The Economy
Andrea Leadsom Excerpts(13 years, 5 months ago)
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Ed Balls
I will give way in a few seconds.
The test for the Treasury is not whether it can eventually get back to growth, but where it will make up the lost ground in jobs and living standards.
In this debate, I challenge the Chancellor to agree with me on three propositions: first, his plan is not working; secondly, he has the opportunity to change course; and, thirdly, there is a better and fairer alternative economic policy for our country—better for jobs, better for living standards, and a better, fairer way to get the deficit down.
Ed Balls
I have plenty more; we will come to them in a second. Just think, “Good publicity, good publicity, it’s all good publicity.” It did not do the hon. Member for West Suffolk any harm; it did not do him any good either.
We do not hear much from the Chancellor these days about snow being the explanation for the contraction of the economy at the end of the year, because as he knew at the time, it also snowed in America, Germany and France, and they all posted stronger growth. In fact, Denmark, Ireland, Greece and Portugal were the only other countries with falling output in the last quarter of 2010. The Chancellor of all people, a regular skier on Europe’s slopes, should have known that even in winter it does not snow in Greece and Portugal. Instead we hear a new weather-related line. He blames the global headwinds, factors outside his control—rising oil prices, food prices, the eurozone, the Japanese earthquake, all reasons why prudent Chancellors should always be vigilant and choose caution over complacency. It is ironic to hear the Chancellor and the Prime Minister blame the rest of the world for Britain’s economic difficulties, as they did the opposite for their last four years in opposition.
Compared with other countries facing the same global headwinds, we are doing worse. We have gone from being in the top half of the EU economic league, to fourth from bottom in the past few months. It is no wonder that the OECD Deputy Secretary-General said a few weeks ago that
“we see merit in slowing the pace of fiscal consolidation if there is not so good news on the growth front”.
Even the IMF has said that
“there are significant risks to inflation, growth and unemployment”.
The excuses are not working, and the Chancellor is starting to be rumbled.
Andrea Leadsom
Does the right hon. Gentleman recognise that when the Government took office, our country was on credit watch for a downgrade? Does he welcome the fact that this country’s borrowing rates are similar to those of Germany and nowhere near those of Portugal and Greece? Does he further recognise the impact that his proposal effectively to reduce VAT rates right now, unfunded, would have on our current national deficit?
Ed Balls
The irony of a Conservative MP opposing tax cuts in VAT for families while allowing a tax cut, compared with last year, for the banks, is almost overwhelming. As everyone who studies the figures and not the political spin knows, we went into the crisis with lower national debt than France, Germany, America and Japan. Every country had a rise in its deficit, so of course we did. The fact is, however, that our gilt yields were very low and falling month by month before the general election, even as the opinion polls narrowed—
Ed Balls
It is fine for the hon. Gentleman to be thinking of his intervention rather than listening to the answers, but the fact is that we had a lower budget deficit and lower national debt than we inherited in 1997. The IFS, in its report, “The public finances: 1997 to 2010” said:
“By 2007–08, the public finances were in a stronger position than they had been when Labour came to power in 1997.”
That entirely disproves his point.
Mr Osborne
Let me conclude now.
The scales have fallen from the eyes of Labour MPs. They realise that they have a shadow Chancellor who has to spend the next four years defending his record, and they are completely silent as they realise that they are going to be talking about the past, not the future.
Scotland Bill
Andrea Leadsom Excerpts(13 years, 5 months ago)
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Andrea Leadsom (South Northamptonshire) (Con)
If that debt must be consolidated with the UK’s national debt, it should surely be considered as quasi-UK Government debt. Does the Minister therefore agree that if the Scottish National party goes ahead with its vote on independence, it will need to consider very carefully the increased cost of borrowing that would ensue?
Mr Gauke
The decision on whether to put a toll on the Forth road bridge will be one for the Scottish Government. The Treasury has therefore not considered that proposal. Perhaps my hon. Friend should ask Scottish National party Members what consideration was given to such a toll. I suspect that the answer will be, “Not a lot.” The expression on the face of the hon. Member for Dundee East (Stewart Hosie) is probably confirmation that no consideration was given to my hon. Friend’s suggestion. Asymmetry is inherent in such devolved matters.
The UK Parliament has an interest in ensuring that Scottish Ministers can borrow efficiently and sustainably, because although interest paid on any loans will be funded from within the Scottish budget, it will be included in the UK fiscal aggregates.
Andrea Leadsom
For the sake of clarity, the Minister tells my hon. Friend the Member for Warrington South (David Mowat) that the decision on whether there will be a toll on the Forth road bridge is a devolved matter, and yet also says that any Scottish Government borrowing would be included in the British national debt. How can that toll be a devolved matter? The UK is involved in keeping the cost of funds to the Scottish Government down so that they can afford to fund a bridge that people in England are unable to afford without charging a toll.
Mr Gauke
We must remember that any debt service will be financed by the Scottish taxpayer—that is the context.
We should move on. As I said, any loans will be funded from within the Scottish Budget and included in the UK fiscal aggregates. The Bill therefore continues to give Scottish Ministers the power to borrow in the most efficient and sustainable way—from the national loans funds, as recommended by the Calman commission. In addition, should Scottish Ministers choose to do so, the Bill gives them the power to borrow by way of a commercial loan when that represents value for money.
The Government continue to believe that Scottish Ministers should be able to borrow only by way of a loan, but because overall macro-economic policy will continue to be a reserved matter, and because Scottish borrowing will impact on the UK fiscal position, it is right that this House agrees the limits and conditions of borrowing. I therefore ask Opposition Members not to press amendment 2 and amendments 26 to 29 to a Division.
Eurozone Financial Assistance
Andrea Leadsom Excerpts(13 years, 6 months ago)
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Andrea Leadsom (South Northamptonshire) (Con)
I stand here as a big fan of Europe but a big enemy of the European Union, and I want to share a few of my passions with you, Mr Deputy Speaker. First, I want to share my anger at the Opposition for their failure to give us the referendum on the Lisbon treaty that they promised. I also want to share my fury at the former Chancellor for signing us up to the EFSM that has caused so many problems—the reason we are having this debate. Finally, I would like to share my gratitude to the former Prime Minister for not taking us into the euro.
I want to spend a moment talking about our friends the Europeans who find themselves in an extraordinarily difficult position. At the moment, 10-year Government bonds in Portugal are trading at around 64 cents in the euro, while in Ireland they are trading at around 66. In Greece they are trading at around 51—that is about 51 cents in the euro for Greek 10-year Government bonds—which basically means that when our European friends have to lend them money, as they will undoubtedly have to do, it will effectively be half a gift and half a loan. We in this country are extraordinarily lucky that our Front Benchers have enabled us to withdraw entirely from the bail-out mechanism from June 2013. We should praise the Prime Minister and the Chancellor for arranging matters so that we will not, over the longer term, have to suffer the price that will undoubtedly be the case for our European friends.
Amendment of the Law
Andrea Leadsom Excerpts(13 years, 7 months ago)
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Mr Campbell
No, I am not going to give way; I do not have time.
What happens when the Conservatives are in the pockets of the banks? Where does the bill for the bankers’ crisis fall? Yes, you’ve got it: it falls on the working people of this country. We are seeing that now, with sackings all over the place and wages cut.
Andrea Leadsom
I thank the hon. Gentleman for giving way. Does he recognise the fact that 1 million people in this country are employed by those banks in one way or another, in financial services, accounting for 3.5% of employed people in total? Is he blaming all those individuals?
Mr Campbell
I am blaming the bankers for the way they invested their money in the crisis that they caused. They caused it—they knew what they were doing, and they will all say that. They all came to the Treasury Committee and apologised, if the hon. Lady remembers.
As I was saying, the bill for all this falls squarely on the working people of this country, with the sackings that we have seen and the wage cuts. Wages are 2.2% below the average. That is what they are: they are not above. In fact, we had to take a pay cut ourselves last week. We all did it, and most of them on the Government Benches are in the pay of somebody—some board or some consultancy—so they will be all right when they get a pay increase from them.
What else is being cut? Pensions are being cut. Look at the furore. I am sure that hon. Members have had letters from servicemen, policemen, teachers and local government workers about their pensions. The Government are murdering their pensions, and what are they doing about it? Absolutely nothing. The Government are going to sink them with their pensions—[Interruption.] Never mind looking at my lot: your lot are in power. They are in charge, and they have to deliver the pensions that those people are entitled to have.
We can go even further, because we can look at those who are in their pockets—the pockets of Government Members—who also evade tax. There is £16 billion out there in evaded tax, with people running off to the Cayman islands, or some island where they can put their money under a sack and hide it. That is what is happening today. What are the Government doing about it? Absolutely nothing. They will tax the people of this country, but they will not tax those who run away to another country to put their money in a sack. That is what they will do, and they always have.
Then there is the argument that there was no money. That’s funny—we had £7 billion to give to Ireland when Ireland went under. Why, we saw the Chancellor jumping up at that Dispatch Box and saying, “Not a problem, Ireland. We’ve got plenty of money—there’s £7 billion,” yet we kept being told that there was no money. Now what have we got? We have got this Libya crisis. Not a problem for Britain. Tomahawk missile? Not a problem, even when one Tomahawk missile costs £900,000, and we are firing them left, right and centre. That is another expense for the British people. Ministers are not saying anything about that at the Dispatch Box, but I am waiting for it, and it may come.
Andrea Leadsom (South Northamptonshire) (Con)
The measures our coalition Government have taken in the Budget make something of a silk purse out of the sow’s ear left by the previous Government, and I was very reassured by the letter published in today’s The Daily Telegraph today from venture capitalists about the fact that these measures will be very attractive to business start-ups. Some 99.9% of enterprises in this country are small and medium sized, 60% of private sector employment comes from that sector, and there are 500,000 new start-ups each year. In my constituency, there are many small businesses, some focused on motor sport or high technology, and they are exactly the sorts of businesses this coalition Government are determined to support. I welcome the many measures we took in the Budget to try to encourage the development of such new businesses.
I recently had a meeting with my Northamptonshire business club, at which business people told me that the single biggest problem they face is funding. Bank finance is still not being made available to them at prices they can afford. The figures show that between 2009 and 2010 small businesses with a debit account turnover of less than £1 million per year suffered a 19% drop in total lending made available by banks. The problem is not just the lack of availability of funding, however; it is also the terms, such as the time scales, which have been much shorter—sometimes just a year—and very difficult to achieve for small businesses. The arrangement fees have been much higher too, and the margins have increased by an average of 60 basis points. Funding for small and medium-sized enterprises has therefore been extremely difficult, and remains so in spite of the excellent Project Merlin agreement this Government put together, which I thoroughly welcome.
I want to make the following suggestion to Ministers. United Kingdom Financial Investments Ltd, which holds the taxpayers’ investment in the banks, should look at the shares we own and consider whether it might restructure some of the shareholdings in Northern Rock, Bradford & Bingley, RBS and Lloyds HBOS with a view to creating new banks out of the bank shares. In other words, it should consider restructuring some of those shareholdings to create, at a stroke, new competition in the high street and particularly in the SME lending area. While we remain significant shareholders in those banks, I believe there is a huge opportunity to improve funding availability and banking competition.
The Treasury Committee recently took evidence that showed that up to 90% of SME finance comes from just five banks in the UK. It is absolutely true that conservative lending is the way forward, and banks will not be able to afford to make loans at such cheap rates as in the past, but there is plenty of evidence to suggest that these enormously concentrated market shares are creating enormous pressure for SMEs. Indeed, Mervyn King told the Treasury Committee that
“we should try to encourage new entrants into the banking system because they will not have the same problems of legacy balance sheet difficulties.”
He also said:
“We have to make sure there are other sources to which those SMEs can turn for finance.”
This Government have been incredibly generous and creative in their support for SMEs, and I urge Ministers to consider this idea, because it is only through revitalising our private enterprise in an SME-led recovery that we will put our economy back on track.
Amendment of the Law
Andrea Leadsom Excerpts(13 years, 8 months ago)
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Mr Redwood
My hon. Friend is quite right. Improving the quality and cost-effectiveness of our purchasing is crucial in Government. There are many opportunities; PFI and public-private partnerships provide some good examples, but so does general purchase. It would speed up the deficit reduction if there were a stronger moratorium on purchasing items and supplies where there are already stocks. Any company undertaking the kind of radical turnaround that the country is trying to achieve would immediately freeze all unnecessary purchases and make people run stocks down to save money.
Where I have had answers to my questions on this subject, I have found that the current rate of natural wastage of staff in core Departments is running at about 6% per annum; it was about 4% in the first eight months. Quite a number of those posts have been filled by taking on new people from outside. I urge my friends on the Front Bench to get more of a grip on that, because the easiest way of reducing the administrative overhead on the scale that they want—the least painful way for their staff, who need their morale to be up—is to not replace people who leave and not to make others redundant. We cannot afford the redundancies. If we make greater use of natural wastage, Ministers can say to their staff that it means better opportunities for promotion and a change of job. If the post vacated is not essential, it should be removed; if it is essential, we should appoint someone from inside and remove some other, less important, post. That surely is the civilised, sensible way to tackle the necessary task of cutting the administrative overhead. If the Government can cut their administrative overhead by the very large 30% that they are talking about, it takes the pressure off cuts in the areas where none of us wish to see them—in the schools and hospitals, the front-line services that matter so much.
The question that I was about to ask before the interventions was about the international context. How easy is it going to be for the Government to have the three or four years of above-average growth which are so crucial to the strategy? I must warn those on the Front Bench that I fear that the world background will get more difficult going into 2012 and 2013 than it is at present. There has been a prolonged boom in the emerging market world, and we now see China, India and Brazil lifting their interest rates to very high levels. They are desperately trying to squeeze inflation out of their system, so in a year or so we must anticipate some fall-off in demand and spending power growth rates in those big emerging market economies.
The United States economy will have a good year this year, by the looks of it, on the back of a lot of money printing, low interest rates and other matters. That comes to an end in the middle of this year, so by next year we will see a slower rate of growth in the United States of America as well. Were the situation in the middle east to get worse, and the damage from politics to spread into oilfields outside Libya, we could have another unpleasant external shock on the oil price, which would also serve to impede the growth of the world economy.
The conclusion that I take from this is that the world economy does not look as though it is going to go back into another deep recession—we are not going to have that kind of impossible situation—but the world economy is not going to provide the impetus that it is currently providing. It may not feel that great, but it is providing quite a bit of impetus at the moment. It will provide less impetus next year and beyond. That means that the Chancellor must intensify his pursuit of measures that make the UK that much more competitive and that much more successful.
Andrea Leadsom (South Northamptonshire) (Con)
Will my right hon. Friend comment on the importance of improving our export position vis-à-vis the BRIC countries in particular—Brazil, Russia, India and China—and how important a part that could play in our recovery?
Mr Redwood
Of course I agree that if there is a solvent and enterprising business and it is not getting proper banking facilities, that is very bad indeed. It is particularly bad if it is a state-owned or state-influenced bank that is responsible.
My final points are about banking, as time presses and many others want to speak. Of equal importance to the weighty matters covered by the Chancellor today will be the Vickers report and the Government’s response to it. I believe that we will have interim conclusions from Sir John Vickers on 11 April. We are not going to have fast, sustained, above-average growth in this country unless we sort out the banks a little more than we have done so far. All colleagues in the House are united in having individual cases where they feel a company could have been saved or could have grown more rapidly if only there had been more sympathetic or understanding bank managers and facilities. There is a problem with British banking serving the SME sector town by town, county by county. There is a lot of talent in the banks, concentrated at the national level and in the big national accounts. Many hon. Members like to knock those people, but they made an important contribution to the growth rate under the previous Government and to our economy.
Andrea Leadsom
In the last quarter of 2010, lending to the SME sector dropped by 38% from the last quarter of 2008. One of my big concerns is that this reflects the incredible concentration of SME lending among the four or five largest banks, which are responsible for around 90% of all SME lending. Does my right hon. Friend agree that the work of the Vickers commission and the Treasury Committee should focus on breaking up the oligopolistic positions of some of those big banks?
Mr Redwood
I certainly hope that when we see the Vickers report and have a proper debate on it we will be able to find sensible ways of promoting much more competition in the domestic banking market. We need more competition on the high street for individuals and families and more competition in town centres for SMEs, which in previous generations probably had better and more direct relationships with local bank managers, who had a bit more authority to grant loans and make money available on judgment than is currently the case through the box-ticking, centralised computer systems.
Oral Answers to Questions
Andrea Leadsom Excerpts(13 years, 8 months ago)
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Mr Osborne
Of course, the very sharp rise in the world oil price has posed a challenge to lots of economies—all but the oil-exporting economies. That is one of the headwinds currently facing the global economy. Specifically on fuel duty and other issues, the hon. Gentleman will have to wait for the Budget.
Andrea Leadsom (South Northamptonshire) (Con)
Will my right hon. Friend undertake very carefully to consider improving the diversification of financial services provision in the way that United Kingdom Financial Investments Ltd divests itself of taxpayers’ shareholdings in the banks?
Mr Osborne
I am very happy to consider a number of ideas that have been put forward, but we have not yet reached that stage. If we sold the bank shares today, we would still be making a loss as a nation. That is an indication of the scale of the banking crisis. When we come to put those banks back in the private sector, I am sure that there will be a healthy debate in this Parliament and elsewhere about how we treat the proceeds.
HM Revenue and Customs
Andrea Leadsom Excerpts(13 years, 8 months ago)
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Mr Andrew Tyrie (Chichester) (Con)
I am glad that the request of the Select Committee on the Treasury to hold this debate on HMRC’s estimates has been accepted. I am conscious that I am speaking on behalf of a large number of colleagues from right across the House, many of whom cannot be here today, who have spoken to me about the problems that their constituents are experiencing with HMRC. I am also speaking on behalf of hundreds of thousands of taxpayers who have encountered difficulties and feel that they have nowhere to turn. I am delighted that the Chairman of the Treasury Sub-Committee, the hon. Member for Leeds East (Mr Mudie), will follow me in the debate. He has done an excellent job in focusing the Sub-Committee on these problems and, in so doing, has built on the work done by the Sub-Committee in the previous Parliament under the chairmanship of my hon. Friend the Member for Sevenoaks (Michael Fallon). I should like to take this opportunity to thank my hon. Friend for his hard work.
“Ten years ago the Inland Revenue had the reputation of being one of the best run Departments in Whitehall. Today HMRC’s reputation is in tatters as one disaster has followed another.”
Those are not my words but the considered conclusions of the Chartered Institute of Taxation in written evidence to the Treasury Committee. I have a stack of similar evidence from other qualified bodies and people, and they are all variations on the same theme—HMRC is close to being a failing institution in some areas.
Andrea Leadsom (South Northamptonshire) (Con)
Does my hon. Friend agree that the Treasury Committee has heard much evidence from representatives of businesses who say that dealing with HMRC is now costing enterprises significantly more of their profit and income? Matters that used to take a few hours now seem to take literally months to resolve.
Mr Tyrie
I agree completely, and the next sentence of what I intended to say was to be along the lines of asking what the situation means for small business men. They are not experts in tax, they just want to get on with their job. We must constantly bear in mind the fact that when HMRC gets things wrong, its mistake can be a catastrophe for the taxpayer on the other end of the experience.
I want to tell the story of one such business man who has written to me, who wants to remain anonymous. His business was the subject of an HMRC investigation, and when it found no irregularities, it started an investigation into his personal tax affairs. As he says in his letter to me, “They investigated everything”, even challenging a gift of £15 to a nephew. He had the impression that the local tax office felt it had to find something, having invested so much time in his case. All that went on for five years—it was like being on trial for five years. Finally, a very senior manager at HMRC saw sense and transferred the case to another tax office, and a week later that small business man had an apology.
However, like so many similar cases, it is not a matter of “all’s well that ends well”. The collateral damage has been huge. That business man’s accountant estimates that his business has lost £7 million in the time and effort of handling the case, and on top of that the stress involved in such an experience would have been crippling for many people. It is not just that individual who has lost out but all those who depend on his business for their livelihood and all those who might have had jobs in it had it been able to concentrate on expansion rather than fending off HMRC. One case does not prove anything, but the sheer scale of complaints now pouring into MPs’ postbags suggests something.
Budget Responsibility and National Audit Bill [Lords]
Andrea Leadsom Excerpts(13 years, 9 months ago)
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Justine Greening
The OBR makes an independent fiscal forecast and assessment of the economy. The Treasury may or may not agree with that forecast and assessment, but the point is that it is done entirely independently of the Government. Rightly, however, it will remain the prerogative of Ministers to decide policy. That is the clear distinction we have set out throughout the Bill.
We needed to make sure that we have official forecasts for the economy that the public can trust, even if that means we end up giving away some of our powers as Treasury Ministers. As my right hon. Friend the Chancellor has said, we need to fix the Budget to fit the figures, not fix the figures to fit the Budget. That is why the OBR was established, and the Institute for Fiscal Studies has said it is a “welcome” innovation.
To enable the OBR to get to work immediately, it initially operated on a non-statutory basis. It was headed by Sir Alan Budd, a highly respected fiscal and macro-economic expert in our country. The interim OBR produced an independent assessment of the economy and public finances both ahead of, and at, the Budget in June. We gave it direct control over that forecast, with full access to all the data, assumptions and economic models. It made all the key judgments and decisions underpinning the economic and fiscal forecasts. Great strides were also made in transparency. More information was published than ever before. That fact was noted by both the Treasury Committee and the IFS.
Andrea Leadsom (South Northamptonshire) (Con)
As a member of the Treasury Committee, may I say that it was incredibly valuable to be able to challenge the OBR members who were present and Government Ministers? From our point of view as representatives of Back Benchers, the process was very useful.
Justine Greening
I welcome that helpful intervention. My hon. Friend will no doubt be aware that the Treasury Committee inquiry into the OBR described Sir Alan Budd as an “exemplary” witness. In putting together this Bill, we took on board the Committee’s points, and I am sure my hon. Friend will be happy about the unprecedented role the Committee will play in appointments to the OBR.
The final task of the interim office was to provide advice on how the permanent, statutory OBR should be established. I am happy to report to the House that the Bill is designed in line with the detailed recommendations made by Sir Alan Budd in his letter to my right hon. Friend the Chancellor. We have now moved to permanent arrangements. This Bill enshrines in statute provisions to ensure the OBR’s independence. Robert Chote has been appointed as the OBR’s first permanent chair. His appointment was confirmed by the Treasury Committee. He is supported by Graham Parker and Steven Nickell, whose appointments were also confirmed by the Committee.
The permanent Budget responsibility committee led on the production of the OBR’s economic and fiscal outlook, published in November. In addition, the resources made available to the OBR have been increased. There has been a transfer of technical forecasting capacity from the Treasury to the OBR, and a transparent, multi-year funding settlement has been agreed for the spending review period. The OBR has also moved to a new external location outside the Treasury building.
Let me now turn to the detail of the Bill. We debate this Bill after the constructive scrutiny the other place has given it. The other place welcomed the Bill. Part 1 includes provisions on the new framework for fiscal policy. Clause 1 sets out the need for the Treasury to produce a charter for Budget responsibility setting out the formulation and implementation of fiscal policy. In particular, the charter will set out the Government’s fiscal objectives and the fiscal mandate, and a draft of the charter is available to Members alongside the Bill.
Clause 2 requires the Treasury to produce a Budget document on an annual basis. The detail of exactly what needs to be covered within the annual Budget document is set out in the charter. The Bill also repeals the legislative aspects of previous Governments’ fiscal frameworks, including the Fiscal Responsibility Act 2010, a pointless piece of declaratory legislation that would have made no improvement in fiscal planning, instead merely setting up another set of targets that Ministers would assure us they were going to meet right up until they missed them.
Clause 3 provides for the existence of a statutory body called the Office for Budget Responsibility. Clause 4 sets out the main duty of the OBR, which is to examine and report on the sustainability of the public finances. This is a broad remit, which means that the OBR will not be limited to forecasting alone. At a minimum, the remit of the OBR means it must produce the following: assessments of the likelihood that the Government will meet their fiscal mandate alongside each forecast; a sustainability report at least once a year; a report on the accuracy of its forecasts at least once a year; and full economic and fiscal forecasts at least twice each year. Beyond these tasks, the OBR will be able to undertake any research and analysis pursuant to its remit.
Clause 5 describes how the OBR is to fulfil its duties. Crucially, it includes a set of principles—objectivity, impartiality and transparency—to guide the OBR in fulfilling its remit. It also requires that the OBR must not analyse or develop non-Government policies. Analysis is rightly the domain of the OBR, but, as I have said, policy making is the responsibility of publicly elected Ministers. These principles protect independence. Clauses 5 and 9 also put in place explicit provisions for the OBR to have complete discretion over the way it carries out its statutory duties, giving it full access to the information it requires to do so. The remaining clauses in part 1, as well as schedule 1, set out further detail of the operation and governance of the OBR.
We have sought to reflect the theme of independence in the constitution and governance of the OBR. In line with the recommendation of the International Monetary Fund, the OBR is established with its own legal personality and will operate at arm’s length from Ministers as an executive non-departmental public body. The OBR’s executive functions will be undertaken by a three-person Budget responsibility committee. The members of this committee will be appointed by the Chancellor. To support independence, the Bill makes provision for the Treasury Committee to veto all appointments and dismissals. That statutory veto bestows on the Committee more power than it has over any other public appointment. The Chancellor has said that he is giving the Committee this veto to ensure that there is no doubt that the individuals leading the OBR are independent and have the support and approval of the Committee.
A chairman will lead the BRC and run the OBR. All staff will report to the chair, and that person will control the “hiring and firing” of the staff. The staff will be civil servants, ensuring that the OBR can recruit from the widest possible pool of expertise. There will also be at least two non-executive members, to provide support and challenge to the OBR. The non-execs will report on how the OBR performs its duty. They will also commission expert peer review of the OBR’s forecast and analysis.
The OBR will report directly to Parliament, with its forecasts and reports laid directly in the House, as was the case with the autumn forecast in November 2010. Written questions from Members will be passed to the OBR to respond to, and the members of the BRC will be available for Select Committee scrutiny.
The provisions in part 1 represent a permanent improvement to economic policy making and the transparency of government. Britain is now one of the first advanced economies to have an independent fiscal agency that produces official fiscal and economic forecasts. It is therefore no surprise that these reforms have attracted praise from the IMF, and they put us at the cutting edge of international best practice. I hope that the world will look with interest at our policy innovations.
Part 2 modernises the governance of the National Audit Office. The goal of the NAO is to maintain effective independent oversight of spending. The Bill’s provisions will strengthen the NAO at this critical time of scarce public resources. Members will be aware that very similar provisions were included in the previous Government’s Constitutional Reform and Governance Bill, which passed through this House with cross-party support. However, there was no time for the other place to consider those provisions at the end of the last Parliament, and this Bill represents the earliest opportunity to bring them back before Parliament. The provisions are aimed at implementing the recommendations made by the Public Accounts Commission following its review of NAO corporate governance.
As a result of this Bill, the office of the Comptroller and Auditor General will continue to exist; the CAG will be an independent officer of this House and will be limited to a single 10-year term. The NAO will be established as a new corporate body in its own right. I do not propose to go into great detail on those provisions, given that when they were discussed during the passage of the Constitutional Reform and Governance Bill the then Chairs of both the Public Accounts Commission and the Public Accounts Committee supported them. I also understand that the new Chair of the Public Accounts Committee has indicated that she is content.
In summary, the provisions in this Bill will bring confidence and responsibility back to our country’s fiscal framework, with stronger institutions and improved governance. They are as crucial for the long term as they are for the short term, and I commend the Bill to the House.
Andrea Leadsom
The hon. Lady may be aware from reading the Treasury Committee’s report on the original independence of the interim OBR that colleagues on her own side quizzed Sir Alan Budd and others very closely on that point. The Committee’s report makes it very clear that there was nothing to answer, that the OBR had indeed acted independently and that it had not been in hock to the Government.
Ms Eagle
Nevertheless, independence has to be perceived to be there too. No matter what individuals behind the scenes know, part of consistency and the whole point of such independence is that it is accepted across the political spectrum and in the country as a whole. If that is not the case, the organisation does not have the credibility that the reform creating it sought to establish. That is why I look to Robert Chote, who has moved out lock, stock and barrel from the Treasury, to begin to establish that reputation.
Ms Eagle
In order to fulfil its duties, the Bank of England produces its own forecasts, which do not always agree with what were previously Treasury forecasts and will now be OBR forecasts. There are also a number of independent forecasters out there with their own view of the situation. Forecasts range from optimistic to pessimistic, and those of us who watch these things learn to take account of that. Regarding OBR forecasts or forecasts of the Bank of England as statements of the unvarnished truth will quickly get us into difficulty.
Andrea Leadsom
I am grateful to the hon. Lady for giving way again. On a point of clarification, the issue of multiple forecasts came up in the Treasury Committee review, and it was made clear that the OBR takes the Bank of England’s monetary forecasts on interest rates and uses them as its own for its fiscal forecast, so there is no duplication or overlap. One is forecasting the state of interest rates and the other is stating the fiscal forecast.
Ms Eagle
Yes, but the Bank of England will also forecast for its own use growth and other aspects which it needs to assess in formulating monetary policy.
OBR forecasts predict that by the end of this Parliament, 110,000 more people will be on the dole under the Government’s plans, compared with our previous plans. Under Labour, the economy was forecast to grow by 2.6%, compared with only 2.1% under the current Government’s plans. The consumer prices index would have been at 1.6%, rather than 2.8%. So the OBR has decided that there would have been higher growth, more jobs and lower inflation under Labour.
Oral Answers to Questions
Andrea Leadsom Excerpts(13 years, 9 months ago)
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Mr Osborne
First, I am glad that the hon. Gentleman welcomes the creation of the Independent Banking Commission. I hope that all hon. Members have an open mind about the recommendations that it will make, and that they agree that we should not close off any options until we have heard from John Vickers. He is doing an excellent job, and we await his final report later this year. The hon. Gentleman is ungenerous in his remarks about Lord Green, who brings enormous experience to the job of Trade Minister. I would just point out that he has replaced Lord Davies, who was appointed by the Labour Government at a time when he was chief executive of Standard Chartered, so it is not as though bringing top bank chiefs into the Government is an innovation.
Andrea Leadsom (South Northamptonshire) (Con)
In the light of the recent appalling press about Her Majesty’s Revenue and Customs’ problems with PAYE and, now, with national insurance contributions matching, is the Minister as concerned as I am about the imminent introduction of online filing for companies, many of which have said that they simply lack the preparedness to deal with it?
Mr Gauke
I appreciate my hon. Friend’s concerns about online filing. It is the case that one of the providers has been unable to meet the timetable that HMRC set out, although a number of other software providers have been able to do so. We are seeking to ensure that we implement this in a way that is sympathetic to businesses, but we want to stick to the original timetable. Those businesses that have delivered should not be punished because of the failures of another.
Autumn Forecast
Andrea Leadsom Excerpts(13 years, 11 months ago)
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Mr Osborne
The hon. Gentleman says that I made the forecasts, but they are independent forecasts by Mr Robert Chote, whom I do not think anyone would claim is in anyone’s pocket. He is totally independent. The hon. Gentleman is on the Treasury Committee, which interviewed Mr Chote for the job and passed him. These are Mr Chote’s, Mr Nickell’s and Mr Parker’s estimates and they have made a central forecast. He says that there is scant evidence, but that is not what the Office for Budget Responsibility believes. It is independent and it has forecast that business investment is set to grow by more than 8% for each of the next four years and that exports are set to grow by an average of more than 6% a year.
Andrea Leadsom (South Northamptonshire) (Con)
Is my right hon. Friend concerned that in the Greece bail-out and now in the Ireland bail-out taxpayers will end up supporting professional bond and equity holders in banks?
Mr Osborne
This has been one of the most difficult issues that the international community and, of course, the Irish people have had to wrestle with. For reasons of financial and economic stability, it was decided that it was not possible and would not be sensible to ask the senior debt holders in the Irish banks to take a haircut. That is exactly what did happen in late 2008, in some of the US bank rescues, with pretty disastrous effects, so that is why that decision was taken. Subordinate debt holders in the Irish banks will suffer losses and I think that is appropriate.