Budget Responsibility and National Audit Bill [Lords]

Mark Field Excerpts

Tuesday 22nd March 2011 Commons Chamber

[Chris Leslie]

It is fitting that we are discussing the Bill the day before the Budget. I understand that there are particular reasons, which the Minister will no doubt explain to the House, why the Bill needs to receive Royal Assent this evening, before we reach Budget day, so I am conscious that the ministerial clock is ticking. I pay tribute to the Public Bill Committee, whose members scrutinised the Bill in what I regard as sufficient detail.

Essentially, the first half of the Bill sets out the establishment of the Office for Budget Responsibility, and the second half makes a series of changes to the National Audit Office governance arrangements. It is fair to say that the Committee spent less time on the second half of the Bill, as the House had previously scrutinised many of those measures, but for various reasons that legislation was not included in the wash-up before the last general election. Most of our attention today will focus on the OBR.

Clause 1 relates not specifically to the OBR, but to the creation of a charter for budget responsibility. As we know, the Government have their reasons and rationale for making this set of legislative proposals. It was notable in Committee that Members were quizzical about why the charter for budget responsibility has been quite narrowly defined and why the OBR’s duties are similarly quite controlled and slimline. My view is that any realistic definition of budget responsibility must take account of the impact on jobs and growth of the wider economy and Treasury decisions on fiscal policy, particularly in the current context.

We know that Her Majesty’s Treasury is currently grappling to acquire a growth strategy, some of which might have been left on a number of photocopiers around the building before Treasury questions, although I have not been party to the memo that my right hon. Friend the shadow Chancellor picked up—I will try to get hold of him later to see what was in it. Clearly, the real economy has clashed with the Government’s plan A, which they have refused to depart from, which meant that in the fourth quarter of 2010, as GDP figures show, the economy went into reverse and shrank. The Chancellor blames the wrong kind of snow, but evidently the Government’s approach to fiscal policy has created circumstances that have not only put the brakes on economic growth, but unfortunately seem to have put it into reverse.

When we debated clauses 1 and 4 in Committee, Members felt that it was important to try to challenge the notion that we should somehow have an Office for Budget Responsibility that confines itself to fiscal, deficit and debt issues, to the exclusion of other equally important indices drawn from the wider economy.

[Mr Mark Field (Cities of London and Westminster) (Con)]

The course of events that the hon. Gentleman describes is surely a tribute to the independence of the advisory body—the OBR—during its first phase following last June’s Budget, but does he not share my concern that if it were to have the increased powers, it would cease to be advisory and independent, which it should be, and in some way would become a challenge to Treasury policy? It is correct that it has relatively limited powers, but above all those powers should remain independent and advisory to the Treasury.

[Chris Leslie]

I understand the hon. Gentleman’s point about creating a third institution when it should be Parliament’s job to challenge the Executive and the Treasury on their policies. The point we want to make through the amendments is essentially that, simply to have a fiscal mandate in the charter for budget responsibility is inadequate. We feel that it is important to have a growth mandate to supplement the fiscal mandate in the charter and, more than that, that the Office for Budget Responsibility should also have a duty to assess the impact of the Treasury’s policies on the real economy, on employment and on growth. I do not think that that necessarily sets the office’s face against or in juxtaposition to the Treasury—it would simply give it absolute clarity that it had the right and appropriate remit to consider those wider real economic effects.

[Mr Field]

But there is already a clear monetary mandate in the hands of the Bank of England. Surely a growth mandate along the lines that the hon. Gentleman suggests would muddy the waters, if not necessarily between the Treasury and the OBR, then between the Bank and the OBR?

[Chris Leslie]

Perhaps this is where I differ from the hon. Gentleman. I think that a slightly dry and narrow focus on the accountancy issues in the draft charter for budget responsibility, as well as a monetary policy focus at the Bank of England and in the charter, with no or scant focus on the real economy—economic growth, employment and some of those very important issues that affect all our constituents—would be a deficiency in the role of the OBR.

--- Later in debate ---

[Chris Leslie]

My hon. Friend suggests that the measure is phantom paraphernalia, enrobing the creation of the Office for Budget Responsibility simply to give it a sense of grand importance, and in fact it could have deleterious consequences. That is certainly one crucial reason why we felt it important to table the amendment, stating that at the very least there should be a broader set of mandates within the charter, and that a growth mandate would be especially important.

[Mr Mark Field]

rose—

--- Later in debate ---

[Mr Field]

It would probably be unwise for these provisions to be too wide. The credibility of inflation targeting would be undermined if the target were to be changed even on an irregular basis, if at all. As the hon. Member for Luton North (Kelvin Hopkins) said, the remit of the Bank of England covers not only inflation targeting but the greater interests of the overall economy. The latter remit is less well known than the former, but it is the reason interest rates have stayed at a very low level given the high levels of RPI and CPI that we are experiencing.

[Chris Leslie]

I would recommend that all hon. Members take a look at the draft charter for budget responsibility, which has several interesting facets. I have no doubt that the Minister will explain, in layman’s terms, what is meant by a

“rolling, five-year forecast period”

in relation to the cyclically adjusted current balance. Some hon. Members might find it difficult to envisage how that rolling forecast will operate in principle. Many of us can understand the concept of a fixed year or a fixed date against which a set of targets are to be judged, but if the horizon shifts continually, that is different. It would be interesting to hear the Minister explain that when she responds.