Budget Responsibility and National Audit Bill [HL]

Lord Barnett Excerpts

Monday 8th November 2010 Lords Chamber

[Lord Barnett]

My Lords, I am delighted to participate in a debate which has been largely non-party political and in which we have heard from two senior ex-Treasury officials, the noble Lord, Lord Burns—I nearly said my noble friend—and the noble Lord, Lord Turnbull.

I am in favour of reform and change, but change should be for a specific purpose. While I agree with much of what has been said about the OBR, certainly as outlined by the noble Lord, Lord Sassoon, today, and in various documents before us, I am not as sure as my noble friend Lord Eatwell that there is a real purpose in having an OBR at all. I shall explain a bit more why I think that. I agree with my noble friend Lord Eatwell and others about the personalities of who we are told will be executive members of the OBR—Robert Chote, Stephen Nickell and Graham Parker, all three of whom have had great responsibility for preparing forecasts and are highly respected in this area.

The noble Lord, Lord Sassoon, told us—this also appears in many documents—that the whole purpose of the OBR is to provide independent assessments of forecasts. When he referred to the past, he spoke about Ministers being responsible for the forecasts. Theoretically they are, but we all know that the forecasts were prepared by the same Treasury officials who are now in place. It is very sad that the Chancellor said:

“The creation of an independent Office of Budget Responsibility has brought back honesty to official forecasts”.—[Official Report, Commons, 20/10/10; col. 949.]

To accuse your own Treasury officials of not being honest is frankly a dishonest thing to do. I hope that the noble Lord, Lord Sassoon, will apologise for that loose language, which we have had all too often from the Chancellor. I am not accusing the noble Lord, Lord Sassoon, of that, but it is an appalling thing to have said about the people who prepare those forecasts. Effectively that is what he was saying.

The forecasting by anyone, no matter how independent, is to say the least, as the noble Lord, Lord Burns, said, uncertain. We are now told that around that uncertainty we will have audited sustainability. In the past, I have done some auditing as a professional accountant. However, that was a long time ago as, when you become a senior partner, you no longer do any specific auditing. When auditing, you look at the figures on a balance sheet and in a profit and loss account, which is easier than forecasting and auditing sustainability. Perhaps the noble Lord, Lord Sassoon, can tell us how to audit sustainability, as we are told the Office for Budgetary Responsibility has done. We were told that by the Chancellor, but I have never been able to find a report of what the OBR said. Can that be published and can we be told whether that audit of sustainability and forecast was carried out without any qualification? Is that what we are being told? Frankly, I find it hard to believe.

On independent forecasts, we have a document issued by the Treasury called Forecasts for the UK Economy, within which there are 58 independent forecasts. I wonder how many of those forecasts the noble Lord, Sassoon, could tell us were totally right. I am not sure that the new chairman, the highly respected Robert Chote, who controlled the IFS—I assume that he audited the IFS as well—could tell us that the IFS never got a forecast wrong. Of course, he cannot. No one could ever say that they have never made a forecast that was wrong. That would be an incredible thing to do. Is the noble Lord, Lord Sassoon, telling us that the Bank of England, which has often got forecasts wrong, is dishonest? Are all those who issue truly independent forecasts, which have been wrong, dishonest?

There is no doubt whatever that independence is crucial here. I am not sure whether there is truly any need for yet another independent body. Unless, in Committee, we can amend this Bill substantially, as has been suggested by my noble friend and others, I do not think that we will have a body which will be of huge importance to us. We are told that the current OBR has issued forecasts and that, at the moment, it still has offices right next door to the Chancellor. Can we also be told how often the head of the OBR had formal and informal chats with the Chancellor when he was giving the office details of his comprehensive spending review, which no one else received in advance? We are told that these were better independent forecasts because they had been audited. You cannot audit a forecast or sustainability accurately. No doubt, in winding up the Minister will tell us how to do it. I shall be glad to hear it.

When all is said and done, what on earth are we really doing here? Are we setting up a new independent office which will be able to provide us with forecasts, without qualifications, that are better than many of the other forecasts now being made? My experience of a few years now is that, for every Budget, the Treasury lists the number of occasions when independent forecasts are wrong. No matter how good it is, I am not sure that the OBR—using excellent Treasury staff, no matter whether they are “dishonest” or not, to prepare the basic work—can, without qualifications, give us forecasts on which we can rely more than we have ever been able to in the past.

I turn briefly to the other major reform in the Bill—the National Audit Office. I suppose I should declare a past interest. After five years as Chief Secretary, I was chair of the Public Accounts Committee for a Parliament. I found that both the C&AG and the National Audit Office did a first-class job. As two former members of the Public Accounts Committee have said today, it could not have been bettered. However, we are now told that there are not going to be new value for money audits; it is all going to be done the same, presumably with the same staff. I take it that the Government are not going to change the whole staff of the National Audit Office. The Minister is shaking his head. I am happy to hear that. There is a better case for change because of what has happened in the past and I strongly support the recommendations for carrying this change through. For now, I would be glad to hear what “positions reserved” means. It is so often referred to in the Bill. If positions are reserved there, so are mine on the Bill itself.

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[Lord Sassoon]

My Lords, I thank noble Lords for their contributions to a stimulating and interesting debate on both parts of the Bill, although noble Lords focused more on Part 1 than Part 2. The debate has focused on the role of institutions and the part that they can play in ensuring transparency and accountability in the public finances. This is clearly a matter of much importance at the current time. At the beginning of the debate I explained the Government’s broader plans to reform the fiscal framework, and the establishment of the Office for Budget Responsibility is the most substantial aspect of this reform. For the first time, we are introducing independent and impartial scrutiny into the official forecast.

I should start by welcoming the confirmation by the noble Lord, Lord Eatwell, that the Opposition welcome the creation of the OBR, which was confirmed by the noble Lord, Lord Tunnicliffe, just now. The only substantial note among those who have spoken this afternoon questioning the purpose of change has come from the noble Lord, Lord Barnett. However, I think that the reason for change was very clearly set out in different ways both by my noble friend Lord Newby, who quoted from ministerial memoirs from the former Government, and by the noble Lord, Lord Turnbull, who made it quite clear—he referred to wishful thinking in the past—why, in his words, this is an idea whose time has come. I completely agree with that. I should as a rider say that I was not in what I said questioning in any way the work of Treasury officials. I would like to think that the noble Lord, Lord Barnett, recognises that. What I was questioning was precisely the way in which forecasts were put together—whether it was by way of wishful thinking or whether it was something more sinister in the past. That is precisely why I think that the overwhelming majority of speakers this afternoon have confirmed that the OBR’s time has indeed come.

I shall come back to the point about independence.

[Lord Barnett]

The Chancellor, in his comprehensive spending review speech, referred to the previous forecasts as dishonest.

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[Lord Barnett]

Before the Minister does that, he said that the Freedom of Information Act applies. The Chancellor referred to the audit done by the OBR on his comprehensive spending review. Will we see that?

[Lord Sassoon]

I have already said that the next forecast will be produced by the OBR before the end of this month. Clearly, that will include forecasts based on all decisions taken by the Government, including the comprehensive spending review. We have approximately three weeks to wait for that.

I want to spend one minute on the points made about the National Audit Office. The critical point is that credit is due to the Public Accounts Commission for its work that led to the Bill brought forward by the previous Government and on which we have built. In answer to the points made by my noble friend Lady Browning, the provisions enshrine the independence of the Comptroller and Auditor-General. A similar point was also made by the noble Lord, Lord Touhig, to whom I am grateful for his welcome of the provisions relating to Wales. I will respond in writing to his detailed point that the period should be five years rather than two years or what was proposed by the Public Accounts Commission. I am grateful to noble Lords for confirming our direction of travel on the National Audit Office provisions.

I conclude by thanking all noble Lords who have attended and spoken in this debate—