Budget Responsibility and National Audit Bill [HL]

Lord Burns Excerpts

Monday 6th December 2010 Grand Committee

[Lord Burns]

My Lords, perhaps I may add to the point made by the noble Baroness, Lady Noakes. The OBR will produce two forecasts a year. Between them, data will emerge, conditions will change and all kinds of things could happen in the world at large. The Treasury will need to take a view during that period of whether or not the events that are unfolding are consistent with the forecasts. The Treasury will want to prepare for future announcements of one kind or another. It is hugely important that it retains the capacity to monitor what is happening to the economy in the mean time, to make an assessment of whether unfolding events are consistent with the OBR’s previous forecast and to prepare itself for the work that continually goes on. One of my worries throughout the establishment of the OBR has been that some capacity within the Treasury will inevitably be required if the Treasury is to continue to do the job that it does month by month. The Treasury has to prepare Ministers for speeches, answering questions and making observations on whether or not the economy is evolving in the way that it thought. The idea that there should be no capacity left in the Treasury to make this kind of analysis is frankly unrealistic.

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[Lord Newby]

My Lords, I am sure that all noble Lords wish that Chancellors were models of balance and completeness in the way in which they present figures, but the noble Lord, Lord Myners, is placing an unrealistic burden on the OBR if he expects it to undertake this task. For example, he uses the word “balance”; balance is not an objective fact but, to a considerable extent, is a subjective view. That goes equally for “completeness”—at what point does the failure to refer to the paragraphs on page 73 in the OBR report render the Chancellor’s statement incomplete? When the Chancellor has made a political speech on the economy, to expect the chair of the OBR to audit it, to coin a phrase, in some way as the noble Lord suggests is, frankly, impossible. While I agree with the sentiments behind the amendment, I do not think that it is workable.

[Lord Burns]

My Lords, I support the remarks of the noble Lord, Lord Newby. The noble Lord, Lord Myners, knows that what he is asking for is impossible; we also know that he can be very good at creating a little bit of mischief every now and again and we have to see this amendment in that light.

The OBR can be responsible only for its own documents; it cannot possibly hold the Chancellor to account. That is a job for Parliament, including the Treasury Committee and the Economic Affairs Committee. I can think of nothing that would make the job of the OBR more impossible than to give it a task that began to resemble this. The key thing is that the OBR has to be kept out of the political debate but the noble Lord, Lord Myners, implies that he would like to plunge it directly into that debate. I am sure he has used the amendment as a vehicle to make quite sensible points about some of the practices that occur from time to time, but the OBR will not protect us from those.

[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.

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[Lord Newby]

We had a long debate on this issue at our previous meeting and I am not going to rehearse all the arguments. I suggested, out of frustration, that we were spending too long on this form of words, which, in slightly more words, actually had the same purpose as Amendment 31. We did not spend any time looking at it, because we were considering the amendments in order. However, Amendment 31 is clear and achieves the purpose that we sought to achieve in our debate last time, which was that the OBR, in making its assessments, obviously should take account of government economic and other policies. Equally, in the context of the second part of the subsection, the OBR’s role should not be what the noble Lord, Lord Peston, thinks it would be. It should not be able to stray and look at anyone’s alternative policies—that way madness lies. The OBR must have a straightforward remit to look at what the Government are proposing and work on the assumptions that the Government are making in their policies.

[Lord Burns]

My Lords, I agree with the noble Lord, Lord Newby. I had hoped that the purpose of the clause was to restrict the activities of the OBR to avoid it getting into political trouble. There are two clear cases where I could see this happening. One is where it is asked to continue a practice that has emerged in the past 20 or 30 years, whereby a Government ask the Treasury to cost the opposition manifesto as an election approaches. That practice has been divisive and has not suited anyone. I had hoped that this clause, by restricting the OBR to consideration of government policies, would prevent the Government or anyone else—for example, the Treasury Committee—asking it what the effect would be of implementing the Opposition’s manifesto.

The second thing that I had hoped would be avoided was getting into the sort of detailed arguments that took place in the summer about what the effects of particular packages of measures would be on economic activity, unemployment, the PSBR and so on. The remit given to the OBR by the Bill, as I read it, is to tell us what the effect would be on public finances of a whole set of government policies, taking into account the world environment and everything else, and whether or not the Government are on a sustainable path as a result of that collection of policies. That remains very challenging and is what the OBR’s job should be restricted to. It is set out early in the Bill. I had assumed that this clause was there to prevent encroachment, or a widening of the OBR’s remit to include a number of other things, all of which would lead us into a difficult area of political activity.

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[Lord Burns]

My Lords, for the reasons that I have set out about the importance of the political impartiality of the OBR, I felt that the original subsection (3), although a little inelegant, did much of its job. However, I also support the spirit of Amendment 31, although I am a little concerned about the use of “effects”, which could in future give someone the opportunity to ask to have particular subsections of government measures analysed for their effects on the economic outcome and on the public finances. I worry that going down that road could cause problems in future.

[Lord Sassoon]

My Lords, perhaps I might go back to confirming what we are seeking to do and not to do in the Bill. We have discussed all these related issues at some length. The noble Lord, Lord Burns, has got it pretty much spot on in terms of what we are trying to achieve, but for the avoidance of doubt I shall restate it.

With regard to the core forecasting remit, the intention is that the OBR should consider government policies and not other policies. To take the point made the other day by the noble Lord, Lord Eatwell, we want to ensure that the OBR can take account of external shocks, for example, so in technical drafting terms his amendment would not quite work as it focuses narrowly on policy. We agree, anyway, that it is the Government’s policies and not other policies that need to be considered. We must not leave out the fact that, in doing the forecasts, the OBR can look at scenarios and at other issues.

With regard to the noble Lord’s specific question about an EU-related policy, either it has been adopted by the UK Government and is therefore included in government policies or it is not. Either the EU policy example has been adopted as policy in the UK or it has not, therefore it falls accordingly. That would get picked up, so that much is clear. Equally, it is the clear intention that the OBR should not be drawn into costing alternative policies, whether they are opposition policies or just other scenarios or partial packages of policies. That is what is intended by the construct in the Bill, and part of it is clarified by paragraph 4.12 in the draft charter.

Even though I am convinced that the Bill achieves what most, if not all, of us are trying to achieve in these various respects, I take to heart the fact that we have spent a lot of time going around the interaction of Clauses 4 and 5(3) and, to an extent, the relationship with Clause 1. Notwithstanding the fact that I think that the Bill works as drafted, I am listening carefully to all the points being made. I will go away and see whether anything can be done to make it even clearer in the Bill what the intentions are. However, it is difficult drafting. We should certainly not take out Clause 5(3) in its entirety, because, as the noble Lord, Lord Burns, pointed out, we want to make sure not only that the forecasts are concentrated on the right thing but that the OBR is not drawn into other political controversies.

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[Lord Sassoon]

I assume that in all normal circumstances it will look intently at the forecasts of the MPC about future inflation and interest rate prospects.

[Lord Burns]

Perhaps I may help the noble Lord, Lord Peston. One must assume that the Monetary Policy Committee will abide by the law under which it conducts its affairs.

[Lord Sassoon]

In summary, I cannot promise that there is any way of making all this clearer. I think that there is consensus among us as to what we are trying to achieve in this area. I shall think hard about whether we can make it even clearer. On that basis, I ask my noble friend Lord Higgins to consider withdrawing his amendment.