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We have introduced a number of measures to ensure a proper separation of production from assessment. That applies not least to the head of assessment, who will be appointed by the non-executive board members while being distinct and separate from the executive
members, and will lead the staff work on assessment issues. Decisions on whether to approve something as a national statistic cannot be delegated, but must be made by the full board.
We do not believe that the structure replicates the problems cited by the hon. Member for Chipping Barnet. I think that the analogy with the BBC is a false one, although I am sure that the Committee will examine the issue in detail.
The hon. Member for Braintree feared that the role of the national statistician might be downgraded.
Ed Balls: I will give way to the hon. Gentleman in a second. It is good to see him.
The national statistician will carry out the day-to-day delivery of the executive statistical production functions. Moreover, as well as being the board’s chief professional adviser, he will be a Crown appointment and the board’s chief executive. The board will be obliged to take account of his advice on all statistical matters. If the board overrules the national statistician, it will need to publish a statement and lay it before Parliament, explaining why it had chosen to do so. At the same time, the national statistician will be a full member of the board and will therefore share responsibility with other board members. In our view, that will enhance and strengthen the role of the national statistician, but within a framework in which there can be proper and unified focus on the executive functions of the service, and where there can also be proper scrutiny and accountability.
Mr. Fallon: The Economic Secretary has announced two important safeguards for governance, and I have a couple of questions. Is he set on the balance that he has announced between the numbers of non-executive members and executive members, or might Ministers be open to debate on that? As for the Crown appointment, I would like an answer to the question I have posed twice today: will that appointment be made by Her Majesty on the advice of the Chancellor, or on the advice of the Prime Minister?
Ed Balls:
Before the hon. Gentleman arrived in the Chamber, I paid tribute to the thorough and effective report that his Sub-Committee produced, and I know that its work will have a real impact on debates in Committee in coming weeks. On the first of the two points that the hon. Gentleman raised, we have made it clear that although there will be three executive members, there will be at least six non-executive members. Therefore, it is clearly open for there to be more than six, but there will be six or more. As a result, there will be a majority of non-executives on the board. On the second point, it is my understanding that that Crown appointment will be the same as others; for example, the Governor of the Bank of England is appointed by the Queen on advice from the Prime Minister, and on issues as important as who should be the Bank’s Governor, the Prime Minister takes the advice of the Chancellor of the Exchequer. I expect that a similar process will occur in this case; it will be a decision of the Crown, but the Prime Minister and
senior Ministers will have input into it, as it is important that we get the right person.
The hon. Member for Twickenham raised the issue of the Treasury versus the Cabinet Office—
Peter Bottomley: I am unclear whether the Minister thinks that he has dealt completely and satisfactorily with the question of why the Government chose not to have a separate body supporting the executive statistical service. He said that they decided not to, and that that would have meant putting the Statistics Commission on a statutory basis. What has been unsatisfactory about the current arrangements, and why could he not have decided to have put the Statistics Commission on a statutory basis?
Ed Balls: We had an earlier debate with the hon. Member for Sevenoaks about the potential for differences of view between the independent head of the Office for National Statistics and the independent head of the National Audit Office. In our view, there would be no gain in having two separate independent institutions additionally—one to produce the statistics and another to scrutinise. Given that the production of statistics is an important technical and intellectual matter but that it does not require the same kind of difficult political decisions as would be involved in, for example, decisions by the BBC, and given that the role of the board is to scrutinise quality but it is not a regulator in the sense that the BBC is a regulator, in our view it was possible to combine both functions—ensuring proper professionalism in production and providing proper scrutiny of quality—in one board. Therefore, it was decided that it was right to have a single, unified, independent statistical service, and that is the basis on which the Bill has been produced.
Peter Bottomley: The issue I raise is not to do with why the Government have changed their mind since six years ago. The Statistics Commission was not the same as the ONS. Its role was to support it, and to invigilate—to be a watchdog—but also to be a supporter. The Government still need to explain, if not fully this evening then certainly in Committee—regardless of whether I am a member of it—why they could not just have made the Statistics Commission a statutory body, which would have allowed it to go on doing the technical work that the Minister has talked about. I am presuming that the reason is not to save money, because the Statistics Commission has not cost much money. There must be some other real reason, which I do not think Members yet understand.
Ed Balls:
There is a danger that we will hold the entire Committee proceedings in this final summing-up speech, and I shall try to avoid that risk. Previously under the current regime, the head of the ONS was not a decision maker on a number of subjects, which were matters for Ministers. The new national statistician will be an independent decision maker on a range of operational matters, as well as on the integrity of statistics. The view was taken that, given that we were strengthening the role of the ONS and moving to a statutory basis, we could build on the Statistics Commission’s experience and turn it into a fully fledged and statutory board. So all the functions presently undertaken by the commission will be taken
over, in statute, by the board, which will also take over a number of functions currently carried out by Ministers that relate to the budgeting of the ONS and the national statistician. My hon. Friend the Financial Secretary has explained in detail the way in which those new funding arrangements will work, and that we will move to a five-year budgeting process. I have done the best that I can in a Second Reading debate to explain our thinking, and if it is okay I shall now move on—but there will be plenty of time to scrutinise these issues in Committee.
The hon. Member for Twickenham referred to the issue of the Treasury versus the Cabinet Office, and the hon. Member for South-West Hertfordshire helpfully reminded us—as did the hon. Member for Sevenoaks —that the Treasury Committee recommended that the Treasury retain those residual functions. That is what we have decided to do, having listened intently, where we could, to the advice of the Treasury Committee.
The second issue was scope, about which there was some discussion.
Dr. Cable: Before the Minister moves on, will he explain how the Government envisage that the very substantial area of non-economic statistics will be covered by the appointments that will be made on the recommendation of the Chancellor, and through parliamentary scrutiny, which should surely go well beyond the Select Committee on the Treasury?
Ed Balls: I shall come back to parliamentary scrutiny in a moment.
On the board we will also endeavour to ensure that, as well as expertise from the devolved countries, we have the widest range of expertise. As the Financial Secretary made clear in our earlier discussion on scope, the issues considered under the category of national statistics go much wider than the economic. Indeed, the majority of series categorised as national statistics do not come under current ONS arrangements, so it is clear that the scope is very wide indeed. We will need to ensure that people appointed to the board through the Nolan process cover the widest range of expertise.
It is our view that the scope is wide, and it will be made wider over time—there was some discussion of this issue earlier, and I shall not repeat it here—but the idea that as a matter of principle, every official statistic should be a national statistic, independent of its importance or of the resource implications, is not realistic. For example, the Treasury collects detailed information on the number of parliamentary questions asked by Opposition Members. There is no need for that to be categorised as a national statistic and to be scrutinised through these processes.
Mrs. Villiers: But the code of practice is based on impartiality, integrity and objectivity, so whatever statistics the Government are collecting, it is surely worth collecting and using them only if they comply with the principles that will be enacted in the code of practice.
Ed Balls:
The hon. Lady is of course absolutely right, and we are setting up a board and a code of
practice to ensure that we have the highest standards of integrity across the piece. But the question is: does every statistic need, as a matter of principle, to be designated as one of the 1,300 different statistics? In our judgment, the answer is no. It is for Ministers to make such recommendations, and to do so on the basis of resource allocation and of the matters for which we are accountable. At the same time, the new board will be in a position to make public its recommendations on decisions of designation, and on the need to improve quality and integrity.
Only if the board approves something as meeting the standards of the code will it be approved as a national statistic. It will be fully open to the board, in public and in Parliament, to comment on any issue it chooses when it comes to designation. If it judges that issues should be designated that are not, I am sure that it will not be shy in coming forward with its views. My experience is that, as the hon. Member for Twickenham suggested earlier, it is not a profession or community that is shy about making its forthright views known. The fact that we are putting in place a statutory framework in which it can do so will only enhance its standing. The idea that as a matter of principle every statistic published, however insignificant, needs to be designated as a national statistic is not realistic or sensible. I am sure that the point will be further debated in Committee.
The hon. Member for Worthing, West mentioned timetables. All national statistics are preannounced according to release practice protocols. Another role for the board will be ensuring that similar standards apply.
Mr. Fallon: Will the Economic Secretary give way?
Ed Balls: I shall take one more intervention, but then I must make progress, because otherwise we will overrun.
Mr. Fallon: I do not think that we could overrun. I hope that the Economic Secretary understands that the issue of scope is important. From what he has just said, I understand that if the board spots a series of statistics that are official but which it thinks should be national, it will have the power to recommend that change. If so, that will be a huge comfort to those of us worried about that point. Nobody is arguing that every conceivable line of official statistics should become a national statistic at the whim of the board: all we are suggesting is that Ministers should not have the monopoly on recommending which statistics should be national rather than official.
Ed Balls:
Not for the first time, there is a little dissonance between the Treasury Committee and Shadow Ministers. The fact is that the board will have a duty to report on coverage and to scrutinise best practice. If, in the judgment of the board, there are gaps, I am sure that it will make its views public to Parliament. The issue is whether the decision to designate, with its potential resource implications, should be made outside the Executive’s decisions on resource allocation. The judgment of the Government, which is reflected in the Bill, is that those decisions
should be made by Ministers, but they will be scrutinised. The board’s wider responsibilities require it to scrutinise such decisions actively.
My hon. Friend the Financial Secretary made clear our agreement with the Treasury Sub-Committee that there is a case in principle for pre-release. That case was also echoed by several former Ministers. The Member for Chipping Barnet was the only Member who appeared to doubt the case for pre-release. I shall give one example, because the hon. Member for South-West Hertfordshire asked for one.
The obvious example in the current monetary policy framework is the open letter system. If, on the basis of pre-release information, it became clear to the Bank of England and the Treasury that inflation was likely to deviate more than one percentage point beyond the inflation target, the Bank could produce an open letter that it could publish simultaneously with the inflation figures. The Treasury would then be able to respond very quickly, as required under our procedures, to that open letter. If instead there was no pre-release and the figure was launched on to the markets without any preparation, the Bank would have to move quickly to produce an open letter, but that would take some hours or even days. The Treasury would not be able to respond until the Bank had published its letter, and there would be a period of uncertainty and potential instability in the financial markets. That is a clear reason why, for operational and policy purposes, pre-release is essential to the smooth and stable operation of monetary policy—and there are many other examples. Luckily, the open letter system has not had to be used, because inflation has been slow and stable.
There is clearly a debate about how pre-release should operate in practice, which will be held in the House when details of the regulations are published. They will then be debated in Committee under the affirmative resolution procedure. My hon. Friend the Financial Secretary has made it clear that we will review the operation of the system after 12 months to see whether the pre-release system set out to Parliament is operating consistently with the principles guiding our approach. That is a good step forward, which, combined with the tightening of the pre-release system, means a substantial advance on the position on pre-release that we inherited from the previous Government in 1997, but there will be a full opportunity for Parliament to debate the matter if it judges that it wants to go further. That is a matter for Parliament.
Peter Bottomley: The Economic Secretary has given one example, which he rightly says has not needed to be used. Would he consider making a written statement before the Bill goes into Committee giving some illustrative examples of where pre-release of more than three hours might be necessary?
Ed Balls:
There has been a certain amount of confusion in the debate; it has been regularly said that there is only 30 minutes’ pre-release in the United States but, as I understand it, the President and the Council of Economic Advisers receive the data the day before. There is clear acceptance on both sides of the House, with the exception of the hon. Member for Chipping Barnet, of the case for pre-release, but it
needs to be done properly. We shall be able to review the operation of the system after 12 months, and I suggest that the detail should wait for Committee.
My hon. Friend the Member for Slough made a powerful speech in which she reminded us that it is often the quality of data, rather than the suggestion, or risk, of manipulation, that can undermine public confidence. Her speech was certainly colourful and required a certain degree of latitude from the Chair, but she and my hon. Friend the Member for Colne Valley (Kali Mountford) made clear the importance of approaching such debates maturely, and of focusing on what is actually happening on the ground and the ability of statistics to tell us the full story.
The hon. Member for Sevenoaks made an important speech, and I am sure that he will return to those issues in Committee. The hon. Member for Braintree warned of the dangers of allowing the position of the national statistician to be undermined and said that if the system needed one thing it was scrutiny. It is clear from the debate that there will definitely be scrutiny.
My hon. Friend the Member for City of York said that it was important that we enhance the role of Parliament. He proposed a new Select Committee, separate from the Treasury Committee, to review in Parliament the decisions of the new statistical service. That is a matter not for the Treasury but for Parliament, and we have made it clear that Parliament should use all its opportunities to enhance scrutiny of the new independent service. My hon. Friend is right to say that stronger parliamentary scrutiny will be required, and we shall definitely refer his remarks to my right hon. Friend the Leader of the House. My hon. Friend the Member for Southampton, Test also pointed out that the onus was on Parliament to strengthen its role in such matters.
I have already referred to a number of the points that the hon. Member for Worthing, West made in his speech. I have also referred to scrutiny in Scotland and to the importance of the fact that the Bill is a UK measure that has the support of the devolved Administrations. As the hon. Member for Dundee, East (Stewart Hosie) said, there is much to welcome in the Bill, and we look forward to his constructive contribution in Committee to make sure that we take fully into account all the points that he made.
The hon. Member for South-West Hertfordshire made some points about pre-release and about the role of the Treasury, to which I have referred. The hon. Member for Ludlow made an important point about the RPI. It will be picked up in Committee, but I can assure him that the provisions concerned are consistent with our legal obligations and will be used only in the rarest circumstances.
The hon. Gentleman talked about consensus, as did the hon. Member for Fareham.
Mr. Newmark: Will the hon. Gentleman give way?
Ed Balls: No, I shall not take any more interventions.
The odd thing about the debate is that Opposition Members seemed to start off by calling for consensus but then immediately moved on to partial political diatribe. The hon. Member for Chipping Barnet began her speech by pointing out that she would support the
Bill, saying that it was a step in the right direction, yet then tried to claim that trust in statistics was at an all-time low and that issues of transparency, honesty and public trust were matters for the Government. However, I have to tell her that it was the Labour Government, not the last Conservative Government, who made the Bank of England independent. In 1997 there was no code for fiscal stability. The previous Government never had the foresight or courage to make the ONS independent of Ministers. The reality was that however many times they fiddled the figures, they could not conceal the truth.
Before 1997, the previous Government changed the definition of unemployment 32 times, but they still could not conceal the fact that unemployment went above 3 million. They tried a series of different aggregates for monetary policy, but could not prevent inflation from going above 10 per cent. They fiddled the definition of the public sector borrowing requirement and ended up being forced to exclude privatisation proceeds from the official count, but they still could not stop borrowing going above £100 billion. In 1994 they tried to fiddle the inflation target and to introduce a new target of 1 per cent. to 4 per cent., but they could not avoid the fact that the inflation target was missed in 48 out of 52 months in the period up to 1997. They changed the fiscal rules every year. We have had the same fiscal rules since 1997, but under the previous Government there was a different fiscal rule every year. Whether they specified back to balance, in balance, or in surplus close to balance, they still could not disguise the fact that in the last cycle the golden rule was broken by £240 billion.
We are proud of our record of a strong economy, low national debt, the lowest unemployment for 30 years and the lowest interest rates for 40 years. The Bill lays the foundations for a strong and stable economy and a statistical system fit for the 21st century. We are confident that we will create for the first time in our history a strong and successful system that is fully independent. As my hon. Friend the Financial Secretary said, the key to the system is the scrutiny of Parliament, which, in the case of the Bill, should now proceed in Committee. I commend the Bill to the House.
Bill accordingly read a Second time.
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