Budget Responsibility and National Audit Bill [HL]

Lord Burns Excerpts

Monday 31st January 2011 Lords Chamber

[Baroness Noakes]

My Lords, I add my support for the amendments. It is to the great credit of the Minister that he took away the good discussions we had in Committee and has produced this and the other amendments today.

The noble Lord, Lord Barnett, referred to the OBR being regarded as the Government’s in-house forecasting body. I have never heard it referred to in those terms, although I know that noble Lords on the Benches opposite have tried to make that accusation stick. I believe it is already regarded as a properly independent body under its chairman, Mr Robert Chote, and we should rejoice in that.

[Lord Burns]

I also welcome these amendments. We spent a great deal of time in Grand Committee trying to bring greater clarity to the remit of the OBR and protecting its independence. We also tried to clarify the governance of the OBR and, particularly, the role of its non-executive members. The Government have responded positively to those discussions. The amendments deal very well with the bulk of the issues that were raised, particularly in clarifying those areas of the remit where there was ambiguity and the role of the non-executive members in relation to their oversight of the forecasting process and as the protectors of the external review process. That has been a success.

I fear that there will always be a certain amount of tension between observers when it comes to the relationship between the forecasts of the OBR and the activities that take place within the Treasury. I pointed out at Second Reading that whatever arrangements are put in place for the OBR, you cannot strip the Treasury of its own skill set and the resources it needs to monitor the progress of the economy and to make judgments on whether the economy is following the track that was intended at the time that measures were taken. This is an arrangement that we have to live with. I am sure that as time goes on, we will see much more clearly the way in which those are worked out and how the OBR relates to the internal activities of the Treasury. I hope that noble Lords will not get too exercised about this. That is a natural tension that exists in this type of arrangement and I would be surprised if it cannot be made to work.

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[Lord Burns]

My Lords, the noble Lord, Lord Eatwell, describes his proposed change from at least five years to at least three years as “crucial”, but his whole argument as set out implies that, on all occasions, the non-executive committee would choose to have this review at the very end of the period during which it is allowed to have the review. I cannot for one moment imagine that that is what it would do. If we are to have confidence in the non-executive committee that is being set up in the Bill, it seems to me that we have to give it quite a lot of discretion about the timing of when it thinks it is appropriate to have a review. That will be governed in part by the extent to which the outcome of the work of the OBR comes under criticism, the extent to which we think there are lessons to be learnt. I am content with the five years not because I think the review should take place every five years, but because I think that the onus should be upon the non-executive members to take the decision about the timing—one should not box them in too much.

By bringing this forward and suggesting that it should be every three years, we are setting a clear timetable as to when those reviews will take place, rather than leaving it in the hands of the committee that is being set up in the Bill to make that decision. I hope that the noble Lord, Lord Eatwell, will reflect on the emphasis that he has given to this five-year period and his interpretation that the committee will always let it run the full length. I would rather show more confidence in the role of the non-executive body and give it discretion as to when is thinks is an appropriate time to have that review in the light of circumstance and events and how the work of the OBR is seen.

[Lord Myners]

My Lords, I support Amendment 6 to Amendment 5. I was not in the House for the beginning of Report, but I add my congratulations to those that I understand were expressed to the Minister on rejecting the advice that Ministers so often receive to resist and instead listening carefully to what was said by all sides in Committee, taking that into consideration and bringing forward a set of very constructive and welcome amendments. That shows the House performing its correct and proper function of revision, being professional and efficient, enhancing the quality of the Government’s intention and not unduly delaying the House in so doing.

I repeat my support for the concept of the Office for Budget Responsibility. I hope that, just as the Minister reminded us during Oral Questions that the previous Government established the Monetary Policy Committee which is now an important part of our financial and economic infrastructure, the OBR will be a similar testament to this Government’s contribution to building a sustainable and effective architecture. However, I support the amendment put forward by my noble friend Lord Eatwell because it seems to me that the symmetry between the electoral cycle and five years is simply inappropriate for something which should be established to stand well apart from day-to-day politics and the electoral cycle.

It is particularly important that the work of the OBR should be subject to independent review in a shorter period than five years at commencement. It is new, and it is going to be establishing a lot of new ways of working and new formats for reporting that no doubt will evolve over time. It would be unfortunate if we did not have a chance to stand back and look at how it was performing and how its contribution could perhaps be further enhanced before five years had elapsed—before we got to 2016.

There is a strong reason for having these reviews in periods of not more than three years, rather than in periods of not more than five years, as proposed. However, the noble Lord, Lord Burns, is right to remind us, as I am sure the Minister will in his closing speech, that the current draft says that, as it should not be more than five years, it could well be that the committee, the membership of which has not yet been selected or identified, could choose to make the reports earlier. For the purpose of good order and good process and, frankly, to strengthen further the integrity of the OBR and the confidence that it will be able to sustain from the broader public, these reviews should take place more frequently than once every five years. Once every three years would be a better outcome. It is for that reason that I support Amendment 6.

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[Lord Higgins]

My Lords, given that I was chairman of the Treasury Committee in another place for something like 14 years, I am naturally rather sympathetic to the amendment. However, it does not seem to do what the noble Lord, Lord Eatwell, said it does. It does not enable the Treasury Committee to control the budget, but enables it to ensure that the budget is scrutinised after being published. This is something which my noble friend should readily accept, because it would be very surprising if the annual operations budget were not to be published. I should have thought that that was consistent with the whole argument for transparency which we have heard from the Government throughout the debates on this Bill, and that it should be virtually automatic. It is equally likely that the Treasury Committee would wish to scrutinise the budget, once published. My noble friend might of course argue that it is unnecessary for the amendment to be made, but, if it were, some reassurance would be given to those expressing the kind of view expressed by the noble Lord, Lord Eatwell. It would certainly be right for the budget to be published and for the appropriate body to look at it to be the Treasury Select Committee in another place.

[Lord Burns]

My Lords, I will disappoint the noble Lord, Lord Barnett, by agreeing with the amendment, or rather with its spirit, because it is important that the funding of the OBR is as transparent as possible. We need an arrangement that will last. We all know that the Treasury has great power and I accept the argument that the OBR needs the protection of a transparent process. Of course, nothing would in the end prevent the OBR from suffering in respect of its budget if the Government wished that to happen and could get the support of Parliament, but it is important that that process should be transparent. I recognise the argument that it is already evident from the public expenditure process that there is nothing to stop the Treasury Committee being involved, but I support the principle of making a specific provision for the funding of the OBR that should be as transparent as possible.

The detail in the amendment that I am not happy with is the suggestion that the committee should investigate the annual budget. It is important that if you are to have a successful operation such as the OBR, it should know what the prospects for its finances are, stretching beyond one year. Subjecting it to an annual budget process might not do the job. The noble Lord, Lord Eatwell, already referred to Sir Nicholas Macpherson’s existing letter talking about a financing process that stretches some way ahead.

I therefore support the principle of the amendment and hope that it is possible to find a way of expressing its intentions that provides reassurance that a transparent process will be in place and will stretch for somewhat longer than the annual budget round.