Budget Responsibility and National Audit Bill [HL]

Debate between Lord Tunnicliffe and Lord Higgins

Monday 8th November 2010 Lords Chamber

[Lord Tunnicliffe]

My Lords, I thank the noble Lord, Lord Sassoon, for introducing the Bill so clearly—he confirmed that, fortunately, I have managed to read it with reasonable accuracy—but he also introduced a number of other points and promises in relation to a framework agreement and potential memorandums of understanding. It is very important that he should produce those, in draft at least, before the Committee stage.

I will touch on other contributions to the debate. Like the noble Lord, Lord Barnett, I was pleased that it was largely non-political or at least non-party political. The noble Lord, Lord Newby, had a little poke at us but made the important point that we all want to work together so that reports, as we have in the NAO, enjoy public confidence. He also brought out the whole issue of what the non-executives will really do.

The noble Lords, Lord Turnbull and Lord Burns, put the political interference issue in perspective, using the rather nice term “wishful thinking”, which is probably a fairer way of reflecting how politicians have been involved—in practice, somewhat reluctantly—with responsibility for forecasts. Broadly speaking, we support the OBR because of the extent to which it will take politicians out of that. The noble Lord, Lord Turnbull, made important points about the need to challenge and to have consistent presentation so that data are easier to use year by year, policy by policy and change by change.

A bit uncomfortably I even found myself agreeing with many of the points made by the noble Baroness, Lady Noakes. I, too, would like to see two Bills. Indeed, we are proposing that there should be two Bills. We take the point that writing one’s own school report has a certain lack of comfort about it. We will be probing and pressing strongly in Committee the whole issue of who audits the auditors—who does the peer review—to achieve an appropriate mechanism for a review of the whole thing. I think that her contribution was very useful. Many noble Lords came forward with the idea that we must have more clarity of what the non-executive directors do.

The noble Lord, Lord Myners, moved on to the issue of independence, which is key to this proposal. This is about the Treasury’s involvement. I know that the Treasury is a wonderful place, but when I was a public servant the word “Treasury” gave one a little cold feeling round one’s heart. It has an ability to permeate its influence through the staff and the charter. The general point made by the noble Lord, Lord Myners, about the Treasury, the staff and the charter is important. I am sure that it is not the Government’s intention to influence the OBR through the charter or the staff, but there may be another Government, with a different attitude, who may find those tools usable.

The noble Lord, Lord Myners, mentioned the word “sustainability”. The word “sustainability” is one of the most worrying things in the Bill, because it is presented as if it is a well defined term. It is not; it is very much a matter of what outcomes you want to be sustainable. We will need to probe that in Committee.

The noble Baroness, Lady Browning, and the noble Lord, Lord Touhig, clearly have enormous experience of the NAO and I thank them both for their contributions. We will be reading them with care to see whether there are points that we need to probe in Committee through amendments. I have to say that, at first look, the NAO part of the Bill seems fairly straightforward, but it is important that we have the experience of two such contributors to make sure that we get enough depth.

The noble Lord, Lord Burns, as well as putting the whole issue of politicians’ involvement in its proper perspective, raised the big question of how we solve this problem: what are the appropriate degrees of separation and what do we mean by “independence”? He called it “remit creep”; I would call it “mission creep”. It is important that we probe what the size of the mission should be in the Bill. I shall be reading Hansard with great care. The noble Lord started to flesh out what these non-executives might do and made the important point that, in the Bill, not only do we need the word “independent”—it happens not to be there, but at least the concept is—but we must have the resources, the money and people.

The noble Lords, Lord Higgins and Lord Barnett, both asked the real question: do we need this at all? We on these Benches think that we do, as a step forward, but there is the whole issue of what it adds and how it usefully contributes. It will have a good brand, but it also needs review, audit and debate involving those who have different points of view.

[Lord Higgins]

The noble Lord was right to say that that is what the noble Lord, Lord Barnett, said. I do not think that it was what I said overall; I just had a qualification with regard to particular parts.

[Lord Tunnicliffe]

I apologise to the noble Lord to the extent that I misinterpreted his words. I certainly agreed with two important points that I think he made—he may have to correct me again. I apologise; my note-taking may not be very good. I think that he strongly made the point about publishing assumptions. That is an important point, which we should have clear either in the MoU or in the Bill. I think that he raised at least a question mark as to whether the charter will be helpful or—I cannot think of a better word—sinister as a way in which to control the OBR. That needs to be clarified. Finally, the noble Lord made an important point about the OBR looking at the CSR and describing its outcomes. At least in those areas, we enjoyed some common ground.

The noble Lord, Lord Barnett, has his way of looking at these things and asked some questions of the noble Lord, Lord Sassoon, the answers to which I await with interest. He, too, asked about the word “sustainability”, which is in the Bill as if it has a clear meaning. That is a point that we will really have to mine.

We like the idea of the creation of an independent and credible OBR. It would be an important step forward in transparency and open government and an important addition to the democratic institutions. On this side of the House, we think that it is a good idea and we are prepared to co-operate to the full with the Government to achieve it. We are not prepared, however, to co-operate in the production of a seriously flawed institution. To do so would both ruin a good idea and potentially bring the whole project into disrepute. “Disrepute” is a strong term but that at least in part happened during the unfortunate events before the Summer Recess.

It has become clear in the debate that the Bill fails on this objective. We do not criticise the Government’s objective but we are critical of its execution. Perhaps Ministers were diverted from their laudable goal by their advisers; perhaps Sir Humphrey was meddling. What seems to come through is that the Treasury needs to hang on to its tools of control. Have the Government considered alternatives? Across the road, in Dean Trench Street, there is an internationally respected economic forecasting organisation, the National Institute of Economic and Social Research, a body that is already substantially publicly funded. The institute is recognised as being totally impartial and one of the best forecasting organisations in the world. A suitable contract could have handled all the confidentiality issues and much public money would have been saved. Instead of setting up a new quango, why did the Government not simply contract out the OBR to the institute? Are there good reasons for not doing that or is it because the Treasury would lose control? Why did the Government not consider going to the other end of the spectrum and placing the OBR under the control of Parliament, just as the Congressional Budget Office in the United States is under the control of Congress? The OBR would then be able to perform the range of services to Parliament and the Executive that the CBO provides in the US.

It is important to understand that the OBR is not and will not be a policy-making institution. It is therefore not part of the political process. The OBR is in the assessment business, not the making-policy business. Why, therefore, are so many control mechanisms built into the Bill? My noble friend Lord Eatwell compared the powers of the Comptroller and Auditor General set out in the Bill with those of the OBR. I compare the role of the two and their independence. Independence depends—as I said, I once worked in the public sector—on how one is appointed and how long for, how one is paid and how secure one is in that role.

The Bill strongly brings out the difference between the C&AG and the chairman of the OBR. With regard to status, one is appointed by the Prime Minister, while the other is appointed by the Chancellor. One is agreed to by the chair of the Public Accounts Commission; in the case of the OBR, it is just a matter of consent. The C&AG will serve for 10 years, while the chair of the OBR serves for two times five. Two times five is not 10, because a lot happens between those two fives. Termination is difficult in the case of the C&AG but, while it is quite difficult for the chairman of the OBR, it will not be difficult between those terms of office. At that point, the Chancellor and his concerns will come very much to the forefront of the individual’s mind when contemplating his further five years of employment. The individuals there now will be above these influences, because we know them as individuals, but we have to think in the longer term.

In matters such as pay, the pay of the C&AG can be indexed, whereas the pay for the OBR will be determined by the Treasury. The money for paying the C&AG comes from the consolidated fund; the money for the OBR comes through the Treasury. The terms and conditions of staff in the National Audit Office are determined by the NAO; in the OBR, they are determined by the Minister for the Civil Service. The finance in relation to the NAO and the C&AG comes from the public accounts commissioners—finance is pretty well independent when it comes to the National Audit Office. In the case of the OBR, it comes from the Treasury, which will have an influence on resources.

Finally, we have the staff of the OBR. I think that the Minister said that he saw them as civil servants coming in and out of the office. It is important to bottom out just who these people are going to be. Will they be an independent group, as, very clearly, the staff of the NAO are, or will they be people who, while doing their best to be totally independent, are influenced by their prior career and by where their career will be in future? All this needs to be questioned. We are not convinced that this organisation has sufficient independence.

We have looked at the work of the Treasury Select Committee and have suggested that the three tests are independence, credibility and robustness. The committee asked similar questions in paragraphs 126, 128 and 132 of its report on the OBR. Independence and credibility are crucial. We believe that the Bill as drafted fails these three crucial tests. However, we see the potential of this good idea, which is why we are prepared to work with the Government to create an OBR that passes the three tests. At the end of his speech, my noble friend Lord Eatwell advanced a concrete proposal on behalf of the Official Opposition. It would be a major step forward if the Minister could accept that proposal. The proposal remains on the table. We are ready to consult as to the particular all-party forum that is used to design the new OBR. It need not take time. It could well be done before Christmas. We are ready to accept that the OBR’s interim structure is satisfactory for the time being.