Budget Responsibility and National Audit Bill [Lords]

David Heath Excerpts

Monday 14th February 2011 Commons Chamber

[Kerry McCarthy]

I knew it began with a W. Anyway, she is probably very familiar with this quote:

“The only function of economic forecasting is to make astrology look respectable.”

The hon. Member for Macclesfield said that he was not a great fan of J. K. Galbraith. I happen to be a great fan, although I had not heard that quote before. His “A Short History of Financial Euphoria” ought to be required reading for anyone who takes up a job in the City these days. The hon. Gentleman resisted the temptation to resort to political point scoring. His point that the OBR can in time become a respected and trusted reference point is valid—I certainly hope it will be achieved.

What the hon. Member for Macclesfield said about greater powers being given to the Treasury Committee was interesting. I was a member of the Committee for a couple of years when first elected to Parliament in 2005, and I remember spending many sittings seeking assurances from the Financial Services Authority and the Bank of England about regulation, the risks that derivatives trading imposed, and so on. I remember receiving blithe assurances that it was difficult for Committee members— with their limited resources—to challenge on an ongoing basis. If increased powers are given to the Treasury Committee to vet appointments, to scrutinise the work of the OBR, particularly its funding, and to ensure that it has the necessary resources to do its job, thought needs to be given to whether the Committee has the resources necessary to do that job.

The hon. Member for Bristol West (Stephen Williams) slightly lost me at the beginning with his talk about Disraeli and fridge magnets, but then moved on to talk about Bank of England independence, which he claimed was a Liberal Democrat manifesto—

[The Parliamentary Secretary, Office of the Leader of the House of Commons (Mr David Heath)]

It was.

[Kerry McCarthy]

I am not denying it. The hon. Member for Bristol West said that it was an example of Liberal Democrat manifesto policy being implemented 13 years before they got into government. I would suggest that the reason he is claiming credit for that is that there are very few examples of that now that they are in government.

Let me move on to the Bill. The plans for the National Audit Office have received very little attention in this debate, because there is a general consensus that they are the right thing to do. They are almost exactly in line with our plans for the National Audit Office that we set out in our Constitutional Reform and Governance Bill, which we did not get through the parliamentary process before the May 2010 election was called.

We support the creation of the Office for Budget Responsibility, which we see as continuing the direction of travel that we set in government by giving independence to the Bank of England and the Office for National Statistics. However, we have a number of concerns about the details of the proposals. We welcome the amendments that were introduced in the other place—with some, limited success—to try to make the OBR more independent from the Government, for example by giving it budgetary independence, so that we can be sure that it has the resources that it needs to do its job and produce genuinely independent forecasts without being compromised by Treasury control. We intend to explore that further in Committee, to see whether we can give the OBR greater independence. It is also important to explore in Committee how we make the OBR more accountable to Parliament, rather than to the Treasury.

However, we will not let this Government hide behind the OBR or use its independence as a shield to protect them from valid criticism of the impact of their economic policies. The Government are wrong if they believe that the OBR will protect us from the consequences of the Chancellor’s misjudgments. Indeed, the OBR will help to hold the light up to the Government’s record. It is notable that the OBR has already predicted that unemployment will be higher under this Government than under Labour plans, that growth will be lower under this Government, and that consumer prices index inflation will be higher. In fact, as has been mentioned—I think by my hon. Friend the Member for Glasgow North East, or perhaps by my hon. Friend the Member for Wirral South—the OBR has already had to revise its growth forecast downwards twice, down from 2.6% to 2.3% after the emergency Budget, and down again, to 2.1%, after the spending review. That is a telling verdict on this Government’s policies for growth—or lack of them—and the Chancellor’s failure to produce a growth plan. We wait to see whether the March Budget will force the OBR to downgrade its growth forecast yet again.

The OBR has also confirmed—although the Government seem to have ignored this because it is politically inconvenient for them to acknowledge it—that the deficit was more than £20 billion lower in 2009-10 than expected, owing to firm and decisive action taken by the Labour Government. What is clear—we do not need the OBR to tell us this—is that under this Government unemployment and inflation are rising, living standards are falling and the recovery has stalled. Although we support the substance of this Bill to a large extent and we shall not seek to push its Second Reading to a vote this evening, we remain deeply sceptical about whether the Government have learnt any lessons from the past eight months during which the shadow OBR has been in place. We hope that lessons will be learnt going forward.