Office for Budget Responsibility (Manifesto Audits)

Baroness Morgan of Cotes Excerpts

Wednesday 25th June 2014 Commons Chamber

[The Financial Secretary to the Treasury (Nicky Morgan)]

I beg to move an amendment, to leave out from “House” to the end of the Question and add:

“recognises the important role of the Office for Budget Responsibility (OBR) in producing independent forecasts for the economy and the public finances, and the value this has had in restoring trust in official forecasts; notes that the OBR is a newly independent institution and judges that it would not be appropriate to involve it in party political matters at its first election; notes the comments made by the Chairman of the OBR, Robert Chote, in a letter dated 15 January 2014 to the House of Commons Treasury Committee that ‘to embark on this exercise in a rush, or with insufficient resources, could be very disruptive to the parties and very damaging to the OBR’; and supports the view expressed in that letter that it is ‘better to consider these issues at the beginning of the next Parliament’.”

I am sorry that the shadow Chancellor is disappointed that I am opening for the Government in this debate. I must say that I have only been in this House for just over four years, but it is always true in politics that there is a first time for everything. This afternoon, the shadow Chancellor accused the Government of playing political games and called for cross-party consensus, so there is a first time for everything and we heard it here first. The most sensible thing that he said in his speech was to offer the hon. Member for Bolton West (Julie Hilling) a job as his speech writer, so let us hope that his future speeches are dramatically improved.

The shadow Chancellor made his views on this matter very clear to the House, so I will begin by answering him with equal clarity. The Government do not believe that the OBR should cost the Labour party’s, or indeed any Opposition party’s, manifesto commitments for the election next year.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

In an effort to keep the tone of consensus so admirably set by the shadow Chancellor, will the right hon. Lady accept that the amendment she is currently moving is selective in the quotes that it gives from the OBR, giving the strong impression that it is opposed to this, when clearly, it is in favour?

[Nicky Morgan]

As I will come on to say, I do not think that the quotations in the amendment or the amendment itself are in any way selective. The amendment sets out the reasons why the Government are not supporting the Opposition’s motion. It does so very clearly, and the OBR, in its letter, sets out very clearly the reasons why it is not at this stage ready to cost the Opposition parties’ manifestos in the way that is wanted.

[Mr Love]

The reality is that the Government are trying to hide behind the OBR. The OBR is clearly in favour of the move, and although the Government are at liberty to say what they truly feel, let them be honest when we are trying to have a consensus in the debate.

[Nicky Morgan]

Let me assure the hon. Gentleman that I will keep to the consensual tone that the shadow Chancellor, often with great difficulty, tried to strike. The letter from Robert Chote makes it very clear that these issues would be better discussed at the start of the next Parliament. The reality is that, actually, the Opposition are looking for a fig leaf for their lack of an economic plan. That is the reality of the motion.

[Ed Balls]

I spoke to the head of the OBR last Friday, who told me that if the House agrees to proceed, with Government support, by the end of June, he would be content, comfortable and pleased to proceed with the reform this year. So when the Minister says that he is against this reform, could she just correct the record, because I believe that to be incorrect?

[Nicky Morgan]

It is all very well for the right hon. Gentleman to have a conversation with the head of the OBR, but we do not know the details of that conversation; if he is going to release a transcript, I would be very interested to read it. In fact, the letter dated 15 January makes it very clear that

“To embark on this exercise in a rush, or with insufficient resources, could be very disruptive for the parties and very damaging to the OBR.”

Is the right hon. Gentleman saying that he wants it to be damaging to the OBR? I do not think that he does.

[Jesse Norman]

On the topic of misinformation, does the Minister share my surprise that the shadow Chancellor should have misrepresented the position of the Institute for Government on this, when he suggested that it was giving up on the idea of a reform of this kind in this Parliament? In fact, what it said—it was an expert judgment— was that:

“More feasible than making any hasty change…would be to consider this option…during the five-year review…due to take place in 2015.”

Does she not share my view that the shadow Chancellor should be invited to correct the record on what he said about that?

[Nicky Morgan]

I thank my hon. Friend for that very good point. He has eloquently set out the misrepresentation by the shadow Chancellor of what was said by the Institute for Government. I am sure that perhaps through later speakers and in the winding-up speech the Opposition will have a chance to correct the record.

[Several hon. Members]

rose—

[Nicky Morgan]

I am going to make some progress.

As our amendment makes very clear, we are not suggesting that the issues that the shadow Chancellor’s proposals present are insurmountable, but we do believe very firmly that the independence and operation of the OBR is critical. We need to make sure that independence and impartiality is preserved, and as such, Parliament would need time to scrutinise the proposals properly and the OBR still needs time to establish itself fully as an independent fiscal watchdog before being drawn into the political heart of a general election.

Let me turn to the situation that the Government inherited in 2010. First, it is worth reminding the Chamber of exactly why and when the OBR came into existence. Hon. Members will need no reminding of the economic inheritance left to this Government by the Labour party, and on taking office we recognised the need to act quickly in the short term to establish our country’s economic credibility for the long term. The creation of the OBR was vital in that respect.

Back in 2010, our country urgently needed a full and independent assessment of just how bad the problem was because, again and again, the possibility of fiddling figures was tempting, and some would argue that that temptation had been responsible for some of the greatest fiscal policy mistakes of the past 40 years.

[Sheila Gilmore (Edinburgh East) (Lab)]

One of the slightly odd things about the Minister’s line of argument is that in its initial reports the OBR predicted that growth would be much faster than turned out to be the case, which suggests that the situation then was not quite as dire in the OBR’s view as the Minister is trying to suggest. What happened, surely, was that Government policies then crushed growth.

--- Later in debate ---

[Nicky Morgan]

I listen to the hon. Lady in debate after debate trying to reinvent fiscal history as we have seen it over the past four or five years. The motion before the House and the moves of the shadow Chancellor, are a desperate attempt to do that. As we have seen in the Labour party political strategy 2015, which was recently leaked to a Sunday newspaper, Labour has to rebuild its credibility on the economy. This debate is a blatant attempt to do just that.

[Mr Newmark]

I asked the shadow Chancellor this question but perhaps my right hon. Friend will answer. Does she find it strange that the shadow Chancellor, who said that he does not want to politicise things, did not see fit to bring this matter up for three and a half years? Suddenly the polls are saying that the Opposition have no economic credibility whatsoever, and he tables this motion and says, “Gosh. Why don’t we have all of our manifestos audited?” Is that a little strange?

[Nicky Morgan]

It would be a little strange, but the shadow Chancellor and the Opposition have woken up to the need to rebuild their fiscal credibility as the election approaches. Of course they had 13 years to introduce an Office for Budget Responsibility, but no move was made.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

Will the Minister confirm how much more the Government are borrowing compared with what they planned?

[Nicky Morgan]

A lot less than the Labour party would have done had it been in government—[Interruption.] I thank the shadow Chancellor for the applause; that is very kind.

The creation of the OBR has meant that for the first time we have a truly independent assessment of the state of the nation’s finances. As the Chancellor noted in his Budget this March, it is to its credit that

“we now take it for granted that the figures presented at this Dispatch Box are not fiddled but fair and independent.”—[Official Report, 19 March 2014; Vol. 577, c. 781.]

By giving the OBR power to produce the official forecast, we have managed to remove many of the risks of the past and put the UK’s fiscal policy at the cutting edge of international best practice. The IMF said that

“strong fiscal institutions can enhance the credibility of consolidation plans”

and the shadow Chancellor wrote to Robert Chote affirming:

“Over the last three years, the Office for Budget Responsibility has become an established part of the framework of British economic policy with broad-based and cross-party support.”

I am sure that—it is not often I say this—we all agree wholeheartedly with the shadow Chancellor. It is also worth reminding right hon. and hon. Members that when the OBR was set up four years ago, it was deliberately designed to ensure that it would be independent and could steer clear of political wrangling. That independence and impartiality is crucial.

[Mr Marcus Jones (Nuneaton) (Con)]

My right hon. Friend is talking about the credibility that the OBR is building. Bearing in mind the political knockabout we have had today, the bogus calls from the shadow Chancellor, and the clear party politics being played, does she think that it would damage the OBR’s credibility if we entered into the plan that the shadow Chancellor is offering?

[Nicky Morgan]

My hon. Friend is absolutely right. One big issue that the Opposition have not addressed is that if this change were to be brought in without proper consideration, it would mean changes to the way civil servants work. That is something we value greatly in this country, and we would have to consider that issue when scrutinising any legislation.

[Mr Jones]

Is it not telling that the shadow Chancellor gave no commitment to carry on with this, should, God forbid, we get a Labour Government and a Labour Chancellor?

[Nicky Morgan]

I entirely agree with my hon. Friend, who, as usual, talks complete economic sense, unlike the Labour party.

As academic evidence noted at the time of the OBR’s creation, it is vital that there should not

“even be a scintilla of doubt…about the OBR’s independence and impartiality, as negative perceptions may undermine the OBR’s reputation, requiring a major effort at changing such perceptions”.

Unfortunately, the Opposition’s proposal not only presents a risk to that impartiality, but raises several difficult practical questions, which I shall go through briefly.

[Clive Efford]

The right hon. Lady will be aware that the shadow Chancellor wrote to the Chancellor last October. How many meetings have Ministers had with the chair of the OBR to discuss this issue in the intervening period?

[Nicky Morgan]

As the hon. Gentleman will know, meetings held by Ministers are published in the normal way. I cannot give him a specific number, but a list of meetings is published in the usual way.

[Clive Efford]

In that case, the right hon. Lady is indicating that these discussions have taken place and that there have been meetings at which this issue has been discussed. If so, did the chair of the OBR indicate whether, if a consensus could be reached before the end of June, he could deliver these budget assessments before the general election?

[Nicky Morgan]

I certainly did not indicate that. It is to be expected that Treasury Ministers will meet the head of the OBR and that various matters will be discussed, and we received a clear letter from him about the motion and the proposals before us today.

I want about to talk about the practical questions that would require much greater scrutiny in the future. First, as I mentioned, the Opposition do not seem to have assessed how their proposal might compromise the OBR’s ability to avoid being drawn into political debate or the real danger that such a change could undermine its perceived independence and, by extension, the credibility of the UK’s official forecasts.

[Mr Love]

rose—

--- Later in debate ---

[Nicky Morgan]

I will make some progress, because I have already given way to the hon. Gentleman twice.

Secondly, the Opposition do not seem to have acknowledged that think-tanks such as the Institute for Fiscal Studies and the National Institute of Economic and Social Research already have a long and distinguished track record in providing costings to parties in the run-up to elections. This, then, is another example of the Opposition asking the public—hard-working taxpayers—to stump up for something that already works effectively.

[Mark Garnier]

The Minister raises an important point about the cost, and it is worth bearing it in mind that the Dutch Central Planning Bureau, which does this for nine political parties in Holland, has about 350 members of staff. Has the Treasury estimated how much it would cost to resource it properly?

[Nicky Morgan]

I am not aware that we have done any estimates, but my hon. Friend is absolutely right about the Dutch Central Planning Bureau—the figure I have is 170, but he says 350—and the American Congressional Budget Office has 250 members of staff. The point is that the Opposition are asking hard-working taxpayers to pay more money to staff up the OBR quickly so that it can certify and sign off their economic plan, such as it is.

[Andrew Gwynne (Denton and Reddish) (Lab)]

The Minister mentions the experience in the Netherlands, so I draw her attention to the comments of Peter Riddell, the director of the Institute for Government:

“As experience in the Netherlands shows, such a system has helped improve the quality of policies and encourages a more informed public debate as parties become more open about the costs of their proposals.”

What is wrong with that?

[Nicky Morgan]

I will come to the overall principle of having the OBR look at parties’ manifestos, but how long has it taken the Dutch Central Planning Bureau to get to that stage? If the hon. Gentleman has the answer, I would be interested to hear it.

Thirdly, there are genuine practical considerations that must be weighed in the balance. The Opposition do not seem to acknowledge that rather than producing costings of Government policies, the OBR certifies the costings already produced. The OBR, which currently employs only 19 members of staff, plus three members of the Budget Responsibility Committee, would need significant additional resources and a range of specialist skills in order to take on such a role. Have the Opposition considered where it would recruit from?

[Ed Balls]

I am grateful to the right hon. Lady for giving way. I have discussed every issue she has raised with the head of the OBR, whose view is that they do not provide a reason not to proceed, so long as the Government support the proposal. The Minister is setting out why she and the Government do not support it, but they should not hide behind the head of the OBR. He is happy to proceed; it is she who is blocking it.

[Nicky Morgan]

As far as Government Members are aware, the letter of 15 January put the comments of the head of the OBR on the record. The right hon. Gentleman has not made any transcript of any such conversation available. We do not know what was discussed or what reservations were expressed by the head of the OBR.

[Ed Balls]

I spoke to the head of the OBR last Friday, in preparation for this debate. The right hon. Lady, who has stepped in for the Chancellor, is quoting a letter from January. Surely, to prepare for this debate, she would have spoken to the OBR in the days before. If he has changed his views since last Friday and contradicts what he told me then, I will withdraw my comments. Did the Minister speak to him; is he content to proceed, or has she not bothered to have the conversation?

[Nicky Morgan]

It is not a question of not bothering to have the conversation. If the right hon. Gentleman has had a conversation, where is the transcript and why has it not been released to the House? If he has a transcript, we would like to see it. We would like to know what the head of the OBR said about—[Interruption.] If I allow the shadow Chancellor to stand up again, will he tell us how many additional staff the head of the OBR said he would need to recruit, where he is going to find them from and how quickly they can be appointed? That is the premise of the right hon. Gentleman’s argument.

[Ed Balls]

Is the right hon. Lady really saying that I am misleading the House? I spoke to the head of the OBR last Friday, and he said to me that if the Government agree by the end of June, we can proceed and these obstacles can be overcome. In his view, the issues that the Minister is raising about resourcing and independence can all be resolved if she chooses to do so. Is she really saying that I am misleading—[Interruption.]

[Madam Deputy Speaker (Dame Dawn Primarolo)]

Order. Interventions must be brief; the point has been made. I call the Minister.

[Nicky Morgan]

Thank you, Madam Deputy Speaker.

We are back to old social government: no notes, no transcript, nothing. If the right hon. Gentleman has exchanged correspondence or if he has a transcript of the conversation, he should put it before the House if he wants to bring it into the debate.

[Mr Love]

rose—

[Nicky Morgan]

I will give way briefly to the hon. Gentleman, but then I want to make some progress.

[Mr Love]

I thank the right hon. Lady. There is a transcript. After the production of the letter of 15 January, Robert Chote appeared before the Treasury Committee, where we interrogated him on all these issues. He confirmed that if all these issues could be resolved, he would be content to go ahead.

[Nicky Morgan]

I prefer to take notice of comments that are on the record, such as the following from Robert Chote. On 4 April 2014—[Interruption.] The shadow Chancellor should listen. This is what the head of the OBR said:

“The Chancellor perfectly reasonably has said he doesn’t think this is the right time to do this… The reasons he has cited are it’s the first general election we’ve existed…you don’t want to throw the OBR as a relatively young body into a politically contested territory now.”

[David Rutley]

Having recruited teams—very sizeable teams—in the past, I know it takes time to recruit talent. These are not unskilled people—[Interruption.] No.

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[David Rutley]

Thank you, Madam Deputy Speaker, for your guidance.

I was making the point that it takes time to recruit skilled individuals, particularly in economic forecasting.

[Nicky Morgan]

My hon. Friend is entirely right; it will take time to recruit skilled members of staff to carry out the project that the Opposition say the OBR should be able to do within a matter of months.

[Jesse Norman]

Is my right hon. Friend aware that Mr Chote also made it very clear that his job would be made additionally complicated by the run-up to a general election? Is she surprised that the shadow Chancellor comes here to present his views with no form of back-up, official record, transcripts or anything on which this House might properly rely?

[Nicky Morgan]

Nothing in politics surprises me any more, so I am not surprised that the shadow Chancellor has done that. I am just surprised that he thinks that the House is going to buy it.

[Mark Garnier]

I am grateful to the Minister for giving way yet again; she is giving up a great deal of her time. Robert Chote appeared before the Treasury Committee, and, while he did say that if he were pressured to an unbelievable extent the work would be possible, he made it very clear that he was not happy with the idea of having to press it too quickly. Moreover, the resources required would be astronomical, and it would be made up of temporary members of staff—

[Madam Deputy Speaker]

Order. Interventions are not opportunities for speeches. They are supposed to be brief, and Members in all parts of the House should adhere to that convention.

[Nicky Morgan]

Both my hon. Friend the Member for Macclesfield (David Rutley) and the member of the Treasury Committee, my hon. Friend the Member for Wyre Forest (Mark Garnier), have eloquently described the reservations expressed to the Committee by the head of the OBR. On page 7 of his letter of 15 January, paragraph 4 states:

“Resource constraints in the OBR and responsible departments would argue for a longer process than that undertaken ahead of Budgets and Autumn Statements, so proposals might be required two or three months ahead of manifesto publication.”

Mr Chote went on to say:

“a May election date with April manifesto publications would imply that the work of certifying manifesto costings would need to be undertaken alongside the Budget and preceding Autumn Statement, when the OBR and responsible departments are at or near their peak workloads.”

In that part of the letter, he was referring mostly to resources.

[Several hon. Members]

rose—

[Nicky Morgan]

I want to make some progress.

[Ed Balls]

rose—

[Nicky Morgan]

I will give way to the right hon. Gentleman, for the last time.

[Ed Balls]

I spoke to the head of the OBR. He believes that if he is to cost manifestos in time, he will need to start in the autumn, he will need agreement by the end of June, and he will need the details to have been worked out by the end of August. The Minister is obfuscating. It is she who is blocking this, not the head of the OBR.

[Nicky Morgan]

Let me say for the last time that if the right hon. Gentleman wanted to pray in aid evidence from a conversation that he had last week, he should have put it in writing and presented it to the House, or placed it in the Library.

If we ask the OBR to recruit additional staff, what will they do between elections? I do not know whether Labour Members have considered the fact that what they propose would involve a radical change in the rules governing civil service contact with the Opposition. I do not know whether they have fully explored the primary legislation that would be required to make this happen, just as I do not know whether they have considered how the demands of Opposition parties would be balanced against other Government priorities.

[Jacob Rees-Mogg]

Will my right hon. Friend give way?

[Nicky Morgan]

Yes, of course I will.

[Jacob Rees-Mogg]

I am extremely grateful to my right hon. Friend for giving way, because I think that the shadow Chancellor has just proved the Government’s case. These references to private conversations are politicising the OBR in exactly the way that frightens the Government. I think that the shadow Chancellor is hoist with his own petard.

[Nicky Morgan]

As always, my hon. Friend has summed up the position brilliantly and eloquently. I was particularly impressed when he intervened on the shadow Chancellor and forced him to admit that the purpose of the Opposition’s proposal was to stop the shadow Cabinet making spending commitments left, right and centre.

I was referring to other Government priorities. I am thinking of, for example, Budget preparations. The time when those preparations are being made is one of the busiest times of the year for the OBR, during which specialist and other staff resources are already occupied.

As I have already said today, what I will not do is stand here and say that the problems are insurmountable, or that a solution could not be found in future. However, if we want to ensure that the OBR’s independence and influence are preserved, the issue merits much fuller and much more careful consideration than is represented by the Opposition’s proposals. That brings me to one of the most important points. We need to remember that the OBR is a very young organisation. We believe that it is doing an excellent job—as, clearly, does the shadow Chancellor—but it has not, as yet, been subject to any major review.

It was announced in last year’s autumn statement that, as required by legislation, the OBR would launch an external review of its publications during the current year, and that its findings would be published in September. The Government have also announced that following the outcome of that review, and following the general election, they will hold their own review of the OBR. I think—I am sure other Members will agree—that until those reviews of the OBR’s current responsibilities have been completed, we should not throw extra responsibilities at it. I consider it sensible for us to wait until after the OBR’s review, our review, and the OBR’s first general election before considering this issue further.

Unlike the Labour party, I do not want to pre-empt the OBR’s review, but I think it safe to say that, through its creation, the coalition has changed the way in which Budgets are made for ever and has created an independent office that has restored public confidence in the numbers that underpin the Budget. In its first four years, the OBR’s independent forecasts have supported the credibility of our long-term fiscal plans. Between now and the general election, the OBR should remain focused on doing that job. It should remain focused on ensuring that, as we fix the mess left to us by the Labour party, the numbers underlying our long-term economic plan are correct. That plan is making a real difference.

[Mr Love]

Will the Minister give way?

[Nicky Morgan]

No.

Inflation is at its lowest level in four and a half years. Employment is at its highest level ever. Just as our deficit is shrinking, our economy is growing, with the recovery balanced across all the main sectors, because of a long-term economic plan being taken forward by the Government and being properly scrutinised by an independent, impartial body. That is how it should stay for the next year. That is why I ask hon. Members to support our amendment.