Treasury Outlook: Leaked Document (Hansard, 26 June 1996)

§ The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish)
My Lords, the Financial Times article was based on selective quotations from a leaked draft document by a junior official. The Treasury is right to assess its outlook. It is an essential part of the change management programme which it is undertaking.

§ Lord Ezra
My Lords, is the Minister aware that over the years many have thought the Treasury to be unduly arbitrary and secretive and not particularly good at figures? Is it not of some interest that the leaked document, whatever its source, seems to admit those shortcomings? Is the Minister further aware that this is not a new problem? With his considerable erudition, does he recall that in 1692 Samuel Pepys, who was not only a remarkable diarist but also a good administrator, complained as follows: the life of a virtuous administrator is a continual defensive war against Ministers of State and in particular against the Lords Treasurers and all other prejudiced inquisitors and malcontents"? After 300 years is it not about time that the inquisitors and malcontents changed their spots?

§ Lord Mackay of Ardbrecknish
My Lords, I am afraid that I do not recall the incident and I congratulate the noble Lord if he does. My brief tells me that I should now say that the reputation of Treasury officials is not borne out by my personal experience (if true). I believe that it is true. I am always impressed by the officials that I meet at the Treasury in my capacity as their spokesman in your Lordships' House. They have a very difficult job, as some of your Lordships on both sides of the House who have served at the Treasury know—and that is to prevent spending departments, pressure groups and everybody else taking more and more of the taxpayers' money. I am afraid that it is not often the most popular job in government.

§ Lord Eatwell
My Lords, is the Minister aware that one of the most well-known sources of error in Treasury calculations is its failure to take into account the secondary effects of policies? Calculations are often hundreds of millions of pounds out. That has happened when the Treasury has failed to take into account the secondary effects of employment policies on tax and revenue. As any second-year undergraduate can make a reasonable stab at such calculations, why does the Treasury fail to take into account the secondary effects of policies and as a result gives erroneous advice which costs the taxpayer very large sums of money?

§ Lord Mackay of Ardbrecknish
My Lords, I was interested to hear the noble Lord refer to second-year undergraduates. I sometimes wonder if the reason that the Treasury sometimes makes mistakes, as we all do, is that there are too many Cambridge graduates in the Treasury—

Noble Lords
Oh!

§ Lord Mackay of Ardbrecknish
That may not be a universally popular view, but the fact is that the Treasury and other departments of government try to forecast and to foresee the behavioural and other consequences of policy and to judge what those policies may cost and what benefits they may bring. However, as the noble Lord well knows, economics is not an exact science—nor is prediction.

§ Lord Boyd-Carpenter
My Lords, is my noble friend aware that anyone who tries to change the outlook of the Treasury is guilty of crazy optimism?

§ Lord Mackay of Ardbrecknish
My Lords, the Treasury has a major responsibility for looking after the taxpayers' money, which is not always easy. It also has to do it against the background of a very changing world. One of the interesting matters to emerge from the report on the leaked document is that it draws attention to the considerable changes in world trade over the next 20 years as a result of the emergence of major players in the Far East. I should have thought that that was certainly something that all of us should take into account.

Lord Bruce of Donington
My Lords, may I draw to the attention of the noble Lord the necessity for him to point out to the Treasury that at present the taxpayer is paying £2.5 billion net to the European Union without any ascertainable return?

§ Lord Mackay of Ardbrecknish
My Lords, I wondered how the noble Lord, Lord Bruce of Donington, would introduce the European Union into this debate. There are other ways of doing it, but he has rather surprised me. I should have thought that our membership of the European Union was not something that could be decided on the simple question of the taxpayers' balance sheet. The other aspect is the importance of the European Union to us as a trading partner and the clout that it gives us around the world when it comes to trading matters, for example the World Trade Organisation and the like.

§ Lord Clark of Kempston
My Lords, does my noble friend agree that whatever criticism can be made of the Treasury, over a long period its policy has resulted in this country having an economy which is the envy of the rest of Europe?

§ Lord Mackay of Ardbrecknish
My Lords, my noble friend is quite right. Thanks to sensible government policy led by the Treasury, the United Kingdom is almost unique in Europe. It has a fast-growing economy, with unemployment falling and employment rising, which must be the envy of a few of the other major players in the European Union.