Budget Responsibility and National Audit Bill [HL]
Lord Myners Excerpts(13 years, 9 months ago)
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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.
Lord Newby
My Lords, I support the government amendments to introduce an external review. The debate in Committee and, to an extent, at Second Reading demonstrated why that was a good idea.
As for whether three years or five makes better sense, I have a lot of sympathy with what the noble Lord, Lord Burns, said about the benefits of five years. The amendment is very flexible. It does not say that the review will be commenced on 1 October five years hence. It says that at any point a review can be undertaken; as soon as the non-execs were appointed, they could cause a review to be undertaken if they were worried ab initio that the office was not performing well. If they then felt that it carried on causing them concern, they could have another review relatively quickly. The draft gives the non-execs a lot of flexibility.
What we are doing here is a belt-and-braces job. On the assumption that the office is doing a reasonable job, and bearing in mind that it will be subject to a huge amount of external scrutiny—this body is not operating in the closet with no one looking at what it is doing; every time it produces a report, 50 economists mark it—to do that roughly once a Parliament sounds about right.
Lord Sassoon
My Lords, I start by welcoming the noble Lord, Lord Myners, back to the Chamber. I am not sure that he had quite got his script co-ordinated with the Front Bench, but I accept his congratulations. I will put aside their slightly backhanded nature. Next time I think he should speak to his Front Bench, which seemed to be taking sole credit for the government amendments that have come forward. Nevertheless, I am grateful to him.
Lord Myners
My Lords, the Minister will recognise that, speaking as I do from the Back Benches, I speak independently. I reach my own conclusions and express my own views. My congratulations to the Minister are in no way fettered by what those on my Front Bench might have said.
Lord Sassoon
I heard the noble Lord say that he wanted to add to the congratulations, but there were none before. Anyway, I am grateful to him. Perish the thought that he might have been out of the Chamber briefing the press on his mildly diverting, if somewhat predictable, contribution to Oral Questions, but let us move on. Noble Lords have focused on only one point in responding to this group of amendments, which is whether the backstop date, because I regard it as a backstop date—the noble Lord is obviously distracted by something in the corner of the Chamber. I want to address the point about the five-year backstop dates.
Lord Sassoon
I thought that I heard support from across the Chamber on this point. As I say, the issue is one of a backstop date. The noble Lord, Lord Eatwell, is seeing chimera where none is to be seen in trying to link the political cycle with this five-year backstop date. We think that it is appropriate to have a date in there to ensure that the independent review happens at some stage, but it is most likely that the non-executive directors will indeed choose to have reviews on some other cycle or whenever they think it is appropriate. I absolutely agree with the noble Lord, Lord Burns, that we have to allow—it is proper to allow this—the non-executive committee the freedom to make up its own mind on this. A shorter period may well be decided on, particularly in the initial period of operation, just as, in the context of the Monetary Policy Committee, a review was carried out a couple of years into the new arrangements. Therefore, we should leave this to the committee’s judgment and not impose a rigid pattern on it.
It might be relevant to consider read-across or precedents from other comparable bodies. However, I have been able to tease out only one comparable read-across involving the Dutch Central Planning Bureau, which has a provision for external reviews every five years and has stuck to that model since 1945. That continues to work for that body.
Inflation
Lord Myners Excerpts(13 years, 10 months ago)
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Lord Sassoon
My Lords, first, the recent relatively high levels of inflation reflect, among other things, the previous Government returning the rate of VAT to 17.5 per cent, so that number is included and it is one of the factors behind the rise in inflation in December. As to the effect on inflation of the increase of the standard rate from 17.5 to 20 per cent, that depends on how much of the increase is passed on to consumers, and we will wait to see on that. However, because the rise to 17.5 per cent will come out of the inflation numbers, it will partially offset the effect of the increase that comes in in January.
Lord Myners
My Lords, we fully accept the importance of the independence of the Monetary Policy Committee but the Government cannot wash their hands of any responsibility for inflation. The exchange of letters between the Chancellor of the Exchequer and the Governor of the Bank of England has now become very anodyne and routine—the same explanations are brought forward time after time. What are the Government going to do about the MPC’s inability to hit the target that the Government have set?
Lord Sassoon
My Lords, I know that it is customary for me to answer the questions and for noble Lords to ask them but five letters were written by the Governor of the Bank of England to the previous Government and I do not recall the previous Government having done anything about them in response. It is quite right that the Governor of the Bank of England explains the situation, but the previous Government put in place and supported the framework that exists, exactly as we are doing, and it is an important part of that framework that the governor writes letters.
Finance and Insurance Market: Underwriting Fees
Lord Myners Excerpts(13 years, 10 months ago)
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Lord Sassoon
My Lords, call me old fashioned if you like but it is probably better if I stay off the substance of matters that are the subject of inquiries by the competition authorities at the moment. I have certainly studied the Ferrans report and I note that he and his team worked closely with the OFT. It will clearly be an important input to the OFT’s studies.
Lord Myners
My Lords, we are fortunate that the Minister is here to answer this Question. He was, of course, an investment banker before he became Gordon Brown’s City ambassador. The Ferrans report, to which he refers, highlights several agency failures, which end up costing UK companies much more to raise capital and end up incurring far larger costs for UK investors, pension funds and insurance companies. I encourage the noble Lord to agree to meet Mr Ferrans and those who authored this excellent report.
Lord Sassoon
My Lords, I am happy to acknowledge that the noble Lord also has a distinguished history in this area. As well as being a fund manager, he wrote a report for the DTI in February 2005, so there are lots of poachers turned gamekeepers out there in the jungle. We should wait to see what the OFT recommends. It can recommend a range of actions, which could include matters coming back to government. I and my colleagues in government would then follow them up in the appropriate way.
Banking: Bonuses
Lord Myners Excerpts(13 years, 10 months ago)
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Lord Sassoon
My Lords, I am grateful to my noble friend Lord Ryder for enabling me to remind noble Lords that other Governments are increasingly following the lead of the UK and introducing variations on the measures that we have introduced for the taxation of banks. Since the announcement of our bank levy, Germany, France and other countries have followed with similar constructs. It is critical that we make sure that, while the UK regime is the toughest interpretation among global financial centres of what has been agreed internationally, we seek to work within the framework laid down by the Financial Stability Board and endorsed by G20 Ministers. Whether it is in relation to the US, other European countries or global financial centres, we will continue to work energetically with our partners to secure, as far as is possible, common standards in this area.
Lord Myners
My Lords, in 2009 the Prime Minister said that no bonuses of more than £2,000 should be paid to bankers while banks were in receipt of government support. The coalition agreement talked about robust action and detailed programmes to handle unacceptable bonuses. On that we have heard nothing at all. When we proposed disclosures about remuneration under the Walker report, this was supported by both the Conservative and Liberal parties. The Government have done nothing to implement the Walker recommendations.
The Minister asked for ideas. I will give him four. First, shareholders should be given a clear fiduciary responsibility, for which they can be held accountable under law, to take appropriate action to oversee the companies in which they have invested their clients’ money. Secondly, banks should not be able to offset the past losses against current corporation tax liabilities while they are in receipt of central government support, which most of our major banks still are through the special liquidity scheme and the credit guarantee scheme, as a consequence of which very few will pay any corporation tax for the foreseeable future.
Thirdly, there should be a charge for the capital that banks effectively enjoy through the state guarantee. The Bank of England has estimated that this is worth £100 billion. A fair charge for that would be of the order of £12 billion to £15 billion—the annual charge for risk for capital, which the Minister will understand—rather than the derisory £2.5 billion pounds which ultimately, but not initially, will be raised under the Government's bank levy proposal. That is a considerably smaller amount than was raised under the bank payroll tax.
Finally, if the Minister finds the RBS employment agreement with Mr Hester unacceptable, he can terminate it and replace it with a new one. Will he do so, because the people of this country will not accept a situation in which in excess of 5,000 people working in British banking will receive total remuneration in excess of £1 million per annum? This is totally unacceptable and we are entitled to a decent answer from the Minister to these questions on bonuses, rather than the blather that we have heard about other matters.
Lord Sassoon
My Lords, I am not going to stand here and listen to the ridiculous tirade from the noble Lord, Lord Myners. If he had all these brilliant ideas, why did he not implement a single one of them when he was in office? It ill behoves him to come here with this litany of ideas, which may or may not be good but are given to me not in the spirit of co-operation but as a lecture telling me what we are not doing. I could repeat—but it would bore noble Lords interminably—the Statement of my right honourable friend, which gave a great list of things that we are doing and have done. The Government of the noble Lord, Lord Myners, left only 25 banks with any sort of disclosure requirements. We have extended that figure to 2,500. His Government managed to get a paltry four banks signed up to the much lauded taxation agreement. We now have the top 15 banks signed up. I could go on. It is no good the noble Lord giving me a lecture about what we should do. He had years to deal with the matter and completely failed. We are getting on in a very practical way to make sure that the banking industry and regulatory system is fixed.
Banking: Liability.
Lord Myners Excerpts(13 years, 11 months ago)
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Lord Myners
My Lords, it stretches credulity that the FSA could conclude that there was no sign of governance failure in the Royal Bank of Scotland. From my perspective as a Minister, there was a lamentable failure of leadership, proper inquiry and proper governance in the Royal Bank of Scotland. Does the Minister agree that the FSA should publish its own report on the lessons to be learnt from the collapse of the Royal Bank of Scotland and that it should seriously consider whether it should no longer use accounting firms to conduct Section 166 inquiries of the sort carried out here?
Lord Sassoon
My Lords, I am sure that the FSA will take note of the noble Lord’s suggestions about how it goes about its business. But I can only, as he does, read the conclusion of a report by the FSA that follows an investigation that began in May 2009 and out of which has come one enforcement case.
Budget Responsibility and National Audit Bill [HL]
Lord Myners Excerpts(13 years, 11 months ago)
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Lord Peston
My Lords, noble Lords will be aware from my remarks last time in Committee that I would not have set up an OBR. I regard it as a waste of public money, to be perfectly honest, but I entirely accept that we are going to have an OBR, since the Government have a majority in the other place and in practice seem to have a majority in your Lordships’ House. Therefore, I entirely agree with my noble friend Lord Eatwell that, if we are going to have such a body, we might as well make it a better one, rather than a worse one. Therefore, we have a duty to scrutinise the proposed legislation and come up with a variety of suggestions, in the hope of persuading the Minister that we could make a better fist of it than the Government have done so far. There I echo the remarks of my noble friend.
On this group of amendments, I repeat something that I said last week. The OBR’s November economic and fiscal outlook report produced a series of forecasts that are not based on any recognisable or explicitly stated economic theory. This is forecasting without theory, which is slightly different from forecasting without a model, although the two are connected.
I have found it difficult to discover from the economic and fiscal outlook report what assumptions the OBR has made—and, presumably, will continue to make—about the way in which the economy works. The central issue as far as serious economics is concerned is whether it is assuming that the economy is a self-adjusting mechanism that will come to a full employment equilibrium—the kind of assumption that what I regard as obsolete economics used to make—or whether it is taking for granted, first, that the economy will not come to an equilibrium at all or, secondly, that there are multi-equilibriums and it does not know where the economy is going to go. Whatever the case, many believe that, wherever it settles, it is most unlikely to settle at anywhere recognisable as a place of full employment.
On a related matter about the facts and how seriously we should take the OBR forecasts as they are now, we have available, as the noble Lord, Lord Higgins, pointed out, the immensely helpful survey published by the Treasury of all the independent forecasts, to which I shall refer further on Report. I have analysed the independent forecasts statistically and it is interesting to note that, given the averages, standard deviations and the other statistical criteria, the forecasts of the OBR and the independent forecasters for 2010 and 2011 are much in step. However, it is extraordinarily interesting to note that the OBR forecast for 2012—that GDP will grow at 2.6 per cent per annum and will continue to grow at that kind of rate—is remarkably optimistic compared with the forecasts of the independent forecasters; it is statistically significantly different. The OBR has not discussed this matter, nor have outside commentators, but your Lordships—we shall return to this issue on Report—have to ask how the OBR has come up with this optimistic view.
There was a time when the Conservative Party believed in the free market—those days seem long gone—and would have taken it for granted that, as the independent forecasters overwhelmingly are in the business of making money from accurate forecasting, they have a tremendous incentive to forecast accurately. Therefore, if one had a choice, one’s normal inclination would be to say, “If you believe in the free market, you will choose the free market forecasts as opposed to the OBR’s forecasts”. We shall return later to the significant issue of the optimistic OBR forecast for 2012 against the rather more pessimistic forecasts of the independent forecasters.
There may be two good explanations for the difference: first, many of the independent forecasters do not look that far ahead and we may have a biased sample of what we get from the Treasury; and, secondly, the OBR may have more information—for example, it may be better advised on government policy—than the independent forecasters. I am not saying that necessarily the OBR is mistaken; I am saying that the difference is, from any analytical and statistical point of view, noteworthy.
Lord Myners
My Lords, I, too, speak in favour of the amendment tabled by the noble Lord, Lord Higgins. Unlike my noble friend Lord Peston, I am in favour of the OBR. However, I share with my noble friend some anxieties about whether we need another set of economic forecasts. We should warrant another set of forecasts, in particular if the Treasury is going to produce its own, only if those from the OBR prove to be better and more accurate than those produced by commercial forecasters and other bodies. Therefore, it is important that we are able to analyse the forecasts made by the OBR, in order to understand the logic behind them and the assumptions that have been employed. That can best be done—and the veracity, standing and confidence that we wish to have in the OBR supported—if the model used by the OBR is freely available for analysis by peers, commentators and parliamentarians.
I have one question for the Minister. He has advised us that HMT will continue to produce its own economic forecasts. However, he has criticised HMT’s forecasts on the grounds of their accuracy and the spin placed on them by politicians. If he believes that HMT was leant on by politicians, it would be interesting to hear some examples, because during my 18 months in government I saw no evidence of Treasury forecasts underlying government policy being influenced in any way by politicians. The Minister has also criticised the amount of content of HMT’s published forecasts, including the fact that HMT did not publish forecasts for unemployment. Will he confirm that in future HMT will publish a full and comprehensive set of its own economic forecasts, which will in particular include forecasts for employment and unemployment?
Lord Sassoon
My Lords, this discussion has been interesting because it confirms how much material the OBR has already published, in its economic and fiscal outlook and alongside it, which enables us to have a richer discussion than we might ever have had in the past. I am grateful that the noble Lord, Lord Peston, is nodding. We have made considerable strides. I do not want to rake over old ground, as the noble Lord, Lord Myners, provokes me into doing, but we must keep coming back to the point that he makes by implication—namely, that we have employment and other forecasts in the 150-page economic and fiscal outlook document. We have many pieces of data that we did not have before and we will continue to have them in future.
I hope that we all agree that there is a huge amount of additional transparency. We have fan charts and all sorts of other things that make clear the basis on which the forecasts have been produced. These forecasts are in no way made or influenced by Ministers or their political advisers. I think that we all agree that transparency is at the root of what we are trying to achieve.
The amendments in this group seek to ensure that the OBR publishes the assumptions, economic analysis, data, methods and costings that it uses to compile its reports. We believe that that is absolutely achieved in the design of the structure that we have put forward. The OBR will have a statutory duty to act transparently. Chapter 4.8 of the charter states 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”.
Thus the general duty is in the Bill, which is backed up by the wording of the charter that expands on it.
We now have evidence from last Monday’s document and the surrounding publications of the OBR about how it will do this in practice. Perhaps noble Lords have looked at the 20 Excel spreadsheets on the OBR’s website. I suggest that these give convenient access to the forecast data in a way that has not remotely been done before. In addition to those spreadsheets, over 20 separate documents with supplementary information have been published by the OBR since August.
One of the tests of whether this meets the legitimate demands of the most sophisticated external forecasting bodies is what the Institute for Fiscal Studies noted earlier this year, which is that the OBR had by that stage already published more detail than ever before on the assumptions underlying its forecasts and on the impact that changes in those assumptions would have on revenues and spending. We have made a significant step change. A lot of the information is available in electronic form. The construct of the Bill plus the charter achieves what we all want from this.
I turn to the specific points raised, particularly by my noble friend. The OBR has complete discretion over the model that it uses and what methods go around the modelling. In its recent economic and fiscal outlook report, the OBR had already made some adjustments to the methods that it used in June, so it is moving the way in which it has adopted the Treasury model. The Treasury will continue to retain economic and fiscal forecasting expertise because ultimately Ministers need to be supported by a forecasting capability. That will include the possibility of the Treasury continuing to use its own model, but the official forecasts will be those of the OBR.
Lord Eatwell
I do not quite follow that. If the Treasury is going to disagree, or at least have the capability of disagreeing, with a forecast put forward by the OBR, how can it do that other than on the basis of a forecast of its own? I note that the word “published” was slipped into the Minister’s final sentence. Surely if the Treasury is going to have the capability of assessing and disagreeing with the OBR model, it must have some forecast of its own.
Lord Myners
Perhaps I, too, may make a comment. I took the Minister’s reply to the question asked by the noble Baroness, Lady Browning, about situations where there is a difference between HMT’s forecast and the OBR’s forecast as confirming that the Treasury will be clear about the fact that its own forecast was different and that its policy decisions were informed by its own forecast rather than by that of the OBR.
Lord Higgins
I find this rather difficult. The Minister raises his eyebrows. I simply do not understand what the purpose of this forecast is going to be. Perhaps I may expand on that for a moment. We had an official forecast and we presume that the Government will operate on that basis, but apparently there is to be an internal forecast on which Ministers will base their decisions. The noble Lord is shaking his head.
Lord Higgins
My Lords, I understand the argument of the noble Lord, Lord Burns, and I should like to think further about what has been said on this issue.
Perhaps I may raise a further point in relation to the model. Over the past 80 or 90 years, we have had a huge difference of view as to whether one should adopt a Keynesian or a monetarist approach to these problems. My impression is that the OBR now has an essentially Keynesian approach and that the monetary aspect does not appear in the discussion at all, other than to say, “Well, of course, the Bank of England is targeting inflation”, and let it go at that. However, as I have previously pointed out to the noble Lord, Lord Myners, and others, until we got into quantitative easing the Bank was concerned purely about the price of money—the rate of a single rate of interest—rather than the quantity of money.
I am not the least bit clear about the proposal as it now comes here and to what extent the OBR is taking monetary factors into account. Let me illustrate this by giving an example from many years ago. I am delighted to see that the basic approach to economic forecasting on page 28 is to decide on how much excess capacity there is and then to see to what extent aggregate demand gradually increases and absorbs that excess capacity. That was precisely the policy that we adopted in 1970 under the Heath Government. We said then, in the clearest terms, exactly what is being said now on page 28. Unfortunately, this was misinterpreted as a dash for growth and we were absolutely pilloried by those who said that the money supply had been going up very fast. In fact there was a big difference between the money supply, the money supply figures and what was happening to aggregate demand. The point that I am seeking to make is that this does not take into account the effect of quantitative easing, for example, or, if it does, I am not clear where that would appear in these forecasts, although no doubt the Minister can enlighten us.
Given that we are told that the Bank of England is going to make yet a third, quite different, forecast in addition to the, I am almost inclined to say, surreptitious one in the Treasury—I accept fully the point made by the noble Lord, Lord Burns—I am worried that the fiscal and monetary side is not sufficiently integrated in the forecasts.
Lord Myners
Further forecasts on the economy are made in government. I believe that the Department for Business also produces its own economic forecasts. Almost as many forecasts are produced in government as are produced in the private sector.
The noble Lord, Lord Higgins, makes an important point. This might not be the right forum in which to discuss this, but the balance of intent behind the decisions currently being made by the Monetary Policy Committee is more focused on the words that come after “and subject to that” in its remit than on controlling inflation—that is to say that, in an environment in which fiscal policy is reducing demand in the economy, the onus for sustaining demand is coming from monetary policy, with considerable risk, in my judgment, of inflation.
There is no recognition in the Keynesian thinking of this document about the importance of monetary policy. We have what the Americans call a saltwater analysis of economics rather than the freshwater or Chicago school analysis associated with the monetarist view. It will be interesting to hear the Minister’s view on where monetary policy comes into the OBR’s thinking.
Lord Sassoon
I would need to go back to the Treasury website, but I believe that in among all the supplementary documents there is a commentary. That is on the website, but I do not have with me the suite of documents which back up the big document. However, I believe that the material is set out in the supplementary documents. I would be happy to send the noble Lord a reference for where to find it.
Lord Myners
Before we rush away to look for this information on the website, let me say this: the noble Lord is a Minister within the Treasury and shares a floor with the Chancellor of the Exchequer, so no doubt he can give us some sense of how this scrutiny operated. I am trying to imagine in my mind’s eye the 12 or so employees of the OBR scrutinising annually managed expenditure. I am trying to imagine how they would look at the AME of the Department for Culture, Media and Sport, let alone its subdivisions, or the AME of the Department for Work and Pensions. Can the Minister at least give us a flavour of how that work was conducted? That would whet our appetites before we see the full information on the website, as he has assured us we can.
Lord Sassoon
As the noble Lord knows very well, if he would like to ask the question, I will pass it on to Mr Chote and his colleagues who, I am sure, would be happy to answer on how they carried out those parts of their remit. It is for them to say how they carried out their remit, and if the question has not been answered satisfactorily by the information already published on the website, I am sure that they would be happy to respond to further questions. Again, I offer my services as post boy, if the noble Lord would like me to pass on the question.
Lord Myners
I am not sure that the answer is entirely satisfactory. The Chancellor described this as an audit. He went beyond the language used by the OBR. We are asking the Minister of the Crown, based in the Treasury, to give us a sense of how this scrutiny was conducted. I am beginning to feel that the Minister does not know the answer. If that is the case, it would be helpful if he said, “I have no idea how this was scrutinised”, after which the Committee could form its own view.
Baroness Noakes
My Lords, the Opposition are getting overexcited this afternoon. The small phrase in the announcement made by my right honourable friend the Chancellor that there has been an audit of the AME savings is being considerably overinterpreted. As my noble friend suggested, it would be helpful if Mr Robert Chote were asked to say how he conducts this aspect of his work. I am sure that if there are then further questions that noble Lords wish to raise, they will be able to. It would be helpful if my noble friend references any material that is already publicly available. However, it is not reasonable to go beyond that this afternoon.
Lord Myners
“( ) There is a duty on the Office to comment on the completeness, balance and accuracy of major economic statements made to Parliament by the Treasury, particularly the Budget.”
Lord Myners
My Lords, in many ways the points that I want to make here have already been made by my noble friend Lord Barnett regarding an earlier amendment, and I run the risk of being accused by the Minister of, in his term, raking over the coals again. The key issue here, though, is to ensure that Mr Robert Chote and his two fine colleagues on the committee of the Office for Budget Responsibility are not put in a place where their words are taken to be saying more than they actually do.
As noble Lords know, I continue to express support for the creation of the OBR and of the appointment of Mr Chote and his two colleagues. I also commend the Government for the steps that they have taken to ensure that there is an independent process around appointments to the committee of the OBR. I regard the document published last week as being a significant improvement in financial governance in the country.
It is therefore perhaps somewhat churlish to say, “This is all very good but perhaps we should have a little more”, but there was one thing missing last week in the Chancellor’s Statement to another place. He put a lot of spin, to use tabloid language, on the OBR statement. He is not the first Chancellor to do that; his predecessor but one was particularly prone at times of the Budget and the Pre-Budget Report to putting spin on information contained in the Budget—indeed, to the point of often forgetting to mention things that were in the Budget which were subsequently regarded as being very important. I would not want to see the OBR used in the same way.
The purpose of my amendment is to seek to ensure that, when the report of the committee of the Office for Budget Responsibility is produced for Parliament by the Chancellor or by a Treasury Minister, there is a reasonable test of the completeness and the accuracy with which the report is described to Parliament. As the noble Lord, Lord Barnett, has already indicated, the report last week is replete with language about uncertainties, such as fan charts and the use of terminology to suggest probabilities and risks around central forecasting.
Lord Sassoon
My Lords, the noble Lord, Lord Myners, accused himself of being churlish. The noble Lord, Lord Burns, accused him merely of creating mischief. I offer no view, but agree completely with the noble Lord, Lord Burns, and with my noble friend Lord Newby, that his amendment would widen the OBR’s remit into completely inappropriate and vastly different territory from that covered by the Bill. The very focused remit in the Bill covers forecasts and the sustainability of the fiscal position. I noted that the noble Lord, Lord Myners, talked about the OBR commenting on the presentation of its report by the Chancellor—which would be difficult, for the reasons given by the noble Lord, Lord Burns—but his amendment goes much wider and is concerned with commenting on major economic statements, which covers a huge range of things well beyond the OBR's focus. I come back to the concerns that were expressed by noble Lords at Second Reading about the critical importance of the impartiality of the OBR. For example, the noble Lord, Lord Eatwell, said:
“I am sure it is right that the OBR should not become embroiled in political controversy”.—[Official Report, 8/11/10; cols. 16-17.]
That is exactly where the amendment of the noble Lord, Lord Myners, would take it—well beyond the sustainability of the public finances, which should be its remit. I ask him to withdraw his amendment.
Lord Myners
My Lords, far be it from me to wish to cause mischief. I have listened with great interest to the contributions of the noble Lords, Lord Newby and Lord Burns, and of the Minister. The Minister is correct that the wording of my amendment is very wide—wider than the OBR itself. However, I have often found it helpful in life to start wide, listen to the wise comments of others and narrow down. The noble Lord, Lord Newby, suggested that the word “balance” was capable of widely differing definitions, which would raise issues of implementation, and that possibly the phrase “absence of bias” might be better. I will reflect on that before Report. For the time being, I beg leave to withdraw the amendment.
Budget Responsibility and National Audit Bill [HL]
Lord Myners Excerpts(13 years, 11 months ago)
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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.
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.
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.
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.
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.
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.
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.
Budget Responsibility and National Audit Bill [HL]
Lord Myners Excerpts(13 years, 11 months ago)
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Lord Oakeshott of Seagrove Bay
My Lords, like the noble Lord, Lord Eatwell, I was rather struck by the word “intergenerational” in the draft charter for budget responsibility. The Treasury’s objectives for fiscal policy are to,
“ensure sustainable public finances that support confidence in the economy”,
which is fine, and,
“promote intergenerational fairness, and ensure the effectiveness of wider Government policy”.
Can the Minister tell me why we need the word “intergenerational”? It seems that one of the basic objectives of fiscal policy is to promote fairness and, of course, our coalition agreement holds fairness very high. Why do we need the word “intergenerational” here? As it is a draft charter, perhaps I may ask that the word be taken out from the final version.
Lord Myners
My Lords, I support my noble friend Lord Eatwell. I think that I need do no more than cite our debate a few minutes ago in the Chamber when the Minister repeated the Statement on the OBR made earlier today in the other place by the right honourable Chancellor of the Exchequer. The central emphasis of that Statement was the economy. It would seem therefore that the Government intend to use the OBR and the charter in support of it to give confidence to their economic projections. I therefore suggest to the Minister that no harm would be done, and considerably greater precision would be achieved, if the words proposed by my noble friend were inserted in Clause 1.
Lord Higgins
My Lords, am I wrong in thinking that the amendment refers to line 6 and not line 5 of the Bill? Be that as it may, no doubt we can sort it out if it is wrong. I have great sympathy with the view put forward by the noble Lord, Lord Eatwell. We shall see what response we get from the Government. Perhaps we may also have from the Government a little clarity with regard to the charter for budget responsibility, since it is described as a draft. Are we to understand that the Government will amend it in line with the comments made by this Committee or will we be able to amend it at some later stage more formally?
An interesting point was made about “intergenerational fairness”. I understand that we must be concerned with fairness generally, but we should realise also that the sudden introduction of this expression reflects a considerable change of view in the Treasury from previous years. It is of course possible for us to consume in this generation and pass on a lesser inheritance to future generations. However, if we are to appraise intergenerational fairness, we need not simply a government balance sheet, on which we have made a little progress, but a national balance sheet, which successive Governments have hitherto failed to provide. If the relevant paragraph is to have any credibility, we need further data. It would be helpful if the OBR could take a first shot at a national balance sheet. The argument that we should widen the charter a little from relating merely to implementation of fiscal policy seems reasonable, but I look forward with interest to hearing what my noble friend the Minister has to say.
Lord Sassoon
I am grateful to the noble Lord, Lord Eatwell, for his explanation of how intergenerational transfers work. I am not sure what difference it makes to the analysis but, for better or worse, it is not the case that substantially all of the debt—he did not use that term—is held by UK citizens or bodies. The burden of debt that we have is well spread among international holders as well.
We should not get too far side-tracked. Intergenerational fairness is an important point, but the objectives for fiscal policy are, as I say, the background in the charter. People can see the context in which the critical elements of the Treasury mandate are set out in paragraphs 3.2 and 3.3 of the draft charter. Those are the two elements that bite particularly on the mandate of the OBR. The full objectives for fiscal policy include supporting and improving the effectiveness of monetary policy, which relates to the independent operations of the Monetary Policy Committee of the Bank of England. We must remember how the architecture fits together.
Let me say a bit more about the background to the charter. Its purpose is to improve the transparency of the fiscal policy framework and, within that, to include the guidance on the role of the OBR within the broader framework. The charter is concerned with fiscal policy and includes the Treasury mandate for fiscal policy. It was important to have that document for people to see ahead of this discussion. The fiscal policy framework is part of the Government’s overall approach to economic policy. Indeed, given the fiscal situation that the Government inherited, the coalition made it clear on its formation that reducing the budget deficit and setting public finances on a sustainable path to build confidence and to create the conditions for economic recovery were the overriding priority.
The noble Lord’s first amendment would require that the charter be expanded to relate to overall economic policy. Amendments 2 and 3 concern the addition of economic policy objectives, which means that we need to be clear about them. They are set out in the paper The Path to Strong, Sustainable and Balanced Growth, which was published today. To achieve the objective of delivering growth that is consistent with values of freedom, fairness and responsibility and to improve the well-being of the British people, the Government must employ all their macroeconomic and microeconomic policy tools and frameworks. I mentioned that monetary policy is operated by the independent Monetary Policy Committee of the Bank of England. That provides one set of tools that play a role in meeting the Government’s economic policy objectives.
It may be helpful to remind the Committee that the Bank of England Act 1998 provides:
“In relation to monetary policy, the objectives of the Bank of England shall be … to maintain price stability, and … subject to that, to support the economic policy of Her Majesty’s Government, including its objectives for growth and employment”.
I know that comments have been made about that, but it is probably not right this afternoon to go into the question of how all this works. The point is that the Bank of England Act does not set out the Government’s economic policy objectives. That is not what we are trying to inject—nor should we—into the legislation that governs the operation of the Office for Budget Responsibility.
Financial stability policies are similarly crucial to delivering the overall economic policy objective. The Government have taken steps to reform the financial stability framework, providing the Bank of England with control of macroprudential regulation and oversight of microprudential regulation. Also, microeconomic policies create the conditions for growth and they, too, are essential. Fiscal policy represents another crucial set of tools that the Government use to achieve the overall policy objectives. The charter is the place where, for the first time, we have a transparent exposition of the framework. However, the charter is not itself the framework. It replaces the code for fiscal stability, which was part of the previous fiscal framework. Replacing that code was recommended by the Treasury Select Committee. The code did not contain economic objectives. Therefore, the charter remains a document relating to fiscal policy and should not be expanded to contain overall economic objectives.
Lord Myners
Surely the “therefore” does not follow. Simply because the code did not include economic policy, it is wrong to say that therefore the charter should not. There is an opportunity, with the OBR and the charter, fundamentally to change the architecture with which we review and analyse the progress and success of the UK economy. I for one have warmly welcomed that from the opposition Benches, but the insertion of the word “therefore” in that sentence is simply illogical and misses the point of achieving the full potential that the OBR can offer.
Lord Peston
Before the Minister rises, I shall raise a point of order. I was under the impression that, when we meet in Grand Committee, we do not divide the Committee at all, so withdrawing amendments is totally irrelevant. I have no intention of withdrawing my amendments, but I am not going to divide on them. Rather like the noble Baroness, Lady Noakes, I want to hear the Minister give some reasoned answers including that he would like to think about it a bit more. He does not have to agree with us, but I thought that the whole point of meeting in Grand Committee was to behave non-politically, if I may say so, and co-operatively to clarify the Bill in order to make progress when we go back into the Chamber, when, no doubt, we will divide the House. I am beginning to get very irritated with the repetition of “withdraw the amendment” because I do not think that we are here for that purpose. We may withdraw it formally, but that is not the point.
Lord Myners
I quite recently sat in the chair in which the Minister is sitting and my experience is that the favoured word that comes from officials at Committee stage is “resist”. As my noble friend Lord Peston has pointed out, there is no need to resist. The purpose of this session is for the Minister to listen in a considered way to points made from the coalition Benches and the opposition Benches and to do us the courtesy of giving us a fair and reasoned explanation. The Minister has not done that. In fact, he has fallen back into the trap of the way in which he handles Written Questions, which is, on the whole, by completely ignoring the Question in the Answer that he gives. I plead that he seeks to answer the questions that are reflected in the amendments and, in particular, the observation from the noble Lord, Lord Oakeshott, that intergenerational is a specified fairness as opposed to a general commitment to fairness that I understood the coalition to support.
Lord Sassoon
I am grateful to my noble friend for reminding us that the OBR should be set a focused mandate. It is then up to the OBR what it considers is appropriate, in its analysis, to explain as background to the mandate that it has been given. It is clearly neither necessary nor helpful to give this Bill different purposes from those that it has—to set a remit for the Office for Budget Responsibility, which is what the charter intends to do, and only that.
Lord Myners
Barely an hour ago, the Minister was telling the House that the OBR report had broken new ground in making employment and unemployment forecasts and what a wonderful step this was compared with what had happened under the previous Government. In response to the observation from the noble Baroness, Lady Browning, I believe that Sir Alan Budd’s reservation was that he had allowed OBR employment forecasts to be released one day early in order for them to be used by the Prime Minister in Prime Minister’s Questions rather than that he had any reservations about the OBR moving into the area of employment and unemployment.
To go back to the point of the amendment tabled by my noble friend Lord Eatwell, fiscal policy and economic policy are inextricably linked and the Minister has given us no good reason why the two should be treated entirely separately so far as the charter is concerned. My anxiety is that, unless the Minister provides us with better explanations on these points, the Committee stage will be wasted, because all these amendments will be repeated when the Bill returns to the House. The Minister is failing to make appropriate use of the opportunity that Grand Committee provides for such matters.
Lord Sassoon
I think that some noble Lords want to have it every which way. The fact is that within the mandate that the interim OBR is being given, it has felt it appropriate—and we welcome this—to set out forecasts for a wide range of things. It is not that these employment forecasts were not done before; it is just that the previous Government chose not to share them with the British public and the economic commentators. The 150-page document that has been put out today is the best indication that the OBR is not going to hold back on analysing and laying out the full background as it considers appropriate under the minimum forecast requirements set out in paragraph 4.10 of the charter. I suggest that we can take confidence from the fact that there is nothing that the OBR feels inhibited about in doing whatever is necessary to underpin the conclusions that it needs to come to on the fiscal mandate and in laying out the full forecast.
Lord Myners
May I briefly beg the noble Lord’s indulgence one last time? I take great comfort from what he says and I fully agree about the failures of the previous Government to disclose fully a wide range of economic forecasts. I cannot be more supportive of the OBR’s broad intention in this and in many other respects. However, there is a provision in the Bill under which the Government can give the OBR guidance, and that guidance stands above all others, including the point that the OBR should perform its duty objectively, transparently and impartially. Therefore, can the Minister confirm that the Government will not be using the guidance process in any way to restrict the OBR’s ability to comment on general economic matters? If the Minister could give us that assurance, it would give me considerable encouragement.
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 Sassoon
I am grateful to the noble Lord, Lord Turnbull, for pointing that out. I do not accept the analysis of the noble Lord, Lord Barnett. Yes, it is correct that, as exemplified by what we have seen today, the OBR indeed has the freedom to do what Members of this Committee are asking for, but that is not what these amendments are essentially about, as the noble Lord, Lord Turnbull, pointed out. Clause 1 is not about the Office for Budget Responsibility doing things; it is about the Treasury producing a document to be known as the charter for budget responsibility. We could require the Treasury to produce all sorts of documents laying out economic policy and a huge number of other things, but the point of the clause is for the Treasury to prepare a document, the purpose of which is to set the background against which the OBR does its work. I have obviously failed to explain it, but the very distinguished former Permanent Secretary has come to my aid to point out that the Bill will set up an office focusing on fiscal policy. That is why the charter relates to fiscal policy. We do not want to widen it out, as the noble Lord said, to a document that sets a background for this office to go into all sorts of wider economic commentary. That point, as my noble friend reminded us, was made by the Treasury Select Committee.
Lord Myners
That is why the Chancellor of the Exchequer and other Ministers must be very careful when they present the reports of the OBR to the committee. Clearly, in the other place, as repeated in our House, the report of the OBR was given by the Minister as an economic commentary. In the Minister’s response to questions, he used the OBR to validate the correctness of the Government’s economic strategy. The noble Lord said earlier that we cannot have it one way and then the other. I suggest that he and the Government cannot either. I hope that he will now answer the question asked by the noble Lord, Lord Higgins.
Lord Turnbull
I shall take issue with the noble Baroness, Lady Noakes. I think there is a distinction between the substance—fiscal policy—which it is well accepted is a privilege matter for the House of Commons, and what we are talking about—the governance structure of policy—which is, in a sense, a quasi-constitutional issue. We are talking about the charter, not fiscal policy. This is an area in which the House of Lords has some expertise. Therefore, I conclude exactly the opposite—that the charter should be rightly within the purview of the House of Lords, even when the fiscal policy is not.
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 Myners
I shall bear that in mind. If the Minister is struggling to keep up with his work, I will obviously make an effort to lighten the burden on him. However, I hope that he makes a serious effort to answer Written Questions. There are some examples in Hansard today which are so far from the mark in terms of attempting to answer the Question that they treat the House with a disregard which is inappropriate.
Lord Oakeshott of Seagrove Bay
It is not just under this Government that that has been happening; it is a problem with the Treasury generally, although it has been happening particularly under this Government. If the Treasury made a bit more effort to answer Questions honestly and fully the first time, we would not need to ask them two or three times. It is a bad problem.
Autumn Forecast
Lord Myners Excerpts(13 years, 11 months ago)
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Lord Sassoon
I am very grateful to my noble friend; his analysis is absolutely right.
Lord Myners
My Lords, I welcome the establishment of the Office for Budget Responsibility and the independent committee. That is a significant step forward and one on which the noble Lord and the Government should be congratulated. However, we can see a contrast between a thoughtful, objective, fact-based analysis from the committee of the OBR and the spin that was placed on it by the Chancellor of the Exchequer. That is a very good and valid reason why the OBR should be invited to ensure that its own conclusions are presented to Parliament in an accurate, unbiased and objective way rather than as we have seen today.
It is disappointing to see that, even at the end of the five-year period, the output gap will still remain substantial—that is, we will still have significant unused capacity in the economy. Will the noble Lord confirm that the noble Lord, Lord Eatwell, is correct in his analysis that an improvement in the balance of payments and a decline in public sector borrowing will inevitably be associated with a significant increase in private sector debt? Is that an assumption which the Government accept and support? Can the noble Lord tell us whether the rate of interest paid by Ireland will be higher or lower than that assumed to be paid by the Government of Iceland?
Lord Sassoon
My Lords, it is always good to have the noble Lord, Lord Myners, present. I do not suppose that his Government ever applied any spin to any numbers. He shakes his head. Oh, well. All our memories are failing. Seriously, the difference this time is that we have a much greater, more transparent analysis of the numbers—over 150 pages of numbers. I am grateful to him for welcoming the formation of the Office for Budget Responsibility, and I hope he will be with me, giving it a fair wind in Committee on the Bill shortly.
There is a serious point here. Not only are there 150 pages of analysis and a lot more detail than was ever given before, and not only has that been available a couple of hours before my right honourable friend’s Statement, but we will be able to pick over it in the next few weeks. The OBR itself will come to the Treasury Select Committee and answer questions there and all sorts of other questions in different fora.
As to his specific question on the output gap, yes the numbers show that it will be 0.9 per cent in 2015, down from 3.3 or 3.4 per cent as it is now and from 4.2 per cent as it got to in 2009. As to the levels of private sector debt, I do not accept the numbers given by the noble Lord, Lord Eatwell; I accept the numbers that are in the OBR’s document. There will be a total leverage in the economy that is very far down on the over-leverage with which the previous Government left us.
Finance (No. 2) Bill
Lord Myners Excerpts(14 years ago)
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Lord Sassoon
My Lords, the debate on the Bill this afternoon has been interesting and wide-ranging, even though it has been between relatively few of us. It has covered a fair amount of ground. I normally respond thematically to points made in debates, but I am trying to get to grips with the number of them. They cover a wide area and I will try to group one or two together. It is interesting that no noble Lord who has spoken has touched on the details of the measures in the Bill, as opposed to the process by which the new Government are going about making tax policy. I stuck my neck out in my introduction and said that the measures were uncontroversial, and I welcome the fact that they appear to be. I am grateful to have that confirmed.
I will start with one or two comments on growth and the broader strategy. First, it is important to remind noble Lords that we have been rolling out a very considerable suite of growth-enhancing policies, right from the start of the new Government. First, we sent a very strong signal to the markets that we had the deficit gripped and that we had indeed come back from the brink of bankruptcy. That is what has convinced the markets that interest rates can remain low, which underpins what business needs in order to invest.
Lord Myners
My Lords, I come back to a point made in an earlier debate when I asked the Minister whether the differential between UK and US bond rates has widened or narrowed since 11 May. At the time, he shook his head, indicating that they had narrowed. In fact, as he has now been obliged to cover in a Written Answer, they have actually widened. The Government can claim no credit for the reduction in interest rates. It is a global phenomenon and, if anything, the risk to the UK economy is deemed by financial investors to have increased since 11 May, rather than decreased.
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 Sassoon
I am grateful to my noble friend Lord Marlesford for pointing that out; I absolutely agree. Any country that has total debt—he is talking about wider debt—of 400 per cent of GDP, as this country has, is indeed skating on very thin ice.
Lord Myners
Surely it is a matter of the purpose for which that debt is used. If the Minister is criticising people for taking out mortgages to buy their homes, which is the largest single source of domestic debt, that is a novel and important statement from the government Benches. Surely, Minister, you need to have regard to both the assets and liabilities on both the public and the private sector balance sheets.
Lord Sassoon
I am grateful for the noble Lord’s attempts to put words into my mouth, but of course we want to see a steady and sustainable mortgage market.
I want to get back to the question of growth and getting the economy on track, which is where we got into this interesting debate but somewhat sidetracked from the main thrust of the debate this afternoon. The noble Lords, Lord Eatwell and Lord Desai, asked about growth, which is important. The question is whether the growth will be sustained and at what levels. I was just looking at the latest of the international forecasts issued: the OECD's November 2010 economic outlook from last week. It is now forecasting growth for 2010 to be 1.8 per cent, growth for 2011 to be 1.7 per cent, and growth for 2012 to be 2 per cent. Of course, we wait until next week to see what the OBR’s latest forecast will be.
On one point of detail from the question asked by the noble Lord, Lord Desai, I do not think it is correct to say that the quarter 2 growth numbers have been revised down. There has been some discussion about what was always seen as a surprisingly high number, but there has been no formal revision of those numbers. If there is, it will be on 22 December. Growth prospects remain robust in the view of most independent commentators, although, as I have said here before, of course the recovery is bound to be choppy.
We then had a couple of comments about child benefit policies. That links into the general state of the economy that we inherited. My right honourable friend the Chancellor announced the withdrawal of child benefit for families containing a higher rate taxpayer in order to make a contribution to addressing the deficit that we inherited from the previous Government. In current circumstances, it is simply wrong that the lower paid should be subsidising the better off. Times are very tough; this is a tough decision but a necessary one. There have been all sorts of suggestions as to how it could be implemented, but the Chancellor was explicit about the need to avoid a complex system of either means-testing or something that would require significant changes to the existing PAYE and self-assessment systems.