and, if they want help, their special advisers should set out the assumptions that should be made, and then the costing can be done. The reason why I understand it says that is because it is important that civil servants are not dragged into some of that side of things. It does cover that and I can send you it.

Q352       Chair: Any costing of Opposition policies will have alongside it the assumptions that are made in a transparent manner.

James Bowler: That is exactly correct, and that is important. Any costing tends to be quite a complicated thing that is dependent on a set of assumptions, so you need clarity on it. For what it is worth, it is also the case that, were people to ask for an Opposition costing, if that Opposition costing is used, then it is my role to forewarn the Opposition that that is going to be the case. It is also a rule that the template with those assumptions in would be published.

Chair: That concludes today’s meeting on the work of HM Treasury. I would like to thank all of you, north and south, very much for providing evidence today. You did offer to write on a few things. We will follow up with you so that nothing is missed. Thank you very much.