Bankruptcy

Lord Barnett Excerpts

Tuesday 7th December 2010 Lords Chamber

Asked By

[Lord Barnett]

To ask Her Majesty’s Government what is their definition of “bankruptcy”, as the term was used by Lord Sassoon on 1 November (HL Deb, col. 1552).

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, public sector net borrowing in 2009-10 was £156 billion or 11.1 per cent of GDP—the highest level in UK post-war history. The Government were borrowing £1 for every £4 they spent. That was the brink of bankruptcy.

[Lord Barnett]

My Lords, I should declare a professional interest; perhaps I should also declare that I have had free tuition in economics from my noble friend Professor Lord Peston.

Despite the Minister’s Answer, does he not agree that on any definition this country never has been, and is not, anywhere near bankrupt? The plain fact is—and the ONS confirms this—that the net asset position of this country at the end of last year, just before the noble Lord took office, was £6.7 trillion. On top of that, there is no problem in paying debts, because the average length of debt repayment is 14.2 years. We recently lost the services of a distinguished noble Lord in this House. I would not like to see another one go so soon from the Prime Minister’s service. Will the Minister withdraw the word “bankrupt” and apologise to the House for using it?

[Lord Sassoon]

My Lords, I know that the noble Lord, Lord Barnett, is a man who likes precision, so I thought that I would do a little research and see how he has used the term “bankrupt” in this and another place. The first time that the noble Lord used that word in another place was very interesting. It was on 8 April 1965 in the Budget debate. The then Member for Heywood and Royton was defending the then Labour Government’s cuts to our Armed Forces east of Suez. He asked:

“Have we discussed this with our Commonwealth friends in the area and told them … that … it would not help them or us if we bankrupted ourselves by having a force in the area of a size which we could not afford?”.—[Official Report, Commons 8/4/1965; col. 737.]

That was in 1965 when public sector net borrowing was 1.6 per cent of GDP. On that basis, does the noble Lord think that I was a little moderate in my language when I talked about the brink of bankruptcy?

Budget Responsibility and National Audit Bill [HL]

Lord Barnett Excerpts

Monday 6th December 2010 Grand Committee

Moved by

[Lord Barnett]

25: Clause 4, page 2, line 32, at end insert “but shall not be regarded as an audit”

[Lord Barnett]

My Lords, Amendment 25 is in my name and that of my noble friend Lord Peston. Everything that I have heard so far this afternoon in these brief debates confirms to me why my noble friend Lord Peston and I have been right to wonder whether the huge expense of setting up the whole of the OBR is worth it. In particular, this amendment relates to the whole issue and is central to it. Indeed, the only person whom I have heard using the word “audit” in relation to this 150-page OBR report is the Chancellor. He is worth quoting. He said:

“I can confirm to the House that the OBR and its new chair, Robert Chote, have audited all the annually managed expenditure savings in today’s statement”.—[Official Report, Commons, 20/10/10; col. 949.]

My experience of auditing is now a bit out of date. Indeed, once you become a major partner in an audit firm, particularly a senior partner, you do not do a lot of actual auditing. Yet I did a little before that and I am bound to say that, when you give a clear audit certificate, there are no exceptions to it. How on earth can you give an audit certificate in relation to the OBR report? The fact is that it is just not possible to give a wholly unqualified audit certificate in relation to the OBR report. Perhaps I might give one or two examples of why it is impossible.

The words “uncertain” and “uncertainty” go right through this report. Quite obviously, I am not blaming the OBR for that. If you are making, as it is, forecasts and assessments, there is bound to be uncertainty. It quite rightly admits that openly. It is not worth quoting all the examples when there are so many of them, but it refers, in the case of the central forecast, to significant uncertainty. Now if, in your report, you have a significant uncertainty that relates to the whole of the report, how on earth can the Chancellor say that everything that it has said is right and that it is all audited? Perhaps the noble Lord, Lord Sassoon, can tell me what it means. It is not clear to me. It is nowhere in the report, but it was at the heart of the Chancellor’s Statement introducing the comprehensive spending review. He said that the OBR had “audited” the annually managed expenditure savings. In fact, the OBR report refers very often to “estimates”. I assume that it will be accepted that you cannot audit an estimate. Page 25 talks about an “equal likelihood” of growth being up or down—it could be all kinds of things. To say that there has been an audit is clearly nonsense. It is done solely to let the public know that this great new independent OBR is giving the Chancellor an overall audit. However, it has not given him an audit, because it cannot. The report states that it is “difficult to draw conclusions”, but the Chancellor says that there has been an audit. The report says that there are “expectations of interest rates”—I wish that the Chancellor would give me some examples of expectations that could be audited; I have never heard of one. I have not come across anybody who can give me a certain forecast of interest rates for tomorrow, let alone for five years, but those “expectations” are central to the forecast, which itself is significantly uncertain.

I worry about Robert Chote, who has taken on the job of chair of the OBR. It is clear that he is an independently minded man who did a great job with the Institute for Fiscal Studies. However, he is allowing the Chancellor to use him. I am very sorry to see it. The Chancellor is using the respected independence of Robert Chote, and now the OBR, to say what a great job he is doing. That is very worrying, because there is a clear danger of the very perception of the independence of the OBR being undermined. I have quoted previously from the foreword to the OBR’s 150-page document, but it is worth doing so again. It states that,

“we have also drawn heavily on the help and expertise of officials across government”.

It then lists the many government departments whose expertise has been used. Despite having asked Questions, I still have not heard from the noble Lord, Lord Sassoon, or from anybody else how often, either formally or informally, the OBR has met the Chancellor and his colleagues. It is not unimportant to know these things. It is all part of the very perception of the OBR. I hope that the noble Lord, Lord Sassoon, will at least see that it is important to accept the amendment, because it goes to the heart of the independence of the OBR, which the Government want to have us believe. I find it hard to believe. I am sorry that the Government are using—I use the word carefully—Robert Chote and his colleagues to give the Chancellor the aura of being right, when it is clear that they cannot do so and are not doing so. I beg to move.

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[Lord Sassoon]

I am grateful to my noble friend for trying to bring this back into perspective. Of course the OBR scrutiny, as the noble Lord, Lord Eatwell, acknowledged just now, will be based on challenging the assumptions underpinning the AME costings. How it then formed the judgments that it did is for the office, not me, to interpret. However, I am happy to point noble Lords towards what has been published and see whether there is anything else that the OBR thinks would be helpful to say on the matter after the discussion this afternoon. Clearly, the OBR will not sign off on its scrutiny of AME savings if it does not think that the methodology and the numbers are reasonable.

[Lord Barnett]

My Lords, there is no need for noble Lords to waste their time looking at websites. I submitted a Written Question to the Minister asking when the OBR scrutinised these particular points. The Answer stated that the noble Lord, Lord Sassoon, passed my question to Robert Chote, who quickly gave me an answer. He referred in particular to chapter 3 of the 150-page document. I went through chapter 3 very carefully. Like the noble Lord, Lord Peston, I could not see in the whole of the chapter any details about scrutiny—far from it. Chapter 3.2 states:

“This is our central projection, or in other words, we believe there is an equal likelihood that growth will turn out to be higher or lower than we forecast”.

How do you scrutinise that? Or perhaps you should audit it. Or perhaps I have been going over the top, as the noble lady, Baroness Noakes, said. If I really wanted to go over the top, noble Lords on the Committee would know that they have heard nothing yet.

The noble Baroness, Lady Noakes, seems to think that she is still sitting on the Front Bench. I do not mind that. She was very good on the Front Bench. Occasionally she got it right. However, today she tells me that I am over the top. I wish someone, perhaps the noble Lord, Lord Sassoon, would explain where I am over the top. I have said that Robert Chote is being used by the Treasury. That is undoubtedly the case, and all that this brief debate has done is emphasise that. Indeed, the Minister has still not replied, or perhaps he has accidentally overlooked replying, to my Question about how often since or before this report Robert Chote and his colleagues met the Chancellor and other Ministers.

[Lord Sassoon]

Forgive me, but I went through the detail of what was published on the OBR’s website by Mr Chote, and I shall say it again. According to the document released by the OBR on its website, between 4 October and 29 November 2010 there have been seven substantive contacts between the OBR and Treasury Ministers, special advisers and their private office staff, including four e-mails, two meetings and one transmission of a hard-copy document. The details of the two meetings are included in the log on the website. I have tried to give this information and I repeat it now. There have been two meetings—on 4 November and 18 November. The details are set out on the website.

[Lord Barnett]

I must tell the noble Lord that I may not be doing my job properly, but I do not spend my life going through Treasury or OBR websites. Perhaps I should; it might make me better informed. I would not go “over the top”, as the noble Baroness described me. I doubt it. It might make me even more so. The noble Lord, Lord Sassoon, has now told us information that I confess I had not read on the website. It may be that every other Member of the Committee has read it on the website.

[Lord Peston]

I did not.

[Lord Barnett]

I am sure that the noble Baroness, Lady Noakes, read the website carefully. She did not quote it to me, but I now have the figures, which are a bit disturbing. I will read them with greater care later. Once again, Robert Chote is doing the job that the OBR is being set up to do—to tell the world how good the Treasury is. I had a little experience at the Treasury for five years. Officials are excellent, in my experience. I can see them over there, but they are not nodding, because they would not do that. The noble Lord, Lord Sassoon, can nod on their behalf. He is quite right; they are very good. I always found them to be excellent. However, that does not make the Chancellor right in saying all the things he says, either in introducing the comprehensive spending review or at any other time. I confess not only to being not over the top but to being too moderate in my remarks. I am very concerned.

[The Deputy Chairman of Committees]

My Lords, a Division is taking place. Does the noble Lord feel that he can wind up in 30 seconds, in which case I am sure he can carry on?

[Lord Barnett]

I beg leave to withdraw the amendment.

Amendment 25 withdrawn.

Budget Responsibility and National Audit Bill [HL]

Lord Barnett Excerpts

Wednesday 1st December 2010 Grand Committee

[Lord Barnett]

My Lords, I agree with the noble Lord. Although I am sure that the Minister will consider the amendment carefully before we get to Report, I wonder whether it would be simpler for him to add a few words to it—namely, that the Economic Affairs Committee of the House of Lords might be added to this consideration. I am sure that he would be happy to see that done.

[Lord Sassoon]

My Lords, I am quite puzzled by this amendment because we are moving into unusual territory. We believe it absolutely right for the Treasury Committee to have a veto over the role of the chairman, but it is almost unprecedented for Parliament or parliamentary committees to have such roles at all, let alone over non-executive members. One of very few other appointments that is subject to a parliamentary veto of the sort provided for in this Bill is that of the Comptroller and Auditor-General.

In terms of the non-executives, I do not share the analysis of the noble Lord, Lord Eatwell, in terms of expertise. I shall come back to the other constitutionally substantive point, which is that we are not talking about experts in this area in any sense but about those who will bring independence of mind and who will challenge and support. That is potentially a much wider field of candidates. So I think that such appointments would rest on the relatively narrow point about what the Treasury could bring to bear, and actually I do not think that it would have anything special to bring to this. The wider point to be made here is that we would be moving into new and extraordinarily different territory. To take one broadly similar example, the non-executive members of the board of the UK Statistics Authority are appointed by the Minister for the Cabinet Office after consulting with the chair of the UK Statistics Authority. So we are following a perfectly respectable precedent.

In answer to the question of why the names that are being considered for the non-expert, non-executive role should be nominated by the OBR, again we want to strike a balance between appointment by the responsible Minister, who is the Chancellor, while not leaving it entirely to the Chancellor and the Treasury to come up with names. So again there is a perfectly well precedented route by which the authority concerned has a role in identifying candidates. That would include the Debt Management Office, the Crown Estate Office, the museums, the Natural Environment Research Council—I could go on.

Our suggestion in the Bill for how this should work is well-worn territory; there is nothing so different about the role of these non-execs. We have already had some questions about how substantive the role is, but there is nothing that takes the roles of these non-execs into remotely different territory from the role of non-execs in a lot of other well functioning bodies in the broader public sector, and we have broadly followed the appointment processes in those other areas. I am genuinely puzzled by this amendment and do not believe that it would add anything to the strength of the OBR governance arrangements.

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[Lord Higgins]

My Lords, the theme running through all our proceedings has been that the OBR shall be seen to be independent. In that context, its forecasts in particular need to be independent. It would appear that, despite what may be a possible solution, the Treasury will continue to make forecasts at the same time as the OBR is making them, and it will be extremely difficult for everyone to believe that there has not been any degree of collusion if in fact the office is located in the Treasury itself.

This is a simple amendment. It may be that the Minister will happily say right away, “It’s clear anyway from the clause, since the OBR apparently owns property in the context of this amendment’s location. There is not the slightest question of it being located in the Treasury”—in which case we can let the matter rest. I hope that that is so. I beg to move.

[Lord Barnett]

My Lords, it is really all about perception. We all know Robert Chote, the chairman; I respect him and believe him to be truly independent. Being based in the Treasury, with everything that that means, would clearly be wrong, but on the other hand I read recently—I do not know whether this is right—that the OBR was looking for premises outside. It may already have found them, so this amendment may not be necessary. Perhaps the Minister can tell us.

[Lord Sassoon]

My Lords, I hope that we might be able to dispose of this a little more speedily than some other matters today, although it is important. I shall make the situation clear: Robert Chote has announced that the OBR is moving out of the Treasury and will do so—my speaking note says “next month”. I think that we are already in next month. It will be moving out in December. Before Christmas the OBR will be out of the Treasury building and going to Victoria Street, so it will not be too far away. I think that the noble Lord, Lord Burns, noted at Second Reading that the OBR will inevitably work closely with the Treasury. It will be out of the Treasury building but it will not cost its members too much in shoe leather if they occasionally need to have meetings with the Treasury and with other government departments. The OBR is moving out and it is up to that body where it goes. We should not lay down in legislation whether it should go to one place and not to another.

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Moved by

[Lord Barnett]

12: Schedule 1, page 13, line 23, at end insert—
“( ) The staff must be employed solely by the Office, and not be civil servants transferred temporarily from other departments.”

[Lord Barnett]

Listening to the previous debate, I am even more confused than I was before about which staff are now being employed by the OBR and what the plans are for the future. Perhaps the noble Lord can help us on that. I know from a Written Answer in which I got a proper answer from the noble Lord that 12 Treasury members were still working officially for the OBR—full time, I assume. As I now understand it, having listened to the previous discussion, there are a lot of non-executive members as well as executive members. Quality will be required in the new members of the OBR, but they will not necessarily be non-executive or executive members.

I do not quite understand what we are talking about when we refer to “staff”. For example, I understand that Robert Chote, quite rightly, retired from his position as head of the Institute for Fiscal Studies. I am not clear whether that institute is continuing with another head. I think that it probably is. I see the noble Baroness, Lady Noakes, nodding—perhaps she is the new chair—but it is just adding to the 50-odd independent forecasters that we have, or whatever the number was before, plus one. I should be glad if the noble Lord could clarify that.

In Amendment 12, my noble friend Lord Peston and I say that the staff must not be civil servants, because we were both worried about them either remaining as officials of the Treasury or being temporarily transferred to the OBR, which we would not find very satisfactory. The whole point about the OBR is that not only must it be independent, which I am sure it will be, but it must be seen to be independent. If we are not careful, because of its proximity to the Chancellor and the Treasury, it will not necessarily be seen to be as independent as it should be. For example, on the previous amendment my noble friend Lord Myners talked about the OBR moving its office to Victoria Street. However, it may be moving to the offices of the Department for Business, Innovation and Skills for all I know. Perhaps the Minister can clarify that as well. My noble friend was worried about whether they would have to keep traipsing backward and forward between the OBR offices and the Treasury, rather than inviting any Treasury officials to whom they want to talk to come to them. The foreword of the recent OBR report makes it clear that it sees not only the Treasury. It states that,

“we have also drawn heavily on the help and expertise of officials across government”.

There is a whole load of them, including Revenue and Customs, and the Department for Business, Innovation and Skills. The OBR officials go to lots of offices, so there is a wide-scale connection with government. I do not object to them seeing officials in government departments—that is sensible—but it makes me wonder, when I see the number of departments that the OBR visits, just how big it is, or is going to be. Perhaps the noble Lord, Lord Sassoon, could tell us how many staff the OBR has now, how many are full time, how many are part time, how many are quality, how many are not quality—doing the footwork, you might say—how many are experts, how many are executive, and how many are part-time executive. For example, are Robert Chote and the two people with him full time or part time? I do not know. Unfortunately, I have not seen the minutes of the Treasury Select Committee, where the answers may have already been given. Perhaps the Minister can tell us. I beg to move.

[Lord Newby]

My Lords, the provision in paragraph 8(2) of Schedule 1is sensible. It states:

“Staff are to be employed on such terms as to remuneration and other matters as the Office may, with the approval of the Minister for the Civil Service, determine”.

Surely that is the sensible way of doing it, with the chairman deciding which staff he wants. It would be slightly surprising if none of them came from a Civil Service econometrics background, which would bring strength to the office. Just because they have come out of Whitehall does not mean that they are somehow tied hand and foot to Treasury thinking. No doubt, people will come in from academia and elsewhere. It is for the chairman himself to decide who the best people are to do the job.

--- Later in debate ---

[Lord Barnett]

My Lords, I was trying to be brief. I introduced this amendment by asking just a few questions so that we might reach the target number of amendments that the Government want to reach today. I am not trying to delay the Committee but we have now spent 32 minutes on this amendment. I am not objecting to that; I welcome the views of Members of this Committee, such as the noble Lords, Lord Burns and Lord Turnbull, my noble friend Lord Myners and, indeed, the noble Lord, Lord Sassoon, himself, who have worked in the Treasury rather more recently than I have. I apologise for trying to be brief and for not expanding on what I might say at a later stage. However, I have now elicited a reasonable amount of information from the noble Lord, Lord Sassoon. I should make it clear that in no way am I or, I am sure, my noble friend Lord Peston seeking to obstruct Lord Chote—no, that comes later; I am making a forecast now. We are not seeking to obstruct the OBR from employing the best possible people.

I want to be crystal clear: like everyone else, we are both concerned about the independence of this body. As I indicated on Second Reading, I was not in favour of setting it up—unlike every other Member of this Committee—but we must have it. I do not object to that now but I want to know exactly what is going to happen. I was told by recent senior officials of the Treasury that people could be popping in and out and that there was no career structure. Perhaps the plan is that the OBR will be temporary, I do not know. I thought not; I thought it was another permanent independent forecasting body that was perhaps doing a lot more work than the Institute for Fiscal Studies or any of the other independent bodies. I would welcome any further information on that.

I do not wish to pursue the matter further now, other than to make clear that we are seeking to ensure the true independence—and the perceived true independence—of the OBR. I beg leave to withdraw the amendment.

Amendment 12 withdrawn.

Moved by

[Lord Barnett]

13: Schedule 1, page 14, line 3, at end insert—
“( ) The Office must make public the nature and membership of any committee or sub-committee it sets up, and subsequently the report of any such committee or sub-committee.”

[Lord Barnett]

My Lords, this is a simple question and I hope that the Minister will be able to reply. I have nothing more to say. I beg to move.

[Lord Sassoon]

My Lords, Amendment 13 is intended to create a legal obligation for the OBR to publish the nature and membership of committees or sub-committees and to publish the reports of those committees. It is inconsistent with the right of the OBR under paragraph 11 of Schedule 1 to determine the procedure of any committee or sub-committee. We should not seek to fetter the way in which the OBR organises its committee structure and processes. While I am happy to talk at greater length, we should leave it up to the OBR to determine how its committees and sub-committees should operate. This would be consistent with everything that we have said about the independent and unfettered way that it should go about its business.

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[Lord Peston]

My Lords, there are three amendments in the group, but I want first to say a brief word about the amendment spoken to by my noble friend Lord Barnett. I am intrigued by what is set out in the Bill: the setting up of a committee or sub-committee that may consist of or include persons who are neither members of the office nor members of the staff. I asked myself what this could possibly be about. The Minister decided that he did not like that by quoting the most trivial example he could have dreamed up, and went on to say that they might have set up a committee to deal with personnel matters and that that should not be known. I do not see why that should not be known; transparency means transparency, it does not mean “transparency but”. I want to know what serious argument the Minister could possibly put forward to explain why the office is not obliged to let us know if it sets up a committee. I had assumed that we were talking about a committee of experts on optimal forecasting methods and that sort of thing. We need a more serious response from the Minister.

A fortiori, the amendment tabled by my noble friend Lord Myners requires a serious reply. If you believe in transparency, would there be any circumstances why the minutes of the Budget Responsibility Committee should not only be published but be made available to the public at the same time as they are made available to the members of the committee? Both of those are matters of significance.

I come now to the third amendment in the group, just to say that it is also important. My noble friend Lord Barnett will enlarge on it in a moment, but again I hope that we are given a serious answer, rather than a trivial example to explain why the Minister does not like it.

[Lord Barnett]

I shall say a word about Amendment 34. It seeks to provide that:

“The Office will place in the public domain a record of all meetings with the Chancellor … and other ministers”.

When I tabled a Question for Written Answer on this matter for the noble Lord, Lord Sassoon, he asked Robert Chote to answer it. Mr Chote has duly written to me and I shall quote from it:

“We will be publishing a list of contacts between the OBR and ministers, special advisers and their private offices shortly after each autumn and Budget forecast, beginning with our forthcoming forecast on November 29th”.

I do not know when the list is going to be published and I have not seen it, but it is clear that regular formal or informal meetings with the Chancellor and other Ministers are a very important matter for an independent forecaster, one that is not available to our other 50-odd forecasters. So I hope we will have an answer to this very soon. That is the whole purpose of Amendment 34.

I shall not add to my remarks because I am trying hard to curtail my contributions so that we get to the target figure of amendments that the Government want to see dealt with. But far be it from me to prevent Members of the Committee speaking.

[Lord Turnbull]

My Lords, it seems that an analogy is being drawn with the Monetary Policy Committee, whose minutes are produced. What happens at the Bank is this. On the preceding Friday of the week in which the committee meets, the members spend the whole day going through virtually every possible economic indicator and receive reports from the agents around the country. That is a meeting, but no minutes are taken. I think the members then meet on the Tuesday afternoon and hold discussions during which they try to sift out what the main measures are to be. Again, there are no minutes, or certainly none that are published. The members then come together at the formal meeting, which is where they take decisions and where the minutes for the record are produced.

In other words, they do not produce a running commentary. We are told here that the BRC has more than 40 challenge meetings with officials from other departments, in addition to numerous meetings at staff level. That is complete overkill and, I would say, a false analogy with the Bank to assume that each of those meetings has to be minuted and published. This thing is published—there are 150 pages of it—and it is produced twice a year. Everything else is work in progress, which leads to the production of the report. We should be satisfied with the fact that it is produced, eventually, after talking to whomever the committee wants to and whatever progress it wants to make. Some of that will include what is or is not in the Budget; some of it goes to the nature of fiscal policy. What is eventually produced is this report. Those are the minutes and I do not think that we need anything beyond them.

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[Lord Barnett]

My Lords, again I intended this to be a very brief debate, but already it has taken 22 minutes. I am obliged to the noble Lord, Lord Turnbull, for replying to my amendment. Sometimes I have the feeling that he is a frustrated ex-permanent secretary who, having taken control of Ministers, the Opposition and everybody else, now finds himself having to listen to arguments that he would have dismissed out of hand before. I hope that he will forgive me. I appreciate what he said, except when he claimed that there was no analogy between the MPC and the OBR. I deliberately never referred to the MPC. I more than recognise the difference between the MPC, which was given a job to do under the Bank of England Act, and the OBR. I recognise that the OBR is a forecasting body, but it looks as if it will be rather more, judging by the 150-page document before us.

The Minister, who has formally replied to the debate in place of the noble Lord, Lord Turnbull, said that once again—in Amendment 13, I think—we wanted to say something that was unnecessary because the OBR can do it anyway. Again, though, if it can do it, why not leave it in the Bill? However, we will come back to that on another occasion. Meanwhile, I beg leave to withdraw the amendment.

Amendment 13 withdrawn.

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[Lord Higgins]

In fact, as my noble friend has discovered, the letter was also available to the Committee today. In it, this complicated issue has been very condensed, and we will no doubt wish to return to it later.

As I say, I still have problems in believing that the OBR will carry out its duty in the terms that I quoted earlier unless it can take into account the Government’s general economic policy, which is one of the means in subsection (2)(b) by which the Treasury intends to achieve its fiscal policy, otherwise known as the fiscal mandate. In any event, it seems to clarify the situation if we accept the wording in the amendment.

Amendment 27, proposed by the noble Lords opposite, is, rightly, linked with this amendment. It raises an important point: what is meant by sustainability? The essence of what I understand that the OBR is going to do is report on whether the fiscal policies—and, I thought, the economic policies—are sustainable. At this stage, so that we have some idea what we are talking about, we need a clear definition from the Minister of what is meant by “sustainability”. One problem, of course, is that one can sustain the finances at various levels. Without knowing what the economic policy is, it will be difficult to know at what level it is proposed to sustain the financial side of the Government’s operations. We need to know, since it is in the Bill and it is important, what “sustainability” means.

[Lord Barnett]

My Lords, the noble Lord, Lord Higgins, has referred to Amendment 27 in the name of my noble friend Lord Peston and myself. The amendment itself says:

“In any report on the sustainability of the public finances, ‘sustainability’ must be defined”.

I have tried hard to obtain some kind of definition of “sustainability” in the sense in which the Minister has used it—I have tried to elicit information on many of the words that he has used, as he knows—but that word, in some of the contexts that it is used, is a little difficult, to say the least. That is why we tabled the amendment; we need to know what is being talked about here.

Again, I have tried to be helpful and brief. I would like the Minister to explain briefly what is meant by “sustainability”.

Budget Responsibility and National Audit Bill [HL]

Lord Barnett Excerpts

Monday 29th November 2010 Grand Committee

[Lord Barnett]

My Lords—

[Lord Oakeshott of Seagrove Bay]

My Lords, I listened at considerable length to the Minister reading out his brief in response to the amendments but I wondered whether, by any chance, he could do me the courtesy of answering my question, which I thought was fairly simple and clear. Why are we having just the word “intergenerational” with fairness? He has said that he does not want a Bible. I am suggesting that he might make it shorter, but why “intergenerational”? Why not any other sort of fairness? The document says that these are:

“The Treasury’s objectives for fiscal policy”.

This is a government document, so could the Minister please address the question that I raised?

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[Baroness Noakes]

My Lords—

[Lord Barnett]

The Minister asked us to withdraw our amendments, so I hope that the noble Baroness will forgive me if I reply.

I had hoped that the noble Lord, Lord Sassoon, on this occasion in Committee, when we have tabled serious amendments, would give us a good reason for withdrawing them. I have listened carefully. Neither my noble friend Lord Eatwell nor my noble friend Lord Peston had taken umbrage at the Government’s economic policy and what they seek to deliver—much as my noble friends and I might disagree with the Government. We were putting serious amendments, which it seems from all that the Minister said there is no good reason for rejecting. I can see nothing in the amendments that should cause the Government any problem.

Our amendment relates to the Bank of England Act, which the Government have accepted and are not seeking to amend, whatever they eventually put in the charter. The Minister was not with us when we debated these matters at length. The three words “subject to that” not just implied but provided a clear remit to the Monetary Policy Committee. I am not sure that it always carried out that remit very well or very carefully, or even, as the current governor has recently been saying, that the Monetary Policy Committee was allowed to discuss these things—a report of something that he said implied that he did not want the Monetary Policy Committee to discuss them.

All we are saying, and all my noble friend Lord Eatwell is saying, is that these words should be inserted. I do not recall either of my noble friends taking umbrage at any of the policies that the Government are proposing. That is not the purpose of Committee stage; its purpose is to have a serious discussion about whether an amendment should be accepted. I had hoped that the Minister would look at this first group of amendments more seriously, unlike with his Answers in the Chamber or to our Written Questions, which he seems not to take very seriously. On this occasion, at the start of the Committee stage, I had hoped that he would take it seriously before asking us to withdraw an amendment that has been put down very seriously without any party-political talk. He has not given me any good reason to withdraw it.

[Baroness Noakes]

I have been listening to what my noble friend has been saying. He seems to be saying that we cannot have the words relating to economic policy because we want this to relate to fiscal policy only. If we step back, it seems to me that the economic policy of the Government ought to be as capable as the fiscal policy of being subjected to the transparency objectives that the Government have set out. Indeed, one of the things that the Government are to be genuinely lauded on is their approach to transparency, not only in relation to the Office for Budget Responsibility but also, for example, in relation to the publication of expenditure amounts over £25,000.

Transparency has been one of the watchwords of our Government, but we come to the Bill and, for some reason, we are saying that the Office for Budget Responsibility will be required to look at our fiscal policy mandate only, not at our economic policy objectives. It seems to me that there is a transparency deficit if we are saying that we have to exclude economic policy, as it seems directly related to what the OBR will be doing. The only reason that my noble friend has given is that the Government have decided not to include it. Like other noble Lords, I am struggling for the rationale for excluding the Government’s economic policy.

--- Later in debate ---

[Lord Sassoon]

I am grateful to the noble Lord and I confirm what he said about the broad purposes and the general greater transparency that flows from all this. I do not believe that anything in the Bill restricts the OBR’s ability, within its mandate, to lay out whatever it considers appropriate. Indeed, I do not think that anything in the guidance will dictate the methods of analysis that the OBR undertakes. The guidance absolutely cannot include provisions on that. The charter seeks to explain what transparency means. Perhaps it is appropriate to highlight paragraph 4.8 at the top of page 12 of the charter, which states:

“Transparently means that the OBR is to act openly, setting out with clarity the assumptions and judgements that underpin its work. It should proactively seek to make available its analysis. It should publish reports according to a regular and predictable process”.

It gives very wide latitude in the areas to which the noble Lord rightly draws attention. We are not seeking to circumscribe how it does this.

[Lord Barnett]

The noble Lord now seems to be saying that the OBR can already do the job that the amendments are suggesting. In that case, why not accept the amendments? He has not given us a good reason for rejecting them. He seems to be saying that the OBR can already do the job and the amendments are not necessary, so what harm would including them do?

[Lord Higgins]

I shall try to speed up the proceedings in the light of what the noble Lord, Lord Barnett, has said. We have a specific amendment to the Bill and the Minister can say one of three things. He can say: “I accept it and will table an amendment at a later stage”; “I do not accept it for the following reasons and we will return to the matter if we wish at the next stage”; or, “I am not sure, so I’ll think about it and return to it at the next stage”. I am not in the least clear whether he proposes to accept, reject or think about the amendment.

--- Later in debate ---

Tabled by

[Lord Barnett]

2: Clause 1, page 1, line 7, at end insert—
“( ) the objectives for economic policy of Her Majesty’s Government, especially for growth and employment,”

[Lord Barnett]

My Lords, I want to stop my noble friend from getting too angry. Like the noble Lord, I have a little experience of replying to debates on Finance Bills—rather more than he has, it seems. For five years, I had at least two Finance Bills a year. I would have told the Committee an hour ago that I would think about the matter again, so I am glad that he has done that now, even it has taken him an hour and 17 minutes to do so. If he had done that an hour ago, we could have ended this debate in that length of time because there was no need for it. I agree with the noble Lord that we meandered wide from the subject and had no need to do so. I think that I now speak on behalf of my noble friend as well in saying that, in the circumstances, I beg leave to withdraw the amendment.

Amendment 2 not moved.

--- Later in debate ---

[Lord Higgins]

This amendment is grouped with Amendments 6, 8 and 35, which are rather more sophisticated than my amendment. Clause 1(7) states:

“The Charter (or the modified Charter) does not come into force until it has been approved by a resolution of the House of Commons”,

and my amendment adds “and the House of Lords”. The variations on that suggest the Economic Affairs Committee of your Lordships’ House and so on. It would seem appropriate that the charter should be considered by a resolution in each House and, if we have any serious problem at that stage, we ought to be able to express a view one way or another. It is a somewhat draconian measure because it would presumably mean that the charter was or was not accepted, but over the years, and despite the row we had on the Floor of the House this afternoon, there increasingly seems to be a tendency for your Lordships’ House to be more involved in affairs involving money. Therefore, I hope that the Minister will accept this amendment.

[Lord Barnett]

My Lords, I hope this group will last only a very few minutes and that the Minister will accept the amendments. As we debated this afternoon on the Floor of the House, this is not a money Bill. I do not think the Speaker in any way thought about certifying it as a money Bill. Every Bill costs a few bob, but in no way could this be described as a money Bill. I assume that the Minister is going to say that he will accept the amendments. It is quite straightforward: there is no reason whatever why the House of Lords and its Economic Affairs Committee should not be involved in looking at what the OBR is saying. When I was on the Economic Affairs Committee and the Select Committee on the Monetary Policy Committee, my noble friend Lord Peston was in the chair, and we had the Governor of the Bank of England, the Chancellor and almost everybody else there. I can think of no good reason for the Minister having the word “resist”. I hope he will not use it because there is no reason to refuse these amendments. I hope he will support them.

[Lord Newby]

I rise to support the noble Lord, Lord Barnett, and possibly to bring to the Minister’s attention the fact that when the Monetary Policy Committee was established, a specific committee of your Lordships’ House was established for the sole purpose of reviewing the way in which that committee worked. There can be no issue of propriety about whether the House of Lords should have a role here. This raises a broader question about the coalition’s view of the role of the House of Lords on financial and economic matters. The previous Government and the former Prime Minister were almost implacably opposed to this House having anything to do with economic affairs, which I thought was a pity because there is clearly expertise here. Last week, we discussed ways in which the House of Lords might play a part in tax policy-making. That would be very sensible as well and it would form part of the piece, along with these amendments, under which the House of Lords would have an enhanced role.

--- Later in debate ---

[Lord Myners]

My Lords, we all now wait with bated breath to see whether the word “resist” appears on the Minister’s brief. Perhaps I may share my own experience with the Committee. When I became a Minister, I was told that of course there would be some duties in the House of Lords but that I should not worry about that. In fact, every effort would be made to reduce those duties to an absolute minimum. I came to the conclusion that most people in the other place had a very poor appreciation of what happens in the House of Lords and of the excellent work that this House does, particularly in revising legislation. That is particularly pronounced in the Treasury. When I became a Minister in the Treasury, I found that there was almost no institutional knowledge there about the processes of the House of Lords. The noble Lord has succeeded me as a Peer based in the Treasury, but you then have to go back 25 years to the noble Earl, Lord Caithness, to find the last Member of the House of Lords who was a Treasury Minister, and another 10 years before you come to Lord Cockfield, who was a GOAT in his own day, although not so described. The Treasury starts with a disposition that matters to do with the economy and finance should not detain the House of Lords. Therefore, the purpose of the amendment is correct in ensuring that the House of Lords is respected in the contribution that it can make by virtue of the breadth of experience represented on the Benches. I support the amendment.

[Lord Barnett]

When I was Chief Secretary to the Treasury, I could not care at all what the House of Lords was doing about Finance Bills, because it could not amend them. The noble Lord is quite right. My noble friend Lord Davies was my PPS for much of that time, and he knows that one place we did not care about was the House of Lords, because it could not amend our Bills.

[Lord Peston]

My Lords, perhaps I could take us back into the history of some of this. When what became the Bank of England Act 1998 appeared before us as a Bill, it had exactly the same fault that this Bill has in referring to the House of Commons as the House that would look at the Monetary Policy Committee of the Bank of England. My noble friend Lord Barnett and I moved an amendment in a slightly different form from this one. It said, “delete House of Commons and insert Parliament”, and it was accepted. I did not know it at the time but that happened over the dead body of my right honourable friend the former Prime Minister and Chancellor. However, that went in. At the same time, we set up the sub-committee of the Economic Affairs Committee to look at the Finance Bills. As my noble friend Lord Barnett pointed out, we cannot amend Finance Bills, but the Clerk of the Parliaments wrote a definitive statement, which I hope the Minister has read, saying that there was nothing in Erskine May to prevent the House of Lords looking at Finance Bills. The House cannot amend them, so we set up the sub-committee of the Economic Affairs Committee to look at them. The House of Lords can look at the substance of Finance Bills—it can look at any bit of them, according to the Clerk of the Parliaments. That is the definitive view. However, it can only draw attention to certain considerations; it cannot amend. So that is the history.

The amendment in this context would do exactly the same thing. It would enable the House of Lords, in various ways, to involve itself in scrutinising the Office for Budget Responsibility, as my noble friend Lord Myners pointed out, but we would have no powers to order it to do anything at all. That is essentially the position of the House of Lords in making a contribution.

I think I may be speaking only for myself when I say that I have a certain amour propre for your Lordships’ House. I have been here a long time. In my younger days when I was an LSE student, I would have abolished it like a shot. When I got here, one of my noble friends said, “You were hardly here a day when you sold out, and you just love the place”. That has been my position for 23 years. I take a certain offence from the fact that the Bill does not include the House of Lords.

--- Later in debate ---

[Lord Higgins]

Perhaps I may intervene for a moment before the Minister replies. Amendment 21 suggests that there should be a discussion between the Bank and the Treasury to agree the forecast. The noble Lord, Lord Turnbull, says that we want competition and so there may be two separate forecasts. That is fine but the two ought to be reconcilable, and in any event there should ultimately be a set of agreed forecasts which form the basis for the Government taking action. I do not think that you can have one set of policies on the monetary side being made on the basis of one forecast and fiscal decisions being made on the other. So far as concerns the point made by my noble friend Lady Noakes, it seems that the whole object of this exercise is to say that the Treasury shall not have its own forecasts and that the forecasts should be independent. However, I look forward to hearing what the Minister has to say.

[Lord Barnett]

I do not agree with the noble Lord, Lord Higgins, on Amendment 21 because I do not see why the Treasury and the Bank of England should necessarily agree. Perhaps I may make one or two points about the previous replies that we have heard from the noble Lord, Lord Sassoon. He said that amendments are unnecessary because the powers are already in the Bill. Although they are unnecessary, equally one could say that accepting the amendments would do no harm to the Bill, as they would only be repeating what is in the Bill. He also made the case for reserving the power for the Commons—at least he has given us a reason for rejecting an amendment. I disagree with him. I reserve the right to consider the matter on Report because I see no reason why the House of Lords should not consider these matters.

[Lord Eatwell]

The amendments raise in different ways an important issue in relation to the draft charter. The noble Lord, Lord Turnbull, drew attention to paragraph 3.7, which states:

“The Treasury will continue to maintain the necessary analytical and macroeconomic expertise to provide on-going advice to the Government”.

That sounds perfectly sensible. However, it goes to the heart of the rather grey area of what OBR independence means that the same paragraph should declare:

“The Government intends to adopt the OBR’s fiscal and economic forecasts as the official forecast for the Budget Report”.

Indeed, according to the draft charter:

“The OBR’s forecasts are essential inputs to the Government’s ongoing policy-making”.

And yet, the Government retain the right to disagree. I can see that the Government can maintain the right to disagree with anybody, especially with an independent body—which the OBR is supposed to be—but I do not then see how they can adopt the OBR’s fiscal and economic forecasts as the official forecast for the Budget report. They cannot adopt something with which they disagree as the official forecast; it just does not work. They cannot have it both ways; it is nonsensical.

It is obvious that the OBR will need to work closely with staff at the Treasury and other government departments in developing costings. That is why we should expect consistency between the OBR’s forecasts and those used by the Treasury—after all, they have worked together to bring them to fruition. They are the crucial decision variables. In his foreword to the forecast document that we discussed in the Chamber today, Robert Chote thanks government departments for providing the decision variables which have gone into it. The OBR is in essence a rather peculiar body. It is not really a non-departmental public body; it is a Treasury non-departmental public body which plays a crucial role in the development of policy. As paragraph 3.7 of the charter precisely states, it is the “official forecast”. I do not understand how the Government can disagree with the official forecast. They can disagree with the OBR, for example, when it takes a punt in describing some scenarios, as it does in the charter, but how can they disagree with the official forecast?

I cannot see why there is a need to require consistency between forecasts put forward by the Treasury and those put forward by the Bank of England. The noble Lord, Lord Turnbull, referred to competition between forecasts. I would take a rather different view and say that to require consistency would endow forecasts with spurious precision, whereas there are number of judgments in forecasts which are worth discussing in the context of the formation of economic policy.

The underlying point is that the OBR is distanced from official policy-making to a degree that was not possible in the past. That is an achievement of which this Government should be proud. But to describe the OBR as “independent” is an exaggeration. It is useful for propaganda purposes, but it is not credible to grown-ups, because it has to be involved in policy-making. There is a degree of independent methodology but not really of judgment, which is a different dimension. The Minister has to answer the following question: how can there be an official forecast with which the Government then disagree?

Finance (No. 2) Bill

Lord Barnett Excerpts

Monday 22nd November 2010 Lords Chamber

[Lord Eatwell]

My Lords, I am grateful to the noble Lord, Lord Sassoon, for his introduction to the Bill. In the Bill we are told that its purpose is to:

“Grant certain duties … and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with finance”.

I intend to address those broader issues. I hope that, while the noble Viscount, Lord Trenchard, feels the debate has been dull, I might be able to liven things up a little.

I begin by referring to the comments of my noble friend Lord Desai and the noble Lord, Lord Newby. In particular, my noble friend Lord Desai referred to the difficulties in which the Government have now found themselves over their policy of removing child benefit from those families in which one member is a higher-rate taxpayer. My noble friend suggests that child benefit be treated just as a general taxable benefit, and the current structure in which it is simply paid to the woman be changed. I remind him that when the late Barbara Castle introduced child benefit in the 1970s, she was insistent that it should go to the woman for fear that men might, as she said, spend the benefit on drink and gambling.

The Chancellor has said that any woman who lives in a household in which there is a higher rate taxpayer and does not declare the fact will be fined. I suggest a credible scenario to the Minister. Let us suppose that a grandmother, who is a higher rate taxpayer, on the death of her husband moves in with her daughter and young family who are in receipt of child benefit. What will then happen? Will the grandmother be fined if she does not tell her daughter that she is a higher rate taxpayer, or will the family lose its child benefit? This is hardly a family-friendly policy and a number of similar scenarios can be constructed which demonstrate that this change in the law has not been thought through.

The noble Lord, Lord Newby, referred to the changes in the making of tax policy. I have pleasure in following him in welcoming the Government’s changes in tax-making policy. I had the privilege of serving on the sub-committee of your Lordships’ Economic Affairs Committee which examined the Finance Bill. His proposal that its role be extended and that more technical resources be made available to it is a very good one which the Government should take seriously.

As I said just now, I wish to focus my remarks on the wider issues of the national debt. In doing so, I will return to comments made by Mr Bernanke and to the speech of the noble Lord, Lord Ryder. I also want to refer to the overall fiscal stance in the June Budget, of which the measures in this Bill are part of the practical emanation. Two slogans have dominated the presentation of the Budget and of the Government’s policies by the noble Lord and his government colleagues: first, that the budget deficit is, as Mr Cameron has put it on numerous occasions, a burden on our children; and, secondly—the point often made by the noble Lord, Lord Sassoon—that when the Government took office Britain was on the brink of bankruptcy. These two propositions provide the foundation on which the case for the Government’s policies on the national debt and deficit reduction is built, so they are worth examining in detail.

First, let us consider the proposition that the deficit, and the national debt which results, are a burden on our children. While the scale of the nation’s indebtedness is a constant theme of government statements, I cannot remember a single reference by the Government as regards to whom the debt is owed. The answer, as is clear in the data published by the Debt Management Office, is that most of government borrowing is from British lenders, predominantly insurance companies and pension funds but also local authorities and some individuals. In other words, the taxes that are raised to pay the interest on the debt and to repay the premium are raised from British taxpayers predominantly to pay to British taxpayers. The accumulation of debt simply defines a pattern of income redistribution; it does not in and of itself result in a loss of income to Britain as a whole,

What of the fate of our children? If we are placing a burden on our children, the policies pursued today would result in lower GDP per head in the future. But by their own admission, it is the Government’s own policies, not the deficit, that are lowering the growth rate of the British economy; and hence lowering future GDP per head. That is the real increase in the burden placed on our children by this Government as compared with the budget reduction plans advanced by my right honourable friend Alistair Darling. Had the Government stuck to Labour’s plans, our children would enjoy a higher income per head in the future. The loss of GDP growth that is the consequence of coalition policy is the clear and present cost of this Government. Indeed, it is the Government’s lack of any growth strategy that is most disturbing. Will the Minister confirm the story in the Financial Times this morning, which stated that the expected White Paper on growth has been,

“quietly dropped after George Osborne, the chancellor, decided he needed more time to draw up a coherent strategy”?

The report continues:

“The much-awaited growth white paper, which was originally scheduled for publication last month, has been downgraded to little more than a discussion document. Aides admitted the government did not have enough serious content to warrant a white paper”.

No serious content and no coherent strategy—that sums up the Government’s approach to growth in Britain.

There is one sense in which the deficit could be a burden on our children, and that is of the taxation necessary to pay interest or reduce the debt were to reduce the GDP’s rate of growth. No argument to that effect has been advanced by this Government. Let us follow that up. Taken to extremes, it is obvious that taxation can inhibit growth. If taxes were 100 per cent of income, then nobody would be prepared to work or invest, even if those taxes were subsequently redistributed as interest payments. So has the deficit threatened to push taxes so high that growth prospects are damaged? Among the G7 economies, the US, Canada and Japan have lower shares of taxation in GDP than us, but Germany, France and Italy all have higher tax rates, and all the Scandinavian countries have tax rates that are higher than the UK deficit—they could pay it off in one year, yet they still sustain respectable rates of growth.

Of course, the transfer payments demanded by a budget deficit can be an unwanted restraint on other government spending policies. However, the core issue here is balance—which mixture of spending and taxation will secure the best long-term growth of GDP per head for our children? The Government’s slogan-driven policy does not just get the balance wrong, it does not even recognise that there is a balance to be struck.

What of the other pillar of Government sloganeering —the claim that the UK was on the “brink of bankruptcy”. The noble Lord has used this expression so many times that he must be able to tell your Lordships exactly what he means by it. Does he mean that the UK was about to run out of cash, as the Greek Government were? If so, how does he account for the ready supply of cash dispensed in the Bank of England’s programme of quantitative easing? Does he mean that the UK had difficulty funding its bond sales? If so, he should look at the Debt Management Office data which show that not a single gilts auction this year has been less than 40 per cent oversubscribed, and many were 100 per cent oversubscribed. Or is he referring to speculation about Britain being downgraded by the ratings agencies from its triple-A status? Would these ratings agencies to which the Government pay so much attention be the same clowns who told us that securitised subprime mortgages were as safe as Uncle Sam? Given their track record, are these agencies the sort of people who the Government listen to when shaping the economic future of the British people?

Before the Minister replies on the issue of being on the brink of bankruptcy—and I am sure he will reply in detail since that is a favourite expression of his—would he care to reflect on the words of Ms Rachel Lomax, who was, until recently, Deputy Governor of the Bank of England? Speaking in the City just a couple of weeks ago she said that the

“crisis conjured up by George Osborne”

was a “straw man”—a misrepresentation of the true position. She added,

“It's just not true. We weren't on the brink of bankruptcy”.

None of what I have said should be taken in any way to suggest that somehow deficits do not matter. I am arguing that they are simply part of the balance by which the Government seek to secure the best possible performance of the economy. An important part of that balance—

[Lord Barnett]

I have a Question next Monday on this specific point about bankruptcy, on which I hope we will all have an opportunity to comment. Is my noble friend aware of what the Conservative chairman of the Treasury Select Committee said regarding the exaggerated nonsense—a massive exaggeration—about bankruptcy? In a massive understatement of the real situation he defined it as being “slightly over the top”.

[Lord Eatwell]

“A massive exaggeration” is a rather balanced statement from a Conservative Member of Parliament, and is balanced nicely by Ms Lomax’s statement, “It’s just not true”.

An important part of seeking balance in the economy is to avoid the slogan-driven hysteria that has characterised economic policy-making under this Government. It is not just that basing policy on slogans can lead to seriously unbalanced policies, but that slogans themselves can seriously damage economic performance. Words used by government Ministers to describe the economy include “shattered”, “busted”, and, of course, “on the brink of bankruptcy”. They have done this over and over again, which can lead to a serious loss of confidence in fragile international financial markets. There is increasing evidence that business and investor confidence has fallen, damaging investment prospects in Britain. Has the noble Lord noticed the conclusions of the latest monitor of UK business confidence for the fourth quarter of 2010, published by the Institute of Chartered Accountants in England and Wales? It states:

“The decline in the Confidence Index has accelerated this quarter, partly reflecting ongoing uncertainty about the path of the UK economy over the coming years ... Business leaders are becoming less sure about the UK's economic prospects for 2011 and beyond”.

That is the impact of this Government's slogan-driven policies.

We on this side of the House have argued for an economic policy based on a balanced appraisal of the relative contributions of fiscal policy and growth in restoring public finances after the ravages of the recession. We support the position taken by the head of the Federal Reserve System, Mr Ben Bernanke, to whom the noble Lord, Lord Ryder, referred. Commenting last Friday on the destructive grip of austerity policies, Mr Bernanke called for,

“a fiscal programme that combines near-term measures to enhance growth with strong, confidence-inducing steps to reduce longer-term structural deficits”.

Those words describe the economic measures put in place by Alistair Darling. They were a measured and considered response to our current economic woes and the very antithesis of the Government's slogan-driven hysteria.

--- Later in debate ---

[Lord Sassoon]

My Lords, the noble Lord, Lord Myners, is a master at selective quoting of the evidence. There has been a marginal widening of the spread over the 10-year Treasury, and there has been a significant narrowing against the 10-year bond, which is a much better comparator, and against all the other comparators that I look at on a daily basis. I am very happy to go on answering the noble Lord's questions on this point for as long as he would like, but the predominant evidence suggests that not only have spreads narrowed against the comparators but the price of CDSs on UK gilts has fallen considerably as others have gone up. That is proof that people get the message that we have the growth policies in place. It extends to cutting the deficit, low interest rates, tax policy, the focus on investment in infrastructure in a very tight spending review, the attack on regulation, and I could go on. Whether we shall have White Papers, Green Papers or discussion documents, there has been a very full suite of growth policies and there is plenty more to come.

As to whether I should explain what I mean by the brink of bankruptcy, the noble Lord, Lord Barnett, has already stepped in to point out what I was going to point out: that he has already tabled a Question for oral answer. He has got to the front of the queue, and I do not want to be discourteous to him. He will receive a considered answer.

[Lord Barnett]

I have no objection whatever if the Minister has a better definition than he has given so far.

[Lord Sassoon]

For the time being, I refer the noble Lord to the first edition of the Oxford English Dictionary, volume 1, part 2, under “B”, which was printed some time in 1888. That is quite a good starting point. We shall return to that in answer to his Question in a few days’ time.

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.

--- Later in debate ---

[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.

--- Later in debate ---

[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—

Finance: Fiscal and Monetary Policy

Lord Barnett Excerpts

Tuesday 2nd November 2010 Lords Chamber

Asked By

[Lord Barnett]

To ask Her Majesty’s Government how the Chancellor of the Exchequer is co-ordinating fiscal and monetary policy.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the Monetary Policy Committee of the Bank of England takes into account the path for fiscal policy in judging the outlook for growth and inflation, and hence in its monetary policy decisions. As provided for in the Bank of England Act 1998, a Treasury representative attends, and may speak at, the monthly MPC meetings. The non-voting representative plays a key role in ensuring appropriate co-ordination of fiscal and monetary policy, including by briefing the MPC on the Budget.

[Lord Barnett]

I thank the Minister very much for that Answer. Did he notice a recent speech by Dr Posen, a new member of the Monetary Policy Committee who presumably was appointed by the new Government, in which he said that we should not get too excited about the welcoming figures on growth that we saw last week—which of course did not come from the present Government’s responsibilities? I would never seek to accuse the noble Lord of getting overexcited about anything, but perhaps I could refer to a Written Answer he gave me on the question of the non-voting senior Treasury official who attends the Monetary Policy Committee. He said that he,

“plays a key role in liaison between the Treasury and the Bank to ensure appropriate co-ordination of fiscal and monetary policy”.—[Official Report, 27/9/10; col. WA 493.]

It would be interesting to know what the Government mean by “appropriate”. Would that include telling the Bank that the Treasury wanted to see something done to help growth, for example by increasing capital investment, which is desperately needed and would also help considerably with unemployment?

[Lord Sassoon]

My Lords, first, since the noble Lord, Lord Barnett, draws attention to the fact that we did have a strong third quarter of growth at 0.8 per cent, we should celebrate the fact that we have had a third consecutive quarter of growth. The recovery will no doubt be choppy, and I am sure that at certain points what happens will suddenly become our responsibility, not theirs. That aside, the responsibility of the Treasury official who attends the Monetary Policy Committee is essentially to bring to the attention of committee members matters of which they ought to be aware in coming to their independent conclusions on monetary policy judgments. That includes briefing them, for example, on the judgments that have been made in the Treasury’s Budget so that they can factor them into account in their deliberations.

Banking: Bonuses

Lord Barnett Excerpts

Monday 1st November 2010 Lords Chamber

[Lord Sassoon]

I certainly agree with my noble friend that we need a vibrant banking market to underpin the economy’s recovery. The action that the Government have taken to make sure that interest rates remain low is absolutely critical. We welcome the first steps taken recently by the British Bankers’ Association task force, which made a range of proposals that go to the heart of tackling the need for a continued flow of credit to British business.

[Lord Barnett]

My Lords, would not the straight answer to the Question on the Order Paper have been to say that the Government do not have any plans whatever to deal with future bonuses?

[Lord Sassoon]

My Lords, I have said that we have already taken action and are continuing to consider other possible actions in this area.

Public Expenditure: Value for Money

Lord Barnett Excerpts

Tuesday 26th October 2010 Lords Chamber

[Lord Sassoon]

My Lords, the first thing to re-emphasise is that we have maintained overseas aid expenditure to meet our commitment of 0.7 per cent of GNI from 2013, but in that context we must make sure that the money is well spent. A new independent commission on aid impact will assess all ODA spending, and DfID in particular will protect all UK aid from corruption by assessing risks and using safeguards to prevent the misuse of funds.

[Lord Barnett]

My Lords, in the spending review, the Chancellor agreed to maintain the spending on the Barnett formula, thus rejecting the serious recommendations of a powerful Select Committee of your Lordships' House, chaired by my noble friend Lord Richard, a former Leader of the House, and including a former Chancellor in the noble Lord, Lord Lawson, and two former Secretaries of State for Scotland in the noble Lords, Lord Forsyth of Drumlean and Lord Lang. He rejected all that, and surely it could not have been on the grounds of value for money. Would the noble Lord care to tell us what the grounds were?

[Lord Sassoon]

I thank the noble Lord, Lord Barnett, for reminding us of the importance of continued consideration of the pros and cons of his formula. We are talking about value for money and he asks whether it was not on the basis of value for money that we rejected these recommendations, but I think that we had better stick to value for money for this afternoon.

Taxation: Avoidance

Lord Barnett Excerpts

Wednesday 20th October 2010 Lords Chamber

[Lord Sassoon]

My Lords, I remind my noble friend that the coalition Government’s policy in this area is that we will make every effort to tackle tax avoidance, including detailed development of Liberal Democrat policy. The policies that were in my noble friend’s party manifesto at the election are indeed getting detailed consideration. In particular, as he knows, the general anti-avoidance rule, which was the linchpin of those policies, has been the subject of recent consultation.

[Lord Barnett]

My Lords, this morning the Chancellor repeated what the Minister said to me in a Written Answer—namely, that it is hoped that doing something about tax avoidance will achieve £7 billion. In his Written Answer to me on 7 October, he said,

“separate figures are not available for avoidance and evasion, and could be produced only at disproportionate cost”.—[Official Report, 7/10/10; col. WA 28.]

In that case, how will he ever be able to say that he has saved £7 billion? Will he still be using it in his deficit-cutting programme?

[Lord Sassoon]

My Lords, it may be helpful if I make it clear that the £900 million of additional money that HMRC will have to use is principally to tackle tax evasion. We are talking about avoidance this afternoon, but the £7 billion will principally be from money that is not avoided but evaded.