§ Mr. TimmsTo ask the Chancellor of the Exchequer if he will make a statement on the feasibility and scope of possible market testing of the Treasury's forecasting function. [954]
§ Mr. Gordon BrownThe Government support market testing as one means to secure better value for money in the provision of public services.
Initial steps in the market testing process are to identify the feasibility and scope of services subject to market testing, and to check whether the potential value for money gains are sufficient to outweigh the costs of testing the market. In line with this procedure, consultants KPMG Management Consulting were appointed earlier this year to advise on the feasibility and scope, including value for 36W money, of a market test of all, or some part of, the Treasury's macro-economic and public finances forecasting and monitoring function.
KPMG have now delivered their report, and I have considered it carefully. The touchstone must be value for money, that is achieving the most efficient and cost-effective method of delivering the forecast.
After extensive consultations, both inside and outside the Treasury, KPMG have noted that the quality of Treasury forecast output is generally perceived to be high, and that a decision to opt for an outside provider is unlikely to turn on this issue. In considering whether the market test would yield better value for money, KPMG have advised that the balance of potential resource savings and costs would not justify a market test. A copy of the KPMG report will be placed in the Library.
In the interests of securing best value for money, I am content to accept the KPMG advice, on merit, that the Treasury's forecasting function should not be subject to market testing, because in this case market testing would not lead to savings. I am concerned, however, to ensure that the forecasting function remains of high quality, and that it is carried out with the greatest efficiency. I intend to set rigorous targets for achieving that. With this in mind, I have noted that KPMG outlined possible internal reforms designed to use Treasury forecasting staff more flexibly and broaden their experience. I have asked my officials to pursue these suggestions.