Budget Responsibility and National Audit Bill [HL]

Lord Myners Excerpts

Wednesday 1st December 2010 Grand Committee

[Lord Sassoon]

I think I had finished.

[Lord Myners]

Before the Minister sits down, I should like to make one point. There is a rather good article in the Financial Times today by Miss Sue Cameron on the subject of the appointment of non-executive directors by government. It starts out by detailing some of the difficulties that the Government appear to be having in getting people of appropriate quality to step forward to take these positions. It then goes on to say that there is a lack of clarity about whom the non-executive directors owe their duties and obligations to and to whom they report. If, as I believe my noble friend Lord Eatwell suggested, the non-executive directors are there primarily to vouch for the competence and independence of the OBR committee, then it begs the question: with whom do they raise doubts about competence or independence? It seems to me that it would be the Treasury Select Committee rather than the Chancellor of the Exchequer. After all, it would probably be the Chancellor of the Exchequer or the Treasury that were encroaching on independence. If that is the case, surely it is also logical that the Treasury Select Committee should be involved in approving the appointment of the non-executive members. After all, those members are the eyes and ears of the Treasury Select Committee within the OBR committee.

[Lord Sassoon]

My Lords, I have not had a chance to read that article. If we have another break, I shall go and do so. The arguments of the noble Lord, Lord Myners, are always powerful and coherent, but there are plenty of instances of where the appointment process does not, for all sorts of different reasons, necessarily have much to do with where reporting lines go. At the moment, quite properly, banks have to do a huge amount of reporting to the Financial Services Authority but the FSA does not appoint the boards of directors, who are appointed by the banks’ shareholders.

[Lord Sassoon]

The FSA does not appoint the boards of directors. We are talking here about public sector boards, and I feel that there is little more to add. The Treasury Select Committee has not asked for this, and it does not happen with other appointments. Critical bodies such as the statistics authority work perfectly well under the sort of construct that we are proposing here.

[Lord Myners]

Will the Minister confirm that appointments to this committee will follow the same procedures and processes as apply to membership of the statistics authority? In particular, will he confirm that the public appointments body will be involved in overseeing the process, that these positions will be properly advertised and that due regard will be given to diversity in the specification of the terms of appointment? I think that the Minister is leading in the direction of giving us some comfort that we can look to such parallels but it would be helpful if he could confirm that that is the case.

[Lord Sassoon]

I hope that I can be helpful on that point. The Government expect the appointment process for the BRC to match up to the high standards of public appointments. A bespoke appointment process has been put in place for the BRC executive members involving advertising, independent involvement in the interview process and so on, and that process has been designed to be open and transparent. It is up to the OBR to design the process for the non-executive members but we would also expect that to be open and in line with the principle of transparency. We have high expectations of the quality of the process and I hope that that gives the noble Lord some comfort.

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[Lord Sassoon]

Certainly it is important that the non-executives are people of independent standing and stature who are able to challenge as well as support. That is why there is a critical distinction. It may bring with it some lack of clarity but the expert/non-expert distinction makes the critical point that the non-executives should come from people who are capable of a broader challenge and support role. That is why there is a distinction between experts—which implies a closed group of economists—and a wider group. The posts will be advertised and subject to competition. It will come down, as it should, to the description of the posts, which should allow for people from wider backgrounds to come in. I welcome the right reverend Prelate’s reminder that that would be healthy.

[Lord Myners]

Does the Minister share my concern that, because these two members have not been approved by the Treasury Select Committee—I realise I am taking a different tack from the right reverend Prelate—their credibility, standing and authority as challengers within the committee is in some way diminished, and that, because they have not been anointed by Mr Tyrie and his colleagues, that detracts from their standing and makes them somewhat subservient or subordinate to those who have been approved by the Treasury Select Committee? I ask the Minister to take this away and give it a little more thought.

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[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.

[Lord Myners]

I do not think we can allow it to go unnoticed that the Minister, in his reference to “shoe leather”, assumed that the OBR would be called to the Treasury. I hope that the OBR will be sufficiently independent to call the Treasury to visit it at its own offices. I hope that the Minister is not conveying a subconscious message to us on that point.

[Lord Higgins]

My Lords, on one occasion when the Government that the late Iain Macleod was opposing accepted an amendment, his response was, “You don’t shoot Santa Claus”. Perhaps that is an appropriate reaction in this instance. I am delighted to hear what the Minister has said.

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[Lord Turnbull]

I support the noble Lord, Lord Newby. As I understand it, the number of staff would be around 20. Some may be seconded from the Treasury, some may be brought in from academia, and some may come from somewhere else. It is basically for the chairman of the OBR to assemble the best team that he wants, and we should not fetter that discretion, because there is a safeguard in Clause 5(2), which states:

“The Office must perform that duty objectively, transparently and impartially”.

In other words, anyone who is on loan from another government department is subject to that duty, which should ensure that the right degree of independence is maintained. If you say that someone with a Civil Service career must resign from the Civil Service in order to go and work for the OBR, you will raise all sorts of issues relating to pensions, seniority, this, that and the other. You will make it difficult to assemble the best-quality team, and that should be paramount.

[Lord Myners]

I agree with those comments. However, the duties described in Clause 5(2) are subject to guidance given under Clause 6(1)(b), which slightly diminishes the confidence and reliance we can place on Clause 5(2).

I support the intention of this clause, but cannot bring myself to support the wording of the amendment. The majority of the staff of the OBR, certainly until quite recently, were former Treasury officials, and the majority are doing work that is very similar to the work that they were doing before the establishment of the interim OBR—work that they are now allowed to appear to criticise through the OBR. They are still in the Treasury building, they are still going to the excellent Treasury canteen for their subsidised lunches and they are still entitled to belong to the Treasury choir and the Treasury glee club. They have not left the Treasury. What we are seeking to achieve is appropriate distancing—but not at the cost of denying the OBR the best people to do the job. It is not unreasonable to assume that currently at least some of them will be working in the Treasury.

The difficulty that I have with the drafting of the amendment is the reference to “transferred temporarily”. “Temporarily” assumes some knowledge of the future. I see a situation in which somebody may go from the Treasury to the OBR and later return to the Treasury without that necessarily having been planned. There must be clear severance in employment terms: it must be quite clear that staff have left the Treasury and are now employed by the OBR. The independent, non-executive directors should keep a particularly close focus on where people are recruited from and where they go afterwards, in order to make sure that the effectiveness and credibility of the body is not diminished by a greater flow between the Treasury and the OBR than common sense might justify. However, I cannot bring myself to support the amendment as it is drafted.

[Lord Peston]

My Lords, I am not in the least concerned about the precise drafting of amendments, because all our proceedings in Committee are exploratory. The central point is that the staff of the OBR should be simply the staff of the OBR—end of story. It needs to be made clear that they are not other staff. The purpose of the amendment is to say categorically that these staff are now the staff of the OBR. I take it for granted that they will be full-time rather than part-time staff. This has nothing to do with the chairman or others choosing the best people; it is to do with the status of the staff. That is all the amendment is about. They should be the staff of the OBR and therefore, unless the law is changed, they will not be the staff of the Treasury or of anywhere else. My noble friend Lord Barnett and I would like a simple answer from the Minister. Are the staff the staff of the OBR? That can be answered with a yes or no.

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[Lord Sassoon]

I cannot give a breakdown of exactly what they all do, although it would be possible to do so. The office no doubt buys in all sorts of services, but that is the total number of staff. As I said, I believe that Robert Chote intends that when the office is totally established there will be about 20 full-time staff. That is the number that he believes will be needed.

[Lord Myners]

I find it extraordinary that the Minister has just disclosed to the Committee that the OBR has a total of 13 staff, including support workers and secretaries, yet the Government suggest that the OBR audited the Government’s forecast expenditure. Auditing is a demanding, challenging and fairly labour-intensive task, as the noble Baroness, Lady Noakes, will no doubt vouch. Auditing future expectations is extraordinarily difficult; to do it with only 13 people makes the use of that word totally inappropriate.

[Lord Sassoon]

There should be no surprise when I say that there are 13 people because I answered a Written Question asked by the noble Lord, Lord Barnett, almost exactly a month ago when the figure was 12. Now, it is 13. I received a note saying “IPA” but I did not say anything about that because I thought, “What does India Pale Ale have to do with it?”. However, I have now worked it out: the OBR has one PA. This is a lean and mean organisation. It includes secretaries and it has one PA. This is not a numbers game; it is a question of expertise and independence and, as has already been referred to, drawing on the underlying modelling base in Whitehall. The OBR does not require a superstructure of people to carry out the critical role that it does. If at any stage it decides that it wants more resources, it will have the ability—we will come to this in later clauses—to put forward the necessary request for money.

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[Lord Sassoon]

For example, if the OBR wished to set up a sub-committee to deal with internal personnel matters, it would not be appropriate that it should be required to publish details about that. We are making presumptions that sub-committees have a particular meaning. Perhaps we should step back for a moment. The output of the OBR is essentially the 150-page document that it has now produced, along with a number of other reports and analyses that it has already made, and it has set out plans for future work streams. We must remember that this is not equivalent to talking about the Monetary Policy Committee or the yet to be established financial policy committee of the Bank of England, which will have regular monthly meetings to make decisions about policy.

We need to be clear about this. The output of the BRC of the OBR will be a series of policy documents that will not come regularly out of a minute-taking and minute-making process. Perhaps I was presuming a bit too much in my brief answer. The committee’s structure is up to the OBR, but it is likely to have more to do with the governance and management of the entity than with the reporting that comes out in its major documents. In that context, requiring this straitjacket would be inappropriate for the nature of the entity.

[Lord Myners]

My Lords, I speak specifically to Amendment 14, which proposes that the budget responsibility committee should publish the minutes of its meetings. I wait with somewhat bated breath, but with diminishing hope, for the Minister at some point, having whetted our appetite on Monday, to find some sympathy for at least one amendment. I fear that this will probably not be the one that he chooses to approve.

It is pleasing, though, in proposing this amendment, to have the noble Baroness, Lady Noakes in attendance in Committee. My mind goes back to a debate on the Financial Services Bill. The Committee may remember that that Bill, which was produced by the previous Government, proposed the establishment of a council for financial stability. The Government proposed that the council’s minutes should be published. The noble Baroness supported that but went on to propose a number of amendments, including ones relating to the speed with which the minutes should be published and, importantly, a requirement that the minutes should attribute comments to individuals participating in the council rather than being produced in the style of the Monetary Policy Committee.

I hope that we are not now seeing a conversion in the thinking of the Conservative Party, which is the leading member of the coalition, in this respect. When it was in Opposition there was a great enthusiasm for transparency, now that it is in government I hope we are not going to hear arguments that transparency would not be appropriate. If I could be persuaded that there was an argument for publishing the minutes of the council for financial stability—which, noble Lords will remember, succeeded the rather less formal tripartite process—a body that deals with quite confidential matters relating to systemic and idiosyncratic risk relating to individual financial institutions, and if I believed that the party in Government supported the view that those minutes should be not only published but published promptly and in a full and detailed form with attributed comments, then I find it difficult to believe that the Conservative Party would not also approve the publication of the minutes of the committee of the Office of Budget Responsibility.

I go back to the points that were made earlier today by at least two noble Lords: that this proposal would further enhance the appearance of independence—and, no doubt, the effective independence—of that committee and, in so doing, facilitate the role that the Chancellor of the Exchequer and the Treasury clearly have in mind. I urge the Minister to recognise that in respect of transparency this is a good opportunity to ensure that the minutes of the committee of the Office of Budget Responsibility are published.

The Government are already committed to saying that the people who meet the committee of the Office of Budget Responsibility will be identified in announcements made shortly after major publications—I do not know whether such an announcement has already been made in respect of the OBR’s report earlier this week—but it is incomplete to say that the OBR met the Chancellor of the Exchequer on five occasions, Mr David Ramsden on four occasions and economists from the Bank of England on two or three occasions without letting us see how that information shaped and formed the thinking that went into the OBR report. That would be best evidenced through the publication of the minutes, which would allude to any such input that had an important impact on the ultimate thinking and conclusions of the committee of the OBR.

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[Lord Sassoon]

I am very grateful to the noble Lord, Lord Turnbull, who, I think, gets it absolutely right. There is a further point, which he did not stress, which is that the Monetary Policy Committee is a policy-making committee. It is therefore important to understand how policy, and the thinking behind the policy, is being made. The OBR is not making policy; it is producing forecasts. They are very important forecasts and that is a critical function, but it is not policy-making that requires minutes to understand.

[Lord Myners]

The Minister has made a very important point. Can he clarify whether, because the committee of the OBR is not making policy, any Freedom of Information enquiries made to the committee of the Office of Budget Responsibility will require the committee to disclose minutes of meetings? One of the exemptions that I found—both as a Minister when I was signing the exemptions and which I now find rather more frustrating when I am not getting the information I require—is that the information officer in the department has concluded that this relates to advice to Ministers on policy-making, and therefore the document cannot be disclosed. The Minister has made a clear statement that that committee is not involved in policy-making, and, therefore, that exemption from FOI inquiries will not apply. I hope that he can confirm that my understanding is correct.

[Lord Sassoon]

The noble Lord’s understanding is correct in so far as the OBR will be subject to freedom of information legislation. That is clear. Of course, the example that he gives is not the only exemption. I do not want to disappoint him, but he should understand that, as he well knows, there are other exemptions—for example, where disclosure could prejudice the effective conduct of public affairs. They will be subject to the normal tests. No doubt the commissioner will test them if people want to challenge any decisions, but it will be for the OBR to decide how it interprets the Freedom of Information Act.

[Lord Myners]

So, the OBR will have its own information staff—it will not be relying on the Treasury for that. Of the 13 people, there is now minus one who is doing FOI; minus two was a PA. I must note that when the noble Lord, Lord Sassoon, was an employee of UBS Warburg, he probably had more than 13 PAs, let alone 13 staff. Can he confirm that that number now includes a freedom of information officer in the OBR, and that it does not rely on the Treasury for that function?

[Lord Newby]

Surely there is an easy solution: make the PA also responsible for freedom of information.