Select committee inquiry
Spending Round 2013
Closed
What the inquiry looked at
“The Committee is inquiring into the 2013 Spending Round. George Osborne MP made his statement to the House of Commons on 26 June 2013.”
The committee's words, from the inquiry page on parliament.uk ↗.
What the government said
3rd Report - Spending Round 2013 - Volume II (Volume II: written evidence)
No government response is linked to this report.
3rd Report - Spending Round 2013 - Volume I (Volume I: Report, together with formal minutes, oral evidence)
The government responded on 12 December 2013.
Summary written by Accountability Index from the government's response.
The government's response sets out its position on spending control, the welfare cap, Help to Buy, HS2 and infrastructure reporting, largely by describing existing or planned measures rather than accepting or rejecting individual recommendations.
- On the welfare cap, the level and forecast margin "will be announced at Budget 2014". The cap will apply to all social security and personal tax credits expenditure, with exceptions for the State Pension and the most cyclical elements of welfare.
- If the cap is breached, the Chancellor would set out the reasons in the Autumn Statement and the Work and Pensions Secretary would table a motion for a debate and vote in the Commons. This framework will be set out in the Charter for Budget Responsibility, which "will be updated in 2014".
- On Help to Buy, the government describes the scheme as "a temporary, targeted intervention" lasting three years. If it wishes to extend it, the Chancellor will ask the FPC for a public assessment, though "final decisions on government schemes remains with the Chancellor".
- The government is "committed to publishing updates to the National Infrastructure Plan annually". On pre-release of Budget information, the Treasury has introduced a ban on pre-release of "core information" from the Budget and Autumn Statement.
Read the government's response ↗ Read the report ↗ Report an error
How the inquiry ran
Each dot is a dated item listed on this page, from the inquiry's opening on 1 July 2013 to its close on 12 December 2013.
- Report 2 reports
- Government response 12 Dec 2013
What it recommended 6 recommendations · 9 conclusions
1It has been put to us that coalition politics has encouraged a more formal process...
Concluded (the committee's words)
It has been put to us that coalition politics has encouraged a more formal process in the Spending Round. Whether true or not, the fact that the Spending Round was concluded without delay or apparent acrimony is noteworthy in view of the scale of the challenge, which is unprecedented.
2In our Report on the 2013 Budget, we argued that ring-fencing tends to reduce the...
Recommended (the committee's words)
In our Report on the 2013 Budget, we argued that ring-fencing tends to reduce the scrutiny of ring-fenced spending, can lead to waste or worse, and if persisted with will distort the balance of spending as a whole. As the Chancellor argues, ring- fencing is an expression of political preference supported by the ballot box. However, spending in ring-fenced departments may receive less scrutiny than that in departments competing for resources. The Government must remain alert to this danger. The Government should place in the public domain its own assessment of the value for money of ring-fenced departments and its rationale for keeping the ring-fences.
3The major political parties all favour a reduction in state spending as a proportion of...
Concluded (the committee's words)
The major political parties all favour a reduction in state spending as a proportion of GDP from current levels, as did the previous government. It is the scale and pace of that reduction that is in question, not the direction.
4The Committee welcomes, in principle, the introduction of measures to provide greater control over Annually...
Concluded (the committee's words)
The Committee welcomes, in principle, the introduction of measures to provide greater control over Annually Managed Expenditure. Some areas of AME are, however, easier to limit than others and we share concerns that the planned cap may not control those elements that are likely to rise.
5A cap nevertheless has the potential to have a significant impact on the benefits received...
Recommended (the committee's words)
A cap nevertheless has the potential to have a significant impact on the benefits received by those in society who are most in need. It is therefore crucial that policy is transparent so that the impacts can be understood and debated. We have welcomed the additional transparency from the publication by the Treasury of distributional analysis to accompany the Budget; more detail is required in this area too. We recommend that the Treasury publish clear guidance over which elements of welfare expenditure will and will not be included under the cap, the further areas of AME that it is considering for inclusion, and the size of the margin above the cap before policy action is triggered.
6We are concerned that the ‘comply-or-explain’ sanction for breaching the cap on annually managed expenditure...
Concluded (the committee's words)
We are concerned that the ‘comply-or-explain’ sanction for breaching the cap on annually managed expenditure could be too weak to ensure adequate control of such public expenditure and that, were this weakness to materialise, the credibility of the cap could be tarnished.
7Concerns have been raised over the rationale for the seven-day wait and other ‘supporting work’...
Recommended (the committee's words)
Concerns have been raised over the rationale for the seven-day wait and other ‘supporting work’ measures announced in the Spending Round. In addition, the Office for Budget Responsibility has highlighted that the costings for these measures are subject to particular uncertainty. In the interests of transparency, we recommend that the Treasury publish its assessment of the behavioural impact of the policy, its analysis of the costs and savings it will generate, and the international evidence of what works to get people into work upon which it has relied in developing this policy.
8The Treasury Committee expressed serious reservations about the Help to Buy: mortgage guarantee scheme at...
Concluded (the committee's words)
The Treasury Committee expressed serious reservations about the Help to Buy: mortgage guarantee scheme at the time of the 2013 Budget. We highlighted the risk that, without a corresponding supply response, the scheme could serve merely to drive up house prices. We also expressed concern about the appropriateness of the taxpayer acquiring contingent liabilities in this way and questioned the Government’s assertion that the commercial fee to be charged to participating lenders could be priced accurately so as to ensure the taxpayer did not suffer losses. We also warned that the political pressure to extend the guarantee scheme— designed to run for three years—could be immense, particularly if the current shortage of high loan-to-value mortgages turned out to be to be structural and not the cyclical problem which the Government said that it was seeking to address.
9The Government’s response to our Report on the 2013 Budget has done little to allay...
Recommended (the committee's words)
The Government’s response to our Report on the 2013 Budget has done little to allay our concerns that the primary effect of the guarantee scheme, at least in the short to medium-term, could be to raise house prices rather than stimulate new supply. Furthermore, we continue to believe that the government of the day will face strong incentives to extend the scheme, with the attendant risk that the mortgage guarantee scheme becomes a permanent feature of the UK mortgage market. Following Committee scrutiny it transpires that the so-called “double lock”—whereby we initially understood that the FPC would have a veto over the continuation of the scheme after three years—is not a lock at all. Our understanding is that the government of the day, if it chose to extend the scheme, could do so despite any objections raised by the FPC. The Government should provide more precise information on the operation of the so-called “double lock” and, in particular, re- examine the case for giving the FPC an explicit veto over the continuation of the scheme.
10As the Governor of the Bank of England recently noted, the FPC has both powers...
Concluded (the committee's words)
As the Governor of the Bank of England recently noted, the FPC has both powers of recommendation, and powers of direction, to counter risks from the housing market. We note that the FPC can issue recommendations to the Treasury, and we would expect it to do so if it believed that the mortgage guarantee scheme should finish early.
11On 11 September 2013, HS2 Ltd published additional material on HS2.
Recommended (the committee's words)
On 11 September 2013, HS2 Ltd published additional material on HS2. We will wish to examine whether the material published by HS2 Ltd, and any further material published by the Government, meets the following requirements: • The National Audit Office has highlighted a number of problems with the existing cost-benefit study that, combined with the increased cost of the project, could have a large impact on its value for money. The Treasury should not allow HS2 to proceed until it is sure the cost-benefit analysis for HS2 has been updated to address fully the concerns raised by the National Audit Office. • The Treasury has based the need for HS2 upon the existence of benefits that are not captured by the existing economic appraisal. The Treasury should publicly quantify these benefits. • Prior to any decision by the Treasury to proceed with HS2, it should publish its own comprehensive economic case supporting its decision. Once these requirements have been met, the Government should formally reassess the project before deciding whether to proceed. In the event that it does proceed, Parliament can then consider the hybrid Bill in the light of that reassessment.
12The Committee welcomes the creation of long term plans for infrastructure investment.
Recommended (the committee's words)
The Committee welcomes the creation of long term plans for infrastructure investment. It is now crucial that the projects are delivered in a timely and effective manner. To aid transparency and public accountability, the Treasury should provide infrastructure plan updates on an annual basis at every Budget. The updates should set out progress on each infrastructure measure announced in Investing in Britain’s Future.
13Sir Nicholas offered no justification in his report for confining the ban on the pre-...
Concluded (the committee's words)
Sir Nicholas offered no justification in his report for confining the ban on the pre- release of Budget information to “core” information, and the Committee is not convinced that a clear distinction between core and non-core information can always be drawn. The scope that exists for politically motivated judgements about whether data is core or non-core could be subject to abuse. There would also be scope for other information to be released principally for reasons of obtaining good coverage rather than in order to explain the “context” of the Budget. In addition, allowing the Government to pre-brief on certain topics, without the “core” data, leaves room for the Government to manage the message of Budgets and Autumn Statements to an unacceptable degree.
14There is no public interest in pre-releasing Budget and Autumn Statement information, whether Ministers classify...
Concluded (the committee's words)
There is no public interest in pre-releasing Budget and Autumn Statement information, whether Ministers classify it as “core” information or not. The Treasury should not pre-release the Budget or Autumn Statement.
15For the avoidance of doubt, the Committee recommends that the prohibition on pre-briefing also include...
Concluded (the committee's words)
For the avoidance of doubt, the Committee recommends that the prohibition on pre-briefing also include special advisers and Ministers.