Budget Responsibility and National Audit Bill [Lords]

The Committee consisted of the following Members:

Chairs: Mr Roger Gale  , † Dr William McCrea 

† Docherty, Thomas (Dunfermline and West Fife) (Lab) 

† Gilmore, Sheila (Edinburgh East) (Lab) 

† Goodwill, Mr Robert (Scarborough and Whitby) (Con) 

† Greening, Justine (Economic Secretary to the Treasury)  

† Hames, Duncan (Chippenham) (LD) 

† Jones, Graham (Hyndburn) (Lab) 

† Leslie, Chris (Nottingham East) (Lab/Co-op) 

† McCarthy, Kerry (Bristol East) (Lab) 

† McGovern, Alison (Wirral South) (Lab) 

† Morrice, Graeme (Livingston) (Lab) 

† Morris, Anne Marie (Newton Abbot) (Con) 

Nuttall, Mr David (Bury North) (Con) 

† Patel, Priti (Witham) (Con) 

Shelbrooke, Alec (Elmet and Rothwell) (Con) 

† Smith, Julian (Skipton and Ripon) (Con) 

† Truss, Elizabeth (South West Norfolk) (Con) 

† Williams, Stephen (Bristol West) (LD) 

Wilson, Sammy (East Antrim) (DUP) 

Alison Groves, Committee Clerk

† attended the Committee

Public Bill Committee 

Tuesday 1 March 2011  

(Morning)  

[Dr William McCrea in the Chair] 

Budget Responsibility and National Audit Bill [Lords]

10.30 am 

The Chair:  Before we begin, I would like to make a few preliminary announcements. Members may, if they wish, remove their jackets during Committee sittings, but they need to ensure that their mobile phones and pagers are turned off or switched to silent mode. As a general rule, I and my fellow Chair do not intend to call starred amendments that have not been tabled with adequate notice. The required notice period in Public Bill Committees is three working days, and amendments should therefore be tabled by the rise of the House on a Monday for consideration on a Thursday, and by the rise of the House on a Thursday for consideration on a Tuesday. There is a money resolution in connection with the Bill, copies of which are available in the room. 

Not everyone is familiar with the process of Public Bill Committees, so I will give a brief explanation of how we will proceed. The Committee will first be asked to consider the programme motion on the amendment paper, for which debate is limited to half an hour. We will then proceed to a motion to report written evidence, and then to line-by-line consideration of the Bill. I call the Minister to move the programme motion. 

The Economic Secretary to the Treasury (Justine Greening):  I beg to move, 

That— 

(1) the Committee shall (in addition to its first meeting at 10.30 am on Tuesday 1 March) meet— 

(a) at 4.00 pm on Tuesday 1 March; 

(b) at 9.00 am and 1.00 pm on Thursday 3 March; 

(c) at 10.30 am and 4.00 pm on Tuesday 8 March; 

(2) the proceedings shall be taken in the following order: Clauses 1 to 9; Schedule 1; Clauses 10 to 20; Schedule 2; Clauses 21 and 22; Schedule 3; Clauses 23 to 26; Schedules 4 and 5; Clause 27; Schedule 6; Clauses 28 to 31; new Clauses; new Schedules; remaining proceedings on the Bill. 

(3) The proceedings on the Bill shall (so far as not previously concluded) be brought to a conclusion at 7.00 pm on Tuesday 8th March. 

It is a pleasure to serve under your chairmanship, Dr McCrea, and I look forward to your skill in chairing the Committee over the coming sittings. I also welcome the other members of the Committee. 

The Bill is important, as it puts the new independent Office for Budget Responsibility on a statutory footing, and puts in place reforms to the corporate governance of the National Audit Office. As members of the Committee will be aware, the Bill has already been debated extensively in the other place, and has also benefited from the inquiry undertaken by the Treasury Committee. I am

pleased to say that the Bill is very much in line with the recommendations in that Committee’s report, and it has also been improved by Lords amendments. 

I hope that all members of the Committee agree that the programme motion is sensible and non-controversial, but they might have noticed that, contrary to customary practice, the motion proposes that we deal with schedule 1 after clause 9. That is because it makes most sense to debate the functions and the remit of the Office for Budget Responsibility before we consider its governance structure. Schedule 1 is first mentioned in clause 3 because we cannot discuss the remit of the office before it is technically set up by an earlier clause. Clause 3 establishes the office, and the Bill then moves on, in clause 4 and beyond, to consider the office’s duties and remit, with schedule 1 setting out the governance framework. Hopefully, that means that members of the Committee have the chance to debate what the Office for Budget Responsibility will be doing and, in the light of that, can look at how it should be structured and what the governance arrangements should be. The National Audit Office schedules will be debated in the usual order. I look forward to the forthcoming debate. 

Kerry McCarthy (Bristol East) (Lab):  It is a pleasure to serve under your chairmanship, Dr McCrea. I welcome all Members to the Committee. 

As the Minister has said, there was a fair degree of debate on the Bill in the other place, and in the Treasury Committee and on Second Reading in this place, and we made it clear on Second Reading that we do not oppose the general thrust of the Bill. We have, however, tabled a significant number of amendments that challenge some of the detail. In seeking to put on a statutory footing an institution such as the Office for Budget Responsibility, which has been running for a while on a non-statutory basis, it is important that we get the framework absolutely right. Some of the amendments seek to get the office working properly and, above all, to ensure that its workings are as transparent as they can be, given the sometimes confidential nature of its work, and that it is accountable to parliamentary institutions. We agree that the six sittings that have been timetabled will probably give us enough time thoroughly to debate the Bill and to give it the attention it deserves. 

A point was raised at the Programming Sub-Committee yesterday about whether schedule 1 should be considered after clause 3, which is when it is introduced in the Bill. Our view is that it would be more appropriate to follow the normal practice and deal with schedule 1 at that point. I do not accept the Minister’s argument that it is better to look at what the Office for Budget Responsibility will be doing before looking at its structure and how it is governed. That is a point on which we disagreed yesterday, but we will go along with the programme motion. 

Quite a lot of things, such as the charter, are not included in the Bill. I will come to that point in my amendments. It is disappointing that the Committee will not have the opportunity more thoroughly to debate what is included in the charter. 

Question put and agreed to.  

Resolved,  

That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Justine Greening.)  

The Chair:  Copies of memorandums received by the Committee will be made available in the Committee Room. 

Clause 1 

Charter for Budget Responsibility 

Kerry McCarthy:  I beg to move amendment 2, in clause 1, page 1, line 16, at end insert 

‘within four weeks of this Act receiving Royal Assent’. 

The Chair:  With this it will be convenient to discuss the following: amendment 3, in clause 1, page 1, line 16, at end insert— 

‘(4A) Once the Charter has been laid before Parliament, the Treasury must hold a public consultation on the Charter for a period of not less than 12 weeks before it is due to come into force.’.

Amendment 4, in clause 1, page 2, line 4, at end insert 

‘and by the House of Commons Treasury Select Committee.’. 

Amendment 5, in clause 1, page 2, line 6, at end add 

‘and by the House of Commons Treasury Select Committee.’. 

Kerry McCarthy:  As I mentioned during my remarks on the programme motion, we think that clause 1 is the Bill’s most important provision because it introduces the charter for budget responsibility, which deals with the Treasury’s substantive work over the coming years. 

We accept that something such as the charter for budget responsibility, which is meant to be something of a movable feast—a document that can be amended, modified and reviewed from time to time—could not be prescribed in, say, a schedule to the Bill without necessitating the complicated process of bringing it before the House to be amended by statutory instrument. 

I accept the charter’s being a separate document. But in some ways I think it is wrong that only a draft charter is in existence at the moment and the Government have not felt able to present something closer to a finalised version, so that we can consider it in the round alongside the Bill. We think it is important that the charter receives proper scrutiny, and that it receives the same level of scrutiny as the Bill itself. The charter sets out the Treasury’s objectives in fiscal policy and policy for the management of the national debt. It also sets out the means by which the Treasury’s fiscal policy objectives will be attained, the so-called fiscal mandate, and it also addresses matters to be included in the financial statement and budget report prepared under clause 2. Those are by no means inconsequential matters. 

I had hoped, given the level of debate in the Treasury Committee, in the other place and on Second Reading, that the Government would update the draft charter so that we could discuss something closer to the finished article. It feels as though a substantial part of what we are discussing today is missing. 

What efforts, if any, have been made to update the draft charter based on the debate and proceedings in the Lords? If there will be no attempt to present a revised charter before Report based on the debates in the Bill Committee, in the Lords and in the Treasury Committee, why can it not be done before the Bill goes through its final stages? Does the Minister think it

would be better if it was done at that stage? We already have a functioning non-statutory Office for Budget Responsibility, so would it be wrong to delay Report so that an updated charter can be prepared, laid before Parliament and then given the scrutiny it deserves before Third Reading? That is where my first amendment comes in. 

Ideally, we would have liked to table an amendment providing that a revised version of the charter should be fully debated and approved by the Treasury Committee and by both Chambers of the House before the Bill receives Royal Assent, but we were advised by the Clerks in the Public Bill Office that it is not possible to put a binding provision in the Bill that something must be done before the Bill becomes law. Obviously, if the Bill has not received Royal Assent and become law, nothing in it is binding, so we could not table an amendment for what we really wanted, which would be more debate on the charter before the Bill becomes law. We have tabled what we consider to be the next best thing, which is that the charter should be laid before Parliament 

“within four weeks of this Act receiving Royal Assent.” 

That is not ideal, but at least it means there will be prompt scrutiny of what is in the charter while the debate on the Bill is still fresh in people’s minds. 

We have also tabled an amendment that requires the Treasury Committee to approve the charter before the Bill receives Royal Assent. That Committee should also have a role in scrutinising the modified charter. I will come to that and a broader discussion of the role of the Treasury Committee in relation to the Bill in a moment. 

The requirements for scrutiny by Parliament within four weeks of Royal Assent and for approval by the Select Committee are separate amendments. It would make sense for the Committee to look at the charter first, so that Parliament has the benefit of the Treasury Committee’s deliberations for its discussions. That is a matter for debate. It would also avoid a situation in which the charter was laid before Parliament and approved, but then went to the Treasury Committee, which might express major reservations about it. Then there is the issue of what happens to the Committee’s reservations: where do they actually go? 

I want to press the Minister to explain how the provision regarding laying the charter before Parliament, as set out in clause 1, would work. Are we talking about a motion tabled by the Government for the charter to be approved? How much time, if any, would be allowed for debate? In the first instance, there could be major revisions to the charter. It could be a significantly different document from the one that is currently circulating in draft, but there could be minor changes in future. Does the Minister envisage that the process for laying the charter before Parliament would always be the same? 

The Chairman is getting slightly nervous as to whether that question relates to the amendment. My point is that our amendment proposes that the Treasury Committee should have a role in considering any modifications to the charter. I am simply trying to tease out from the Minister whether she would envisage that role being the same. There may need to be little tweaks to the charter, such as technical amendments. If she accepts that the Treasury Committee should have a role, would it play

the same role in every instance? On laying the charter before Parliament, would there be instances when it was simply something in the remaining Orders of the Day, going through on the nod, or would there always be a process for full and thorough debate? Who would adjudicate on that matter? 

Our amendments would give additional responsibilities to the Treasury Committee. The Bill already imposes extra responsibilities on the Committee, and I appreciate that we are now adding to them, but it is important that the Treasury Committee has a watchdog role overseeing the legislation for the Office for Budget Responsibility. As a former member of the Treasury Committee, I know that it has a wide remit. I was a member during its quiet days between 2005 and 2007 when things ticked along quite nicely. I came off the Committee weeks before everything exploded; the banking crisis happened and things got a lot more exciting. I am sure that its work became far more time-consuming and, to an extent, onerous during those days. It is an important Committee, and it has an awful lot to deal with at the moment. If we are suggesting that it takes on additional responsibilities, which the amendments do, we need to be sure that it is properly resourced and that it has the right expert advice to be able to do its job properly. Otherwise, it becomes something of a tick-box exercise, and the Committee will not feel that it can do the proper job the Bill requires of it. 

10.45 am 

The final amendment in this group is about public consultation. I appreciate that that does not sit entirely well with the amendments that require the draft charter to be laid before Parliament within four weeks of Royal Assent, and the Treasury Committee to approve it. It is important, however, that there is proper public discussion of not only the existing draft charter, but the charter that will be in effect under clause 1. We need public debate and widespread consultation. Can the Minister suggest how that could happen? We can then ensure that Parliament has a role in considering the results of that consultation and whether the charter is adequate to fulfil the role that is envisaged for it. 

The underlying principle of the Bill should be that we are setting up an independent Office for Budget Responsibility, but there need to be parliamentary checks and balances on it, and, although independent in the forecasts and decisions that it makes, it needs to be accountable to Parliament in the way that it works. My concern is that, at the moment, the Bill does not quite achieve that accountability. I am interested in what the Minister has to say on how we can ensure that that happens. 

Justine Greening:  Broadly, in response to the amendments, I can assure the hon. Lady that there will be proper parliamentary accountability. She is aware that the charter effectively replaces the previous Government’s code for fiscal stability, which is out of date and obviously needed significant reform. It breaks new ground in transparently setting out for Parliament and the public not only the Government’s fiscal policy objectives, but the fiscal mandate for how we are going to get there. 

Under the code for fiscal stability, which ran from 1998, the previous Government could set their fiscal policy objectives and rules from Budget to Budget. There was no requirement to explain any changes to Parliament. To provide the hon. Lady with some reassurance, clause 1 corrects that lack of accountability by setting strict minimum requirements for the contents of the charter. Clause 1 also establishes the mechanism whereby the charter should be published by the Treasury, and that the charter and any subsequent amendments, which she asked about, will not come into force until they have been approved by a resolution of the House. There is far more accountability than we had under the code for fiscal stability. 

I understand what the hon. Lady is seeking to achieve with the amendments. Obviously, amendments 2 and 3 would provide for the charter to be laid before Parliament within four weeks of Royal Assent and then to be consulted on for 12 weeks. The amendments are, however, ultimately unnecessary, because we published the draft charter for budget responsibility in November 2010, and, by the time the Bill achieves Royal Assent, the draft charter will have had at least four months for proper public and parliamentary consultation. The whole point of this Committee is to provide further scrutiny and to debate further changes, and, of course, we have also had a helpful debate in the other place. 

The hon. Lady asked about the changes that we may make to the charter and I draw her attention to the seventh fact sheet on the Bill, which she can find in the Library. It provides Government comments on the charter and draws attention to the particular areas that we have offered to take on board and scrutinise, given the debate in the other place, given some of the amendments that the Lords made, and given the points that they made about the charter. As the hon. Lady will know, few amendments were made to the Bill as a result of the debate in the other place, but she is right to point out that questions were raised about the charter. The Bill fact sheet sets out the Government’s approach, looking at the particular issues that came out of the debate in the other place.

Taken in turn, those steps mean that we will not need another public consultation on the charter after Royal Assent. That would merely delay our putting on a statutory footing the Office for Budget Responsibility, which we all want to see happen as fast as possible. We would not derive a lot of additional benefit from a consultation, because the Bill will have been through the parliamentary process and the public will have been able to scrutinise the draft charter. That will allow us to create a charter that we think will work, taking on board the comments that have been made during that time. The final charter will contain some small alterations in response to comments that have been made during the debate on the Bill, and they are set out in the fact sheet. 

The hon. Lady has recognised, in terms of the technicalities behind amendment 3, that it is not possible to lay a document and subsequently consult on it. It is probably a probing amendment, but we cannot act in that way. We have taken a better approach, which is to publish the draft charter and have it in place for people to respond to and, once we have been through the Committee process, to lay it before Parliament swiftly after Royal Assent. 

Amendments 4 and 5 seek to impose a form of double lock that requires both the House of Commons and the Treasury Committee to approve the charter for Budget responsibility. Those amendments are ultimately unnecessary, because the Treasury Committee is a Committee of the House of Commons. Members are aware that Select Committees fall under the auspices of the House of Commons, so anything that is approved by the whole House does not need to be approved by the relevant departmental Select Committee. I would argue that it is wrong for something to be approved by a subset of Members, when we have stipulated that it must approved by all Members in the House. 

Kerry McCarthy:  The Bill gives a lot of duties to the Treasury Committee regarding things such as the approval of appointments. One could say that in terms of what we are doing today, the Committee is a subset of the House of Commons that is approving things that will go to the full Parliament to be debated. I do not know why the Minister says that that is not appropriate. My point is that the Treasury Committee has a clear remit and a specific role in relation to the Bill, and it is being given onerous additional duties. Because the charter is such a substantial element of the Bill, although it is not contained in its wording, it is important that the Treasury Committee has a role in that respect as well. 

Justine Greening:  I absolutely understand why the hon. Lady is making those points, but we are trying to strike a balance. We are ensuring that, for the first time, unlike with the code for fiscal stability, the whole House gets to approve the charter and any amendments to it. At the same time, I think it would be wrong to go further in mandating what the Treasury Committee has to look into. I have no doubt that in the same way that the Treasury Committee always conducts an inquiry into the Budget, it will want to look at the charter. It has already looked at the Office for Budget Responsibility, and no doubt it will want to consider any proposed amendments to the charter. We are trying to strike a balance between ensuring that there is parliamentary accountability and not fettering the Treasury Committee in what it deems important to inquire into. The hon. Lady is right to point out that it now has a role in appointments. I think that that is right to ensure that there is absolutely no question about the OBR’s independence. In fact, when the Treasury Committee did its own inquiry into the OBR, the OBR itself raised that point and the Government responded to it positively. I can assure her that the way in which the Bill is structured gives the right weight to parliamentary accountability, but does not constrain what the Treasury Committee should look into. As the hon. Lady points out, the charter is of key importance to economic policy and critically sets it out, so I am absolutely sure that the Treasury Committee will pay close attention to what is in it, whether it works effectively and how it may change in future.

Thomas Docherty (Dunfermline and West Fife) (Lab):  It is a privilege to serve under your chairmanship for the first time, Dr McCrea. I rise to speak in support of the amendments tabled by my hon. Friend the Member for Bristol East. 

It is probably fair to say that when the OBR was first established it found itself, unfortunately, off to a bad start when it was perceived to have behaved in a partisan manner. You will recall, Dr McCrea, the particular incident involving the release of figures right before Prime Minister’s Question Time. There was an understandable perception on our side of the House that that was not the best way for the OBR to begin its life. The Minister will recall that the Treasury Committee undertook a short inquiry into the activities around that unfortunate event and I think that the OBR benefited from the work of that Committee. My hon. Friend’s amendments seek to ensure that we never again have that unfortunate circumstance, but also that the Treasury Committee has clear responsibility and a clear mandate to scrutinise the work of the OBR on an ongoing basis. 

I have not been in the House very long. I certainly do not have your many years of wisdom and experience, Dr McCrea. I have noticed, however, that we hear a lot about the new politics. I know that the hon. Members for Bristol West and for Chippenham, in particular, tell us that we have a new politics and that, “A new dawn has broken, has it not?”, as a former Prime Minister once said. I look forward with some interest to seeing how those colleagues, who clearly believe in the new politics, the new public scrutiny and the new parliamentary scrutiny process, speak in this debate, and, of course, how they vote. I am sure that they, in particular, would welcome moves that enhance the role of Parliament in holding both the Executive and the Executive’s agencies to account for their actions. 

Having been a Member for a few months, I have been deeply impressed by the Minister. She has a fine technical mind and certainly puts me to shame whenever we get on to the finer points of Treasury business. I have to say that she did a handsome job of taking me apart during the passage of an earlier Bill on the Floor of the House, when I was trying to construct an argument. The only Members who might be her equal on the Back Benches are colleagues from all parties who are members of the Treasury Committee. I am sure that they will not mind my saying that they are quite nerdy and have fine technical minds. I would feel much more comfortable if there were a fine august body of Members who could make a decent fist of the scrutiny of this process, rather than leaving it to the whole House. 

In my short period in the House, I have noticed—I am sure that it is a very rare occurrence and not Government policy—that there has been the rare occasion when the Leader of the House managed to slip through orders and business without, perhaps, the House having had a chance to provide due diligence. My hon. Friend the Member for Bristol East is today attempting to provide a safety valve. I am sure that the Minister would never seek to slip anything by the House. She is probably destined for greater and brighter things in the remaining four years of this Government, and will move on. My hon. Friend seeks to ensure that the Minister’s successors do not slip through processes without the Select Committee having had a chance to consider them.

11 am 

The Minister mentioned public scrutiny and referred to the Public Bill Committee. I hate to point out that, as I look around the packed public gallery and the vast number of journalists and experts from outside, I fear

they must have gone to the wrong room. I cannot think why the public would not want to be here. However, that demonstrates that the Public Bill Committee does not always provide a suitable public consultation process. My hon. Friend is seeking to provide a safety valve so that over a short period—three months—we can receive some outside input. I have many local companies that would take a close interest in the work of the OBR, as that is what they specialise in. 

The Bill is consensual, and the Minister will recall that we did not seek to divide the House on Second Reading. I hope that she will accept that my hon. Friend the Member for Bristol East has tabled these minor technical amendments in the spirit of that bipartisanship, and that she will take on board the issues raised. 

Justine Greening:  In response to the hon. Member for Dunfermline and West Fife, I think he was describing a different Treasury Minister. I can assure him, having been on the Back Benches and in the Opposition team, and now being a Minister, that the only way that the Government can slip through an order at the end of the day is if the Opposition are asleep on their feet. As a Back-Bench MP, I discovered that Back-Bench MPs are more than capable of holding Government to account. I have no doubt the hon. Member for Dunfermline and West Fife will do that over the coming years. 

I go back to my original comment: I would never try to slip through changes and I do not think that my successors would. I do not think that the way in which the House works enables that to happen. It is the responsibility of us all, as Minister, shadow Front-Bench team and Members of Parliament, to represent our constituents. I hope that, over the past few months when the draft charter has been available, there has been adequate time for not only the Treasury Committee but MPs, constituents, companies and other institutions interested in ensuring that the charter works well, to have the chance to scrutinise it. 

I can reassure the hon. Member for Dunfermline and West Fife that the Bill strikes the right balance, by going far further than the previous code for fiscal stability and making sure that Parliament approves the first charter and then any revised charter. He should bear in mind that the previous Government introduced some golden rules and then reinterpreted how they would work. Other than the normal debating process and the provision of an Opposition day debate through the ordinary channels, there was no way for the House to debate that mandate. We are for the first time putting in place not just the OBR but the charter, which will be debated and have a resolution of the House of Commons. The debating question will happen through the normal channels. We expect that it will be handled as a statutory instrument. It will go through that process of scrutiny and debate in a way that the previous code for fiscal stability did not. 

Thomas Docherty:  I am grateful to the Minister. I do not have her experience in the House, but I have observed from time to time a slightly injudicious use of programme motions. I accept that the previous Government suffered from the tendency as well, on occasion. However, does she not accept that, if we have a 90-minute debate on a SI, or the injudicious use of a programme motion, the debate would be curtailed? That, at least, would be avoided if the Treasury Committee, which does not have such constraints, debated the matter. 

Justine Greening:  By going down that route, we would have the dangerous precedent of Ministers starting to tell Select Committees what they would spend their time considering. The great thing about Select Committees is that they get to choose subjects themselves. We must be careful not to start mandating what inquiries Select Committees will and will not do. 

I have no doubt that, because the charter is fundamental to setting out our fiscal objective and mandate, the Treasury Committee will take a close interest. I hope that its members would also participate—as they already do, as I am sure that the hon. Gentleman sees—in relevant debates on the Floor of the House. Now we have the Backbench Business Committee, which can initiate its own debates, as well as the existing Opposition day debates, to ensure that such issues can be debated. I have no doubt that we have struck the right balance between ensuring that Parliament gets to approve the charter and any future changes to it and the Treasury Committee retaining some freedom about its work. 

Kerry McCarthy:  I was about to intervene on the Minister, but she sensibly sat down before I could do so. I have a number of questions arising from her response to my hon. Friend the Member for Dunfermline and West Fife. I will press her on a number of points and hope that she can intervene with the answers. 

The Minister said that it would be wrong to prescribe the role of the Treasury Committee too closely or to dictate its inquiries. She also said that that Committee not wanting to look at something as important as the charter or its modifications was inconceivable. I accept that that Committee is more than capable of deciding to look at the charter, and it will almost certainly do so, trying to fit that inquiry into its packed work programme. However, that is not entirely consistent with other provisions in the Bill, which give additional responsibilities to the Treasury Committee—for example, in relation to appointments. We have tabled other amendments to propose an enhanced role for that Committee, so it would be useful to clear up the issue now, before we get on to the other amendments and before deciding whether to press to a vote the amendments in this group that call for additional responsibilities for the Treasury Committee. 

Has the Minister or her officials had discussions with the Treasury Committee—in particular, its Chair—about the new role for the Select Committee under the Bill, how it would work and whether it thinks that it would be appropriate to take on such new responsibilities? I mean not the responsibilities set out in the amendments but those laid out in the Bill. That is important. I have already made the point that the Treasury Committee is busy—one could almost say overstretched. Would it feel capable of fulfilling the role? I am interested in what discussions the Minister has had with the Chair of the Select Committee, the Clerks or the people responsible for ensuring that it can carry out the role effectively. It is important to establish that before deciding whether the Treasury Committee ought to have an enhanced role. Can the Minister answer that? 

Justine Greening:  The hon. Lady should be aware that the exceptional responsibility of agreeing appointments has been discussed with the Treasury Committee before being included in the Bill. The process has worked well for the current Budget Responsibility Committee, as

she knows. Interestingly, the Treasury Committee’s approval of appointments will include an intensive pre-appointment hearing, which I hope will ensure that the Treasury Committee gets a good chance to grill potential Budget Responsibility Committee members and, indeed, future chairmen before agreeing whether they should be appointed. Of course, as I have said, there is nothing to stop the Treasury Committee looking at the provisions of the charter either. 

Kerry McCarthy:  I thank the Minister for that response. We have some additional questions, but perhaps they will be raised when we consider the provisions on appointments, particularly the appointment of non-executive members of the office. 

I shall turn to the question of public consultation. The Minister makes a reasonable point that the draft charter has been in circulation since November, but we are not in a position to judge what resemblance that draft charter will bear to the charter that is laid before Parliament. I accept that Parliament will then have a role in deciding whether the changes that have been made reflect the discussions held over the past few months. 

Will the Minister elaborate on what sort of response the Government have had to the consultation? I accept that the Treasury Committee has already had an inquiry, but has there been widespread interest, for example, from economists, think-tanks and people who are involved in the financial and economic sector? Have their views been taken on board in making amendments to the charter and is that reflected in the note that she mentioned—the seventh note? 

Justine Greening:  As the hon. Lady is aware, we have had substantial interest in the Office for Budget Responsibility. We have taken on board many of those comments. When we announced that we would set up the OBR, there was significant comment from the media, as well as from MPs. Organisations such as the International Monetary Fund have warmly welcomed the establishment of the OBR. We have not received any external comment per se as a result of the consultation—the draft charter—being out in the public domain. However, there has been an awful lot of debate about the OBR’s role and how it will work. Of course, such debate comes on the back of the first part of the process of the Bill passing through Parliament in the other place. That resulted in some amendments to the Bill and to some areas of the charter, to which I have drawn attention. We will now consider those areas, and we have set them out in a factsheet that is available from the Library. 

Kerry McCarthy:  Again, I thank the Minister for that response. 

Finally, I shall turn to the point about laying before Parliament. As I said in my introductory remarks to the amendments, I need to get a firm assurance from the Minister about how that will work. Some hon. Members—my hon. Friend the Member for Rhondda (Chris Bryant) comes to mind—are absolute experts on parliamentary procedure and can cite chapter and verse of Erskine May, what has happened in the past and precedents. I am sure that Dr McCrea is also an expert on such things, which is why he is chairing the Committee today. 

My understanding of the phrase “laid before Parliament” is that it could mean anything. I understand that written

ministerial statements and the remaining Orders of the Day, which often go though on the nod or unremarked upon, are laid before Parliament. In addition, statutory instruments considered in Committee are laid before Parliament. I am not necessarily concerned about future versions of the charter, to which there might be technical modifications or small tweaks, but about the first version of the charter that has been out in draft form since November. As the Minister has said, there has been considerable comment on and interest in that. Can she assure me that, when that charter is laid before Parliament, it will be in the form of a motion tabled by the Government that is then allocated time for debate? Or will Opposition Whips have to keep an eye on what is in the remaining Orders of the Day and shout “Object.”? As a former Whip, my understanding is that the Government would eventually table the charter for debate, to avoid a situation where it was always objected to and to get it through Parliament. Usually, there would be a 90-minute debate, or so. 

11.15 am 

Thomas Docherty:  My hon. Friend will recall that the Minister mentioned the Backbench Business Committee as one avenue for laying such provisions before Parliament. Does she agree that the problem with using that avenue is that there would be a non-binding vote, which the Government would be free simply to bypass? 

Kerry McCarthy:  I agree entirely with my hon. Friend. It slightly rang alarm bells when the Minister referred to the Backbench Business Committee. I welcome the innovation of having the Backbench Business Committee—it is an important avenue for putting items on the agenda for debate that would not otherwise be there—but it should not be a substitute for the Government doing what is required of them under Government legislation. Surely, it is the Government’s responsibility to ensure that the charter is properly debated, and the idea that the Backbench Business Committee would have to identify the fact that that was not being done by the Government and that this issue had slipped through the net, when only a certain amount of time is allocated to Backbench Business Committee debates anyway, is wrong. The fact that the Backbench Business Committee would have to use that time to do something that the Government ought to do in Government time is wrong.  

I suspect that that was not really what the Minister was suggesting and that it was just something that she was throwing into the mix. However, I would be very concerned if the Backbench Business Committee had some sort of responsibility to lay the charter before Parliament and if that was the only way that we could guarantee that it would be thoroughly debated. I want to push her on this point, as it is crucial to our decision about whether to press the amendment to a vote. What do the Government mean when they say that the charter will be laid before Parliament? 

The Minister said during her response that the charter will be laid before Parliament very promptly after the Bill receives Royal Assent. Our amendment proposes that it should be laid before Parliament within four weeks of the Bill receiving Royal Assent. I would have thought that “very promptly” and “four weeks” are within the same ballpark at least and therefore that this is a reasonable amendment for the Government to

accept, because we all know that timetables slip. Although there might be the desire, the good will and the intention on the part of the Government and the Treasury to lay the charter before Parliament very quickly after Royal Assent, such timetables do slip. The amendment would put in the Bill a requirement that the charter be laid before Parliament within four weeks of the Bill receiving Royal Assent. Given the projected timetable, we can therefore assume that the charter would be discussed thoroughly and definitely approved by Parliament before the summer recess. That is very important, as all the mechanisms would be in place for the Office for Budget Responsibility to run properly on a statutory basis. 

I think that I am making the final remarks on this issue—I do not know whether the Minister wants to put my mind at rest by intervening. What is the crux of laying this charter before Parliament? What type of debate would be allowed? I appreciate that that might partly be in the hands of Government business managers and the Whips Office. Nevertheless, can she give some assurances that there will be a proper debate on the charter? Also, can she say why there is a problem with the requirement that the charter should be laid before Parliament within four weeks of Royal Assent, because she seems to suggest that that will happen anyway? 

Justine Greening:  It is absolutely our intention to ensure that we lay a final version of the charter before Parliament within four weeks of the Bill receiving Royal Assent. I do not think that that requirement needs to be in the Bill itself. However, just to give the hon. Lady some reassurance, the charter will be approved in exactly the same way as the previous code for fiscal responsibility, which was established by the previous Government. Of course, as she has pointed out, the procedure will be agreed by the usual channels, but we would expect there to be a debate on the charter before a vote. I should also point out to her that this process will work like an affirmative resolution, not a negative one, so there will be ample time for debate. 

The hon. Lady mentioned my reference to the Backbench Business Committee. I believe she understood the point I was making: between this Parliament and the last one, Back Benchers, Whips and Select Committees are now even more able to propose debates. The House is more able than ever to debate what it believes is important. That is the overall approach. I hope that that provides her with some reassurance. We will have a similar process to that for statutory instruments—the same model that her Government used for the code of fiscal responsibility—and no doubt the usual channels, or Whips discussions, will ensure appropriate timetabling. 

Kerry McCarthy:  I thank the Minister for that response. We continue to have some reservations, although I am pleased with the assurances that she has given. It is important that the charter is properly scrutinised. I submit that the Treasury Committee should play a role in that, and there is certainly a role for Parliament in ensuring that the charter is approved. Given her response, we shall not press the amendment to a vote today, but we reserve the right to return to the issue later. I beg to ask leave to withdraw the amendment. 

Amendment, by leave, withdrawn.  

Question proposed, That the clause stand part of the Bill. 

Kerry McCarthy:  We have discussed in some detail the substantial measures in clause 1. As the Minister said, there has already been significant discussion of what will be in the charter. Clause 1 states that the charter 

“must in particular set out…the Treasury’s objectives in relation to fiscal policy and policy for the management of the National Debt…the means by which the Treasury’s objectives in relation to fiscal policy will be attained (“the fiscal mandate”), and…matters to be included in a Financial Statement and Budget Report”, 

and 

“such other material as the Treasury considers appropriate”. 

We will suggest through amendments certain things that it would be appropriate for the OBR to do. In particular, we have tabled amendments saying that its role should include looking at child poverty targets and the local government finance settlement. We could have included other issues, such as the 0.7% of gross domestic product target and various other targets that the Government have set for themselves in legislation. Perhaps, over time, the OBR’s role will expand to include such things, but we shall reserve debate on that until we actually get to those provisions. 

I have already dealt with laying the charter before Parliament and modifying it. I want to stress that it is important that the charter receives scrutiny. We are concerned that there is no such parliamentary mechanism. There is discussion about what will be in the charter, but the very fact that it is not part of the Bill means that we cannot treat it in the way that we would treat legislation and amend it through formal processes. That is slightly of concern when it is such a substantial part of what the Bill sets out. That is my main concern with clause 1. 

Justine Greening:  To sum up the debate on clause 1, it is fair to say that we are introducing the Bill that sets up the OBR at a time when fiscal policy is probably the single most important priority for the coalition Government. Given the fiscal situation that we inherited, the Government’s approach to fiscal policy should be presented to the public in a transparent manner. The charter for budget responsibility, which is established under the clause, is a key statutory document for achieving and maintaining that transparency. As we have discussed today, we have aided scrutiny during the consideration of the Bill by publishing a draft charter for budget responsibility on Monday 22 November 2010. 

Kerry McCarthy:  Perhaps I should have brought up the matter earlier, but I understand that the amendment that we drafted on the 12-week public consultation relates to a Cabinet Office requirement to hold formal 12-week consultations. Does the Minister regard what seems an informal consultation process since the draft charter was published at the end of November as meeting the Cabinet Office requirements? 

Justine Greening:  Ultimately, the effective consultation process that we have had will have run on for longer than three months. It will probably be about four months by the time that the Bill receives Royal Assent, so there has been ample time to scrutinise matters. As we have already discussed today, the progress of the Bill through Parliament began in the other place, where the debate not only on the Bill but the charter went on for several days. There has been significant chance for both the Bill and the charter to be debated. 

The hon. Lady’s point about the importance of the charter is right. There is a need to find a way for the Bill to place both the Office for Budget Responsibility and the charter on a statutory footing, but with the flexibility to respond to the desires of future Governments perhaps to change their fiscal policy objectives and their fiscal mandate. In drafting the Bill as we have, we will build in flexibility in the right way, while giving some accountability by having the charter go through an approval process in the House of Commons. 

Although the charter replaces the previous Government’s code for fiscal stability, it makes a minimum provision for the Government’s fiscal and debt management objectives and the targets for fiscal policy that deliver the fiscal objectives. Moreover, the fact that it establishes a mechanism by which the charter gets published by the Treasury but then has to wait to come into force until it has been approved by a resolution of the House of Commons will be a key safeguard in accountability. It will become a vital part of the new fiscal policy framework that we are putting in place. It will feature not only transparency, but more accountability to Parliament over time. I hope that I have dealt with many of the issues raised by the hon. Lady and therefore that the clause will stand part of the Bill. 

Question put and agreed to.  

Clause 1 accordingly ordered to stand part of the Bill.  

Clause 2 

Annual Budget documents 

Chris Leslie (Nottingham East) (Lab/Co-op):  I beg to move amendment 6, in clause 2, page 2, line 11, at end insert— 

‘(2A) If the Treasury Select Committee determines that the Financial Statement and Budget Report fail to conform with the provisions of the Charter, it may table a motion in the House of Commons requiring the Chancellor of the Exchequer to account for this failure.’.

Good morning. It is always a pleasure to serve under your chairmanship, Dr McCrea. The amendment would tighten the process for ensuring that the provisions under clause 2 make some logical sense. The Committee will see an interesting single word in subsection (2) under which a budget must “conform” to any provisions set out under the charter for budget responsibility. Obviously, there has been a lot of fanfare, pomp and circumstance around the creation of the Office for Budget Responsibility. It is a relatively benign measure, not something that will be discussed down the Dog and Duck pub in my constituency at any great length. 

Clearly, the current Chancellor of the Exchequer made a commitment as a device before the general election, and we now have the delivery of that commitment in a Bill that is relatively long, given that the measure is short. Sometimes, the civil service and those involved in drafting legislation feel the need to pad out clauses and expand them with extraneous measures that may not be wholly necessary. It is interesting that we have a requirement that any Budget should conform to the provision set out in the charter. 

11.30 am 

We will discuss the clause when we reach the stand part debate, but it commits the Government to an annual Budget. Hurrah. That is a fantastic piece of legislative reform. It commits them to presenting that Budget to Parliament. Yippee. That is a great step forward for democracy, although it has always happened that way. It commits them to publishing the Budget. What an amazing advance for democracy that is. I cannot think of a single circumstance or reason why we would need to have in statute a requirement for the Budget to be published. Does the Minister have in mind a set of circumstances whereby a Budget would take place in secret and not be published? [ Laughter. ] Well, clause 2(4) says that the Treasury must publish the Budget. I cannot see the Minister’s logic for wanting to state that the sun will rise in the morning, that the sky will occasionally be blue and that the Chancellor will publish a Budget. 

Thomas Docherty:  Perhaps the Minister is concerned that some Government Members tend to forget what their jobs are, as we saw last week with the Deputy Prime Minister. 

Chris Leslie:  Indeed. “Oh yes, I am supposed to be in charge” is what I think the right hon. Gentleman said. Maybe it is for their own benefit, as an aide memoire. “From Chancellor to self: remember to go to Parliament and publish one’s Budget.” That must be the logic. 

What worries me most is this concept of conformity. It is left undefined in the Bill. Often, legislation has an “Interpretations” clause at the end, which says, “In this section, conformity means ‘as referenced in another piece of legislation.’” That, however, is not the case here, so we are left asking the Minister to define what she means by “conform”. Does she mean broadly conform with the charter for budget responsibility? Does she mean conform to the spirit of that charter or the very letter of the charter? Is conformity something that happens in the eye of the beholder, in the eye of the Treasury alone, or in the eye of the Office for Budget Responsibility? 

As I read the duties of the OBR, it is not its role to test for conformity, but merely to examine and report on the sustainability of the Government’s plans, as long as it is something better than a 50% chance of compliance, which is a little like flicking a coin in the air and saying, “It is sort of about right.” The OBR has certain responsibilities, but they are not to test for conformity with the charter. If we have a charter and we go through all this effort to establish the august document, and we put into statute law primary legislation—the Minister has made several references to the fact that certain things are not necessary in law—I want to hear from her what she means by conformity. Can she shed any further light on it? 

For example, how will conformity be enforced? Can the Minister say what the consequences will be if an individual made an allegation that the Budget does not conform with the charter for budget responsibility? What happens if someone feels that it does not conform with those provisions? Is that a, “Well, too bad, nothing comes of that”, or is there some particular device? In amendment 6, we have suggested a device for testing

conformity. If the Treasury Committee feels that it needs to take the role of an arbiter of conformity, the amendment would allow it to trigger a motion in the House of Commons, requiring the Chancellor to account for the failure. I like the device of bringing people to the Bar of the House of Commons to account for their failure. That might be a bit excessive, but requiring the Chancellor to come to the Chamber at least to account for failure to conform might be a useful addition to the clause. Enforceability is important. 

Perhaps a more important question for the Minister to answer is whether the provision is justiciable. In other words, would a court have the right to test for conformity? Before which court would a case be brought? Would a case for judicial review be allowable in such circumstances? By establishing the test for conformity, are we allowing the judiciary a say in our financial and economic policy? If that is her intention, I would be interested to hear about it. By putting it in statute, we are opening the door to a judicial review to test for conformity. Can she say specifically what would happen in a case that involved testing the justiciability of that point? 

Also, what are the consequences of any failure to conform? Putting the provision into the clause implies that there will be consequences if, for example, the charter is disregarded or cast to one side or the Budget is not congruent with it. Will the Minister elaborate on that point? It is curious and interesting that the word is in the Bill, but it would be otiose if it were there to pad out a clause in order to make the Bill appear grand. I am sure that that is not the case, and that there must be a reason for having it there. 

Alison McGovern (Wirral South) (Lab):  It is a pleasure to serve under your chairmanship, Dr McCrea. I want to add a few words in support of the amendment and about the natural tension between economics and politics on this matter. The process that we are going through brings to my mind some of the tensions and discussions that arose when the independent Bank of England was created by the previous Government. There is a natural conflict between accountability and independence in bodies such as the Bank of England or the OBR as created in the Bill, and some of the comments that my hon. Friend the Member for Nottingham East made draw out that conflict. We as parliamentarians and our constituents want a body that acts in the way that it deems best for our economy, but is accountable to us in Parliament. Getting the mechanics right through scrutiny of the Bill is crucial. The amendment questions a method of accountability that it is important to scrutinise. 

As well as how we weigh independence and accountability and get the balance right in setting up the process, there is a second, economic conflict between the Government setting up rules to which they say they want to stick, the broader forces in the economy believing those rules and the Government having the ability to respond to crises. History and basic common sense tell us that further economic crises will occur. The Bill requires conformity, but it is important to ask what will happen if that conformity does not occur. That might happen because a future Chancellor cannot be bothered or does not read through his Budget properly—[ Interruption. ] The hon. Member for Scarborough and Whitby said, “Unlike the last one.” I shall ignore those remarks from a sedentary position. I could talk for hours about the previous Government’s economic policy, but I will not test your chairship in that way, Dr McCrea.

A future Chancellor of the Exchequer might produce a Budget that does not conform for some other reason, perhaps in response to some fact about the economy or some economic shock. In my view, we should not rule that out and say, “That would never happen because that would not be sticking to the rules that the Government set for themselves.” I think we should say, “If that happens, this is what would happen”—perhaps the suggestion that the Chancellor accounts to Parliament. Failure may mean dramatic personal failure, but it may also mean that something has not happened for whatever reason. That would provide extra accountability if some unexpected economic or other shock affected what the Chancellor needs to put in the Budget. That raises the issue that although the Government have, of course, the responsibility for setting up a Budget that sticks to the financial tests that they set themselves ahead of time, they also need to respond, because, at the end of the day economics and politics is about the good of the people. They are not about sticking to the rules merely for their own sake. They are no good as a law unto themselves; they are good only in so far as they support people’s well-being. 

I should be grateful if the Minister explored the matter a little more, as my hon. Friend the Member for Nottingham East suggested, and explained the meaning of conformity, how that conformity will be accounted for, and how, if for some reason there needs to be a lack of the conformity that we all want and expect, we ensure that we set up the rules properly so that its absence can be accounted for properly to Parliament. 

Justine Greening:  First, I should explain to hon. Members that the previous Government put the same provisions in legislation in section 155 of the Finance Act 1998. Clause 10 repeals that section, so clause 2 reinstates those aspects and allows for further provisions in the charter to aid transparency. Far from being some big deal on putting things in law, it ensures that things stay in law. 

I had a flashback to the debate on the Fiscal Responsibility Bill, and I am sure that many of the points that the hon. Member for Wirral South made were raised by me when the previous Government sought to enshrine in law specific targets that would have been breached by changes in economic circumstances and left no flexibility. We have tried to move on from that. The issue that she raises is flexibility, and ensuring a broad course of where the Government are trying to reach in their economic policy, but at the same time ensuring flexibility. That is what we are trying to put in place, and we have the Bill, which references and sets up the charter. In that charter there are fiscal objectives and a mandate. 

We have been clear about our mandate and our fiscal objectives, and that we are determined to tackle the deficit over the course of this Parliament, ensuring that we get rid of the structural deficit, so that we are in a position to start tackling the debt crisis that we have been left. We recognise, of course, that future Governments may choose to have different objectives, and the charter

gives them the flexibility to change the objectives, but at the same time gives Parliament the ability to debate them. 

Alison McGovern:  The hon. Lady referred to a future Government wanting to change policy. Will she say briefly whether her Government will respond to circumstances and whether the charter offers flexibility? If unemployment was well over 3 million, could the Government use flexibility in the charter to alter their course and tackle that social ill?

11.45 am 

Justine Greening:  As I have said, we have been clear. We have set our fiscal mandate and objectives and we aim to achieve them. One reason this country has avoided going down the route of countries such as Ireland and Greece is because, for the first time in many years, those objectives and that mandate have some credibility. Part of the problem was that although we had a code for fiscal stability, the rules and objectives were changed far too often and ended up with a lack of credibility. The hon. Lady will be familiar with the so-called golden rule. Once it became clear that the Government were having problems keeping to it, they simply redefined when the economic cycle started and might end. That is precisely what this Government want to avoid. The charter provides some flexibility for the Government to put in place their fiscal objectives and mandate. This Government are clear about our fiscal objectives and mandate, and we intend to deliver them. 

The Bill requires the Budget report to conform to any provision set out in the charter, and that provides a clear basis for calling the Treasury to account if it does not meet the provisions. If the Treasury—under any Government—produced a Budget report that failed to comply with the minimum requirements, any hon. Member, including members of the Treasury Committee, would have the right to call Treasury Ministers to account. It is unnecessary to create an explicit mechanism for that in the Bill. 

Chris Leslie:  What is the procedure for any Member of the House of Commons to hold the Chancellor to account specifically on clause 2? Is that the same random chance as putting in for the lottery of oral questions, or is it something slightly better? 

Justine Greening:  There is absolutely adequate provision in House procedures for Treasury Ministers to be called to account. I understand the hon. Gentleman’s desire to codify everything, although I do not agree with it. Hon. Members must be prepared to use the fact that the Houses of Parliament exist to provide that accountability, and the Chamber exists to deliver accountability on behalf of our constituents. If we go down the route of having to set out in the Bill the mechanism whereby any issue may be raised and debated, it will become impossible. There is the Treasury Committee, and on top of that, any hon. Member would be able to call a Treasury Minister to account if they failed to comply with the legislation. 

Chris Leslie:  The Minister is correct—any hon. Member can test and hold Ministers to account. However, she is putting in the Bill a requirement for the Budget report to conform to the charter. Other than simply stating

that requirement, is there any reason for putting it in the Bill if it is not enforceable in any way other than the normal ways? Why put it in the Bill if it is a matter of normal accountability? I am not clear about the motivation for stating it in statute. 

Justine Greening:  If we set up the charter and there was no clause or reference in the Bill to state that the Treasury had to conform to it, I suspect that the hon. Gentleman would complain about that instead. The provision in the Bill is pretty sensible. It will work effectively and there are adequate safeguards in place for the House to use the provisions in the Bill. There is no reason why we should not do that. 

For me, there is a flashback to the Fiscal Responsibility Bill, which gave the House no recourse to hold Ministers to account if they failed to deliver. I remember the debate. There was nothing in that Bill about the consequences for Treasury Ministers if they failed to deliver, which was one reason why it suffered a lack of credibility. We had the ability to debate the Bill, but it went no further than that. I am absolutely happy that we now have the right safeguards. 

Sheila Gilmore (Edinburgh East) (Lab):  Will the Minister explain precisely how the clause makes Ministers more accountable? Would it not be better for the Treasury Committee to have the opportunity to express a view on such an important matter? The Minister has stated that she believes that it would be necessary. 

Justine Greening:  I draw the hon. Lady’s attention to my opening remarks. The clause effectively puts back measures from a previous Finance Act. The Treasury Committee can indeed carry out such an inquiry; if history is anything to go by, it will always conduct an inquiry into the Budget. It would be wrong to imply that it does not have that ability by codifying such matters in legislation. 

Chris Leslie:  I am waiting for the Minister to address the more specific point. Even if we were to accept that the provision gives Parliament extra recourse to test for conformity, which it plainly does not—the clause gives Parliament no powers over the Executive—the present 650 Members of Parliament would be able to check for conformity, but the other 650 million citizens of the United Kingdom of Great Britain and Northern Ireland would not have recourse to check the conformity of a Budget with the charter for budget responsibility. 

I specifically asked the Minister about the justiciability of the provision. I should be grateful if she could explain how if a member of the public felt strongly that there was a disjoint between the charter and the Budget, the provision would help them to check the Executive and test for conformity. Is it to be done by making an application through the civil or county courts for judicial review? At what point would that be elevated to a higher court? What support would be available for members of the public to test for conformity, or would it be the normal justiciability test? 

I should be grateful if the Minister could elaborate on that point. Clearly, she will want transparency and openness for the widest possible range of members of the public. I would be interested to hear her views. 

The Chair:  Some of the matters raised in this debate would fall more appropriately in clause stand part. I draw that point to the Committee’s attention, and ask Members to be careful. 

Justine Greening:  For clarification, I can tell the hon. Member for Nottingham East that conformity is a duty on the Government set out in law. We expect the matters of conformity of which he spoke to be dealt with by Parliament and not by the courts. 

Chris Leslie:  That was an interesting and helpful intervention. The clause does not exclude the courts, although the fact that the Minister’s utterance is now on the record will no doubt give members of the judiciary pause for thought when considering applications for judicial review of a Budget, a financial statement or a Budget report. However, despite the fact that the Minister has voiced that opinion, I am not sure that passing the Bill in this form will necessarily exclude the courts from a role in testing conformity. If that is the Minister’s intention, I strongly suggest that she consider tabling an amendment on Report to clarify that the matter is outwith the consideration of the legal processes. If that is not her intention, clearly it will leave some wiggle room for the court to take a view on the Budget. It would be an interesting set of test cases. It is far better to address the amendment, and ensure that we have a test for conformity and for failure to conform that is clearly within the parliamentary process. 

On further reflection, the Minister may wish to write to the Committee and perhaps consider the amendment in more depth; Opposition amendments may not be drafted perfectly, as she knows. If she feels that it would be helpful, we, on this side of the Committee, are more than happy to help improve legislation. That is, after all, our duty. We can go through the usual channels to have that conversation. It would be a shame to pass over the amendment without recognising that this is probably an area where Treasury Ministers have not seen a potential problem. 

The Chair:  As the Minister is not responding, does the hon. Member for Nottingham East wish to press the amendment to a vote? 

Chris Leslie:  Given that the Minister is clearly pondering the proposal in more detail than I expected, I will withdraw the amendment. It might be wise to come back to it on Report, although I hope that the Minister will take the initiative. I beg to ask leave to withdraw the amendment. 

Amendment, by leave, withdrawn.  

Question proposed, That the clause stand part of the Bill. 

Chris Leslie:  I have a couple of specific points. The Minister said that the provisions were, in many ways, “cut and paste” provisions from previous legislation. In the process of cutting and pasting, did she cast her eye over the necessity for the provisions in law? I am sure that she would not simply scan her computer cursor over a previous piece of legislation and paste it into the Bill without considering whether the provisions were necessary. 

I was not party to the debate in Parliament when it was felt necessary—that is what the Minister said—to put in statute that the Treasury should publish a Budget. If that is the case, can she say, for example on the first of the subsections, on publishing a Budget for each financial year, why she has not taken the opportunity to say that a Budget should take place before each financial year? We will have two Budgets in this financial year: one took place in June and one is due on 25 March. I think we had one at 7.22 am on the day of the most recent Treasury questions, when the Chancellor changed the banking levy arrangements, but that may not count as a Budget report. 

Presumably, if we have a Budget report for each financial year, it would be ideal to have the Budget set out ahead of the financial year, so that the wider economy—the wider world—could prepare and plan for the year. Given the move towards fixed-term Parliaments and a more rigid calendar, why not say that the Budget should take place before each financial year? 

The only other point I want to raise with the Minister on the clause is about the publication of the financial statement and Budget report. I notice that under later provisions in the Bill the Office for Budget Responsibility will have sight of the methodology and costing models for various elements of financial policy decisions. Will the Minister take this opportunity to say that the Budget report will include the publication or, at the very least, the lodging in the House of Commons Library of the methodologies and costing models that the Treasury obviously has and is providing to the OBR for modelling any fiscal policy changes? That level of transparency would certainly be welcome. I imagine that now we know that those methodologies are real and portable to the OBR, they are in a form in which they could be published or made available. Will the Minister take this opportunity to ensure that that level of detail is part of the publication scheme that she envisages? 

12 noon 

Justine Greening:  Clause 2 creates a statutory requirement for the Government to have an annual Budget and to report on that Budget to Parliament. I do not think that this is a controversial clause, although as the hon. Gentleman pointed out, in recent years we have seen more than one annual Budget. That is probably symptomatic of the awful financial situation that the previous Government created. As he pointed out, we had reached a position in which the pre-Budget report had become almost a mini-Budget. Conservative Members felt that those constant reforms of fiscal policy were not helpful, so I can tell the hon. Gentleman that we want to move towards having a single Budget and removing the pre-Budget report. The hope is that that will help the Government to deliver a more stable and simpler tax and benefits system. It will also mean less frequent adjustments to public spending totals. In many respects, clause 2 takes us back to the sort of fiscal and financial calendar framework that we need—one that has more certainty around it. 

I was interested in the hon. Gentleman’s comments about the timing of the Budget. Obviously, the Government do retain some flexibility over the timing of the Budget. As he will be aware, we have said that this year’s Budget will take place in just a few weeks’ time, on 23 March. I would be interested to know whether he is announcing

an Opposition policy to shift the Budget from March to a different part of the year, which he seemed to be suggesting if he was saying that the Budget should take place before the financial year. 

Chris Leslie:  My understanding is that 23 or 25 March is before the financial year to which the Budget applies. Presumably, most of the provisions in the Chancellor of the Exchequer’s Budget in a few weeks’ time will relate to the period from April 2011 onwards. That was the point that I was making. Presumably, the Minister intends to normalise the arrangement so that a Budget would not take place once a financial year to which it substantively applied had already commenced, because obviously that would be helpful for wider planning purposes. 

Justine Greening:  The hon. Gentleman sets out one reason why we want to move to an annual Budget event. Obviously, Governments have flexibility about when they timetable such events. As an incoming Government, we had an emergency Budget in June. That was very much in response to the exceptional circumstances that we took over. I am talking about the economic situation that had been bequeathed to us. 

On the hon. Gentleman’s point about publication of methodologies and costing models, one benefit of having the OBR in place is that it will publish its independent assessment of economic forecasts. As a result of that, as hon. Members will see in relation to later clauses of the Bill, it will also need to set out the key risks that it perceives to those forecasts and the assumptions that lie behind them. That will provide a level of transparency that certainly under previous Governments we never had. 

Chris Leslie:  The Minister implies that now that the OBR will be privy to the methodologies and costing models that the Treasury has historically kept to itself, the rest of the world should automatically trust that and be content with it. I suspect that in this era of openness and freedom of information, many people will not feel that that goes far enough. I would be grateful if the Minister could confirm that, with the methodologies being in a form that is transferable to the OBR, they would presumably also be subject to freedom of information legislation. Would it not be preferable if the Treasury voluntarily made available to specific economists, the Institute for Fiscal Studies, the House of Commons Library and any member of the public who is interested in seeing the basis on which the Government calculate their costings on, for example, fuel duty or income tax, whatever changes may be available to the Chancellor to make? Surely those methodologies and costing models ought to be appropriately in the public domain, otherwise people may suspect a bit of jiggery-pokery. I am sure that that would be incorrect, but it would be better for the Minister to take a stand, to put her best foot forward and to say absolutely clearly that those will be public. 

Justine Greening:  The hon. Gentleman is right to say that people used to suspect jiggery-pokery. That is one reason why we felt it necessary to bring in the OBR in the first place. All too often there was huge scepticism about economic and fiscal forecasts that had been produced

by a Treasury where the Chancellor got to pick what he thought the growth forecasts should be. The whole point of the Bill is to have that work done independently of the Treasury and then to have it published. The hon. Gentleman talks about the Treasury being transparent. Of course, both the Treasury and the OBR will be subject to the Freedom of Information Act. I am sure he will have welcomed the fact that the emergency Budget and the spending review published more analysis of information than was published in the past. I hope he will welcome all those things. 

Question put and agreed to.  

Clause 2 accordingly ordered to stand part of the Bill.  

Clause 3 

Office for Budget Responsibility 

Kerry McCarthy:  I beg to move amendment 7, in clause 3, page 2, line 17, at end insert— 

‘(3) The relationship between the Treasury, Office for Budget Responsibility and the Bank of England shall be formalised in a Memorandum of Understanding agreed by the three organisations and laid before Parliament within three months of this Act receiving Royal Assent.’.

As you can see, Dr McCrea, the Opposition are doing something of a double act and I am alternating with my hon. Friend the Member for Nottingham East. I was about to refer to him as the hon. Member for Shipley, which would have raised more than a few eyebrows. It would be quite entertaining if the hon. Member for Shipley (Philip Davies) were on the Committee and giving his views on these matters. I do not think I have ever been on a Committee on which he has served. Perhaps the Government Whips Office think he is better used on a Friday for private Members’ Bills when he does a sterling job filibustering, but I digress. 

The amendment highlights our difficulties in discussing the operation of the Office for Budget Responsibility. It would be difficult to have a clause stand part debate on this clause because everything that relates to the day-to-day functioning and governance of the office is contained in schedule 1. We will probably reach that schedule later this week. The substance of what we have to say will probably end up being debated then. The role of the Treasury is significantly changed by the establishment of the OBR. Certain functions are removed from the Treasury and, rather than simply being put at arm’s length, they are put on an independent footing. 

Clause 10 repeals the fiscal framework that was set up by the previous Labour Administration, so it repeals the 1998 provisions and the code for fiscal stability. It repeals the Fiscal Responsibility Act 2010, which set out the previous Chancellor’s mandate to halve the public sector net borrowing requirement as a proportion of GDP by 2013-14. It also repeals the Industry Act 1975, which put a requirement on the Treasury to provide biannual economic forecasts. The OBR will now have the primary role of making such forecasts. 

Questions have already been asked about the overlap between OBR forecasts and Government announcements and whether it is happy coincidence that certain forecasts are made at certain times. It is important that there is some way of documenting or formalising the relationship between the Treasury and the OBR. We have included the Bank of England in the amendment as well because the Bank has a similar role to the OBR in monetary

policy. Some of the structures, as we will come on to discuss, will also be quite similar to the role of the independent Monetary Policy Committee and its relationship with the Treasury Committee. It is the similar concept of having that arm’s-length, independent role of forecasting, advising and making decisions. 

It is important that there is understanding of how the relationship between the OBR and Treasury will operate. The underlying concern is that the Treasury should not interfere in the work of the OBR. When we get to the amendments tabled to schedule 1, we will debate the provisions in more detail. For the OBR to do its job properly, it has to be adequately resourced and have a budget of its own. We have seen in countries such as Canada and Sweden that when their equivalent of the OBR said things that were not entirely palatable to the politicians, their budgets were cut, so they were not able to do their job properly. I am sure that we will come on to that and debate it at the appropriate time. 

Perhaps there are echoes of the tripartite agreement between the Financial Services Authority, the Bank of England and the Treasury—[ Interruption. ] The Minister says from a sedentary position, “That didn’t work very well.” I would not accept all her criticisms of the way it worked. The concept it established was that if there are three different organisations—in that case, the Bank of England, the Treasury and the FSA—that all have a role in financial regulation and in looking at the broader forces at work in the economy, that relationship needs somehow to be put on a formal footing. We are suggesting through the amendment that there should be something similar. 

We are also suggesting that there should be a role for Parliament in scrutinising that relationship, and that a memorandum of understanding should be laid before Parliament within three months of the Bill becoming law. If the Minister does not think that there should be a formal arrangement such as that, will she elaborate on exactly how the relationship will work and be monitored? How does she think Parliament will be able to challenge the relationship if it is seen to be out of kilter; for example, if the Treasury is seen not to be allowing the OBR to do the job that it has been set up to do, or if there is not sufficient co-operation between the Bank of England and the OBR, which, given its economic forecasting role, I imagine would be quite important? Does she think that there should be a formal memorandum? If not, what else would she put in place? 

12.15 pm 

Alison McGovern:  I should like briefly to emphasise the remarks made by my hon. Friend the Member for Bristol East. Of course, the roles of the bodies that are working on economic stability in the Government’s fiscal position are interconnected, so the amendment is important. Again, if there were a crash, a lack of appropriate regulation, or a need for cross-working between the OBR and the Treasury, it would be incredibly helpful for Parliament to understand, ahead of time, how that might happen or what the rules of the game might be. We can only try in Committee to set up institutions and bodies that are fit for purpose in advance of knowledge of such events. In doing so, it is important to accept that their roles are necessarily interconnected. 

I would appreciate the Minister’s comments about division of roles and cross-working. Is it worth exploring what work we can do ahead of time to understand how that would work, perhaps, as the amendment suggests, through some kind of memorandum of understanding? 

Justine Greening:  I shall briefly discuss the memorandum of understanding in relation to the OBR and the Bank of England, then I shall talk about it in relation to the OBR and other departmental bodies, including the Treasury. I shall try to address the point made about interference and independence. 

The OBR and the Bank of England are independent bodies that have different functions and will make their own judgments. Obviously, the Bank of England has a monetary policy and financial stability role, whereas the OBR’s role is to examine and report on the sustainability of the public finances. Interestingly, the chair of the OBR has said that he expects the OBR and the Bank of England to have common interests, and that they may regularly exchange views. Ultimately, however, whether working relations are formalised in a memorandum of understanding is rightly a matter for the independent OBR; it is not a matter for primary legislation. 

Hon. Members have mentioned the tripartite agreement, which, as we saw, spectacularly failed. There was, however, a memorandum of understanding between the Bank of England, the Treasury and the FSA. We think that in future it should be for the independent OBR to decide how it wants to work with the Bank of England. 

On the OBR’s working relations with public bodies and the Treasury, as the Treasury Committee noted, given the size of the OBR and the nature of its work, it will need to work closely with other public bodies. I agree that such a working relationship must be clear and transparent. 

Kerry McCarthy:  Before the Minister moves on to the broader points, will she clarify what she means by its being a matter for the OBR to decide how it wants to work with the Bank of England and, presumably, the Treasury? What would happen if those bodies had different ideas about the Bank of England’s role? They might have different ideas about providing information, about meeting and so on, and those are the kinds of matters that a memorandum of understanding would contain. What if the OBR meets resistance from the Treasury and the Bank of England in relation to what it thinks is necessary for it to do its job? 

The amendment would put that matter in the public domain, because a formal memorandum of understanding would be laid before Parliament and debated in the way that we mentioned when we discussed the amendments to clause 1. If it is up the OBR alone to decide how it wants to work with those bodies, it is an undercover— 

Justine Greening:  It is independence. 

Kerry McCarthy:  Well, the Minister says that, but we are not suggesting that we should dictate to the OBR how it works with those bodies. Our concern is to protect the OBR by making sure there are guidelines for it to be able to do its job properly. That includes ensuring that the relationship between it, the Treasury and the Bank of England—that three-party working—is set up in a way that best benefits the office. 

Justine Greening:  First, let us distinguish between the need for a memorandum of understanding between the OBR and the Treasury—with which I agree—and whether the Bill should tell the OBR how it should work with another independent body, the Bank of England. I do not think it is for us to dictate to the OBR how it should work with the Bank of England. That is rightly for it to decide. I do agree that we need a detailed memorandum of understanding between the OBR and the Treasury, which is in preparation. We are also preparing detailed memorandums of understanding between the OBR and Her Majesty’s Revenue and Customs and the Department for Work and Pensions. That is line with recommendations from the Treasury Committee, when it looked at the issue last year. Those memorandums of understanding will set out roles and responsibilities for each body, and will hopefully ensure that working relations are accountable and transparent. In doing so, they will support the independence of the OBR. 

Alison McGovern:  Will the Minister clarify who will publish those memorandums of understanding, especially in relation to HMRC and DWP? Will it be those Government Departments or the OBR? 

Justine Greening:  We are still in the business of putting together the detailed memorandums. To the extent that the OBR is going to be—and should be—independent, we will need to talk to it about how to tackle publishing the memorandums of understanding. They will be in the public domain and ultimately there will be a shared document, because they will set out a working relationship between the various parties that they concern. We agree that something needs to be in place, and the charter establishes that that will happen. We think that the independent OBR needs to work out how it is going to work with the independent Bank of England. I hope I have now addressed the concerns of the Committee. 

Kerry McCarthy:  I am not sure that the Minister has, although it is something that is difficult to tease out until we get to more detail on how the OBR will be governed, funded and all those other issues. The obvious concern is, given what has happened in other countries, that an office of budget responsibility can seem like a good idea at the time. As my hon. Friend the Member for Nottingham East said on clause 2, the idea of the OBR was announced to an extent as a political mechanism. It made the point that we needed arm’s-length economic forecasts; that we needed to divorce economic forecasting and some of the OBR’s other responsibilities from Government; and that we needed less political interpretation and more reliable empirical evidence and interpretation of economic data. It is widely accepted that it was announced by the Chancellor as much for political reasons as for economic management ones. 

The OBR is finding its feet and is already functioning on a non-statutory footing. As we reach a situation where it starts to function on a statutory footing, it may not seem to the Chancellor such a good idea to have set up such a body. As the forecasts are announced, with some criticism of the Government, and as some conflicts arise, one can imagine the Chancellor thinking, “I have created a rod for my own back.” That is why we are concerned that we do not have the situation that arose in Sweden and, I think, Canada. When Ministers there

were unhappy with what their equivalent of the OBR had done, they said, “If you carry on like this, we will cut your budget, so you can’t do your job properly.” If the relationship broke down here, I cannot imagine that the Chancellor would be so indiscreet as to say something like that publicly about the OBR. None the less, one can imagine that behind the scenes there might be efforts to curb its activities, to rein it in and to try to make it a little more helpful to the Government of the day. That is why we think that the measures should be a little more detailed. 

I am glad that the Minister has confirmed that there is a memorandum of understanding between the Treasury and the OBR. I did not quite catch the Minister’s answer to my hon. Friend the Member for Wirral South about the efforts that would be made to put the memorandums of understanding with the DWP and HMRC in the public domain. Perhaps the Minister will update me on that and say not just whether these memorandums of understanding will be put in the public domain but whether there will be an opportunity to challenge them. It is not so important to challenge what is in the memorandums, but we should have the opportunity to scrutinise them. If the OBR felt that the DWP, the Treasury or HMRC were not adhering to the spirit and the letter of the memorandums, Parliament should be made aware of it and either the Treasury Committee or Parliament should have a role in sorting it out, rather than the squabble being conducted on the financial pages of the newspapers. Will the Minister say to what extent the detail of the memorandums will be made public and whether we as parliamentarians could use it to hold the parties responsible to account? 

Justine Greening:  I assume that the hon. Lady has finished summing up her proposed amendment, or is she just asking me to intervene? 

Kerry McCarthy:  If I finish my summing up, we move to deciding on whether to vote on my amendment. If the Minister wants to respond, she must intervene on me. I will then respond to her point when I continue summing up. 

Justine Greening:  Rather than intervening every time the hon. Lady asks a distinct question, I will listen to her questions and come back to them when I respond. That will give me a better chance to respond to her whole argument. 

The Chair:  We will be dealing with the amendment, and whether it is to be pushed to a vote, before the stand part debate in which you will be responding. When Kerry McCarthy is finished, we come to the decision on the amendment. 

Justine Greening:  Thank you for that clarification, Dr McCrea. In response to the points, the memorandums of understanding, as I explained earlier, will be published as joint documents. The independence of the OBR is what this Bill puts in place—in terms of the people who run it, how it is set up, the governance structure and the OBR’s relationship to the Treasury and Parliament. The hon. Lady specifically mentioned the budget. She will be aware that the spending review gave the OBR a

settlement over five years, so there is no question, certainly for the duration of this Parliament or Government, that pressure will be put on the OBR through its budget. 

Kerry McCarthy:  I thank the Minister for that clarification. I still have some residual concerns about how the relationship will work, but perhaps it is something that can be revisited once the structures have been in place a bit longer. I certainly hope that as we come to debate the role of the OBR in the months and years to come, we can assess whether the relationship between the office, the Treasury and the Bank of England should be discussed. On the basis of the debate that we have had to today, I beg to ask leave to withdraw the amendment. 

Amendment, by leave, withdrawn.  

12.30 pm 

Question proposed, That the clause stand part of the Bill. 

Kerry McCarthy:  I do not have much to say, as this two-line clause simply states that there will be an Office for Budget Responsibility, and I think that we all accept that there should be one. It would have been helpful to debate schedule 1 with the clause, as it is difficult to say anything about the establishment of the OBR without doing so, but we will move on to some of the issues that we would have raised in this clause stand part debate when we reach the schedule. 

Question put and agreed to.  

Clause 3 accordingly ordered to stand part of the Bill.  

Clause 4 

Main duty of Office 

Chris Leslie:  I beg to move amendment 12, in clause 4, page 2, line 20, at end insert 

‘The Office shall also examine and report on the impact of Treasury policy on the duties of the Secretary of State under section 2 of the Child Poverty Act 2010.’.

The Chair:  With this it will be convenient to discuss the following: 

Amendment 13, in clause 4, page 2, line 20, at end insert 

‘The Office shall also examine and report on the impartiality of the local government finance settlement as it is applied across local authorities in England.’.

Amendment 8, in clause 4, page 2, line 20, at end insert— 

‘(1A) Sustainability will be defined in its reports by the Office and will include, but not be limited to, consideration of public sector net borrowing, national debt, gross domestic product, economic growth, employment and risks to UK finances.’.

Amendment 9, in clause 4, page 2, line 27, leave out ‘one occasion’ and insert ‘two occasions’. 

Amendment 10, in clause 4, page 2, line 30, at end insert 

‘over the next five years.’.

Amendment 11, in clause 4, page 2, line 37, at end add— 

‘(7) The Office will take an active role in informing public debate on fiscal sustainability and will convene a fiscal sustainability research committee of interested authorities in the public and private sectors.’.

Chris Leslie:  These are differing amendments, but they all relate to the duties of the Office for Budget Responsibility. What the Government envisage as those duties are set out in clause 4, which is clear. On reflection, however, it seemed to the Opposition that the Government are taking a desiccated and a slightly accountant’s-eye view of what public finance sustainability ought to include. I do not wish to disparage the accountancy profession in any way, shape or form, but there is more to life than simply measuring numbers. We ought to be in the business of improving society and focusing on the outcomes of public finance, and not fetishistically obsessing about deficits at the cost of all other public services, the economy, jobs, growth and so forth. 

Justine Greening:  Is the hon. Gentleman saying, as a member of the Opposition Treasury team, that the Treasury should not worry about numbers when tackling the deficit? 

Chris Leslie:  No The Minister heard the word “deficit,” but she forgot that the point I was making was about her fetishism about the deficit. There is a sense of obsession about one aspect—an important aspect—of our public finances. As we know, the Minister and her Treasury colleagues are completely blinkered and blind to the impact on the rest of the economy of some of her policy decisions when it comes to her painful and swift approach to closing the deficit. 

One policy area that we should consider, and which we felt ought to be within the remit of the OBR, is whether Treasury policies have a positive or an adverse impact on levels of child poverty. After all, what could be more important than ensuring that the children of future generations have a decent education, decent living standards and more opportunities open to them than was the case in preceding generations? No doubt, the Minister will say that that is just one area of public policy, and it is not necessary to put it in the Bill. 

If we have an Office for Budget Responsibility, we are essentially testing whether Budgets are responsible. The only way of knowing that is by looking at their impact on society as a whole. Therefore, it is entirely relevant—in fact, necessary—to flesh out the duties that fall to the OBR by having it look at the rather regressive steps that the Treasury sometimes takes, as it unfortunately has in Budgets under this Conservative-led Administration. 

Child poverty is obviously significant and, unfortunately, persistent in many parts of the country. The Child Poverty Action Group reported last week that an estimated 12,000 children in my constituency in Nottingham—about 23% of all children in the constituency—are living under its definition of severe poverty. That is unacceptable and more steps need to be taken to eradicate it. 

It is good that we have the Child Poverty Act 2010, but there are increasing signs that the Treasury is affecting what happens, front and centre in public policy terms, in relation to child poverty. The Government are responsible for changes to tax credits, the appalling abolition of the health in pregnancy grant, housing benefit changes, the wider ramifications of pay freezes across the economy,

the increase in value added tax to 20%, child benefit cuts, scrapping education maintenance allowance, and welfare changes. All those issues have an adverse impact on child poverty. If we are testing the responsibility of the Budget, the Office for Budget Responsibility ought to be able, within its legal remit, to make a judgment about the Treasury’s measures and whether they are, in the true meaning of the word, responsible. 

That is not to say that there are no wider economic ramifications that impact on child poverty, such as the rates of employment and of growth. The Government’s obsession with deficit reduction at the cost of everything else leaves all aspects of economic policy almost untouched. I hope that this is not the case, but growth looks as though it is going into reverse; there was a 0.6% reduction in growth in quarter 4 of 2010. Rather than a clinically narrow view of what responsibility ought to be, our amendment suggests that it should be judged not in isolation, but on the wider impact on society. 

Kerry McCarthy:  My hon. Friend will be aware that the 2010 Act imposed a responsibility on the Government of the day to publish a child poverty strategy and set up a child poverty commission. The new Government have been in office for almost a year, but we have still not had announcements on that front. A number of parliamentary questions have pushed the Government to say when they will make a move and take meeting the child poverty targets seriously. Given the Government’s inaction, it is even more important that an independent body holds them to account on the targets. 

Chris Leslie:  Indeed. My hon. Friend is correct; she has a strong record on speaking out on matters of child poverty. She is in many ways more knowledgeable than me on some of the details, particularly on the legislation passed during the previous Parliament. If we are to have a body called the Office for Budget Responsibility, the ordinary man or woman on the street may well expect it to test whether policy decisions will be reckless or prudent, and whether they will have a positive or negative impact on their lives, work, society, families and children. We think that the amendment is necessary for that purpose, and to put some colour into what could otherwise be a dry and narrow definition of the OBR’s duties. 

The Joseph Rowntree Foundation has published a number of interesting documents, one of which looks at the estimated costs of child poverty to the economy and to the Treasury. One of the Chancellor’s difficulties in grappling with the issue is that he sees the business of tackling child poverty as merely a cost and a line item that will crop up in a future Budget. The work of the JRF shows very much that child poverty is actually a drain on the Exchequer in terms of the income that might otherwise have come to the Treasury. The foundation suggests that £17 billion is lost to the Exchequer in public spending demand and lost revenues because of the economic multipliers; low-income families obviously have higher marginal consumption rates and the income transfers associated with those strong economic multiplier effects are evident, but sometimes ignored under public policy. 

For example, we know that Ministers’ rather depressing defence of the increase in VAT was that somehow it was not a regressive step. That they tried to paint it as a

progressive step was evidence that they do not really grasp and understand the impact that their policies might have on the responsible conduct of social policy. It would be useful to have an OBR that took a stance on that issue and was able to look at how the economic impact and costs of child poverty, such as the psychological and emotional costs, the educational costs, the employment costs, the costs in crime and negative behaviour and the costs to family and community well-being, apply across the board. It would be useful if the OBR had that capability. 

The amendment is grouped with several others, and I draw to the Committee’s attention amendment 13 to supplement the points made about the narrow nature of the duties of the OBR as they are currently defined. It would allow the Office for Budget Responsibility to examine and report on the impartiality of the local government finance settlement across England. Many members of the public are aware that councils throughout the country are currently setting their budgets. When they hear that there is an Office for Budget Responsibility, they might not necessarily see it purely as a national policy body, but might think that their local budget situations in respect of public finance could also be subject to its work. It would seem rather odd to exclude the OBR from testing whether there was budgetary responsibility at sub-national level, and merely to test it at the macro-economic or national level. 

Alison McGovern:  In relation to sustainable public finances, there is great anxiety in my constituency about the damage to our public finances and the current approach to local authority spending. Constituents constantly raise with me the false economy of such a high level of cuts, with cuts passed on to the Jobcentre as people are put on the dole. People frequently raise that connection and the influence that local authorities have on responsible public finances. Is my hon. Friend aware of such concerns? 

Chris Leslie:  Absolutely. There are good, sound reasons in and of themselves for seeking the right for the Office for Budget Responsibility to test the impartiality of local government grant settlements, precisely because many of the decisions made by the Government on local budgets seem highly arbitrary, very regressive and very harmful for the economy and society more widely. 

It is not just Labour Members who advocate a level of audit and support for testing the impartiality of the grant settlement. No doubt the Minister will recall that in February 2009, her party published a rather interesting policy Green Paper, “Control Shift: Returning Power to Local Communities.” It is relevant because early in that document, the current Prime Minister and other Ministers made a number of promises, one of which was about the transparent local government financial system that they wanted to see. 

The document states: 

“Because the details of the current local government finance system are determined behind closed doors in Whitehall, it is hard for councils to be able to estimate with any degree of confidence how much they will be awarded. The system can be adjusted in many subtle ways that shift relative resources between different categories of councils. This element of qualitative input leads to suspicions that the outcomes of the allocation process are subject to covert party-political interference…We need a more transparent system for allocating local government funding. Therefore, a Conservative government will give the independent Audit Commission a new duty to report to Parliament on the draft

Local Government Finance Settlement each year. The Audit Commission will be given a specific duty to report on whether the basis for allocation is transparent and in accordance with objective criteria set out by ministers.” 

The policy document continues in that vein, so the idea was not simply dreamt up by the Opposition when tabling our amendment. We wanted to test for that impartiality, and whether Ministers stand by their commitment that the local government financial settlement should have independent audit; or they do not, and have backtracked, adding to the long list of U-turns happily made by the Government in their shambolic progress. It would be good if the Minister could address that point. 

12.45 pm 

The Government have now abolished the Audit Commission but, in its lieu, the OBR would be the natural, best body to test for the independence of the local government financial settlement. For a number of pressing reasons, we need to have such a test by the OBR. 

The presentation of the recent local government grant settlement was highly partial and suspect in a number of ways. A new method for articulating the grant to local authorities was devised by the current Secretary of State for Communities and Local Government. Never before in the history of local government finance has the term “spending power” been used, but that was the measure when talking about the amount of money councils received, because the Secretary of State wanted to say that no council would be getting a cut of more than 8.5%. In fact, he was rolling within the grant settlement the amount of money that councils themselves would be raising through council tax, which of course has been completely separate. 

Ministers’ spin has given rise to the sense of a partial approach to the presentation of the local government grant settlement. We know that a massive mismatch exists between the deprivation in many authorities and the resources they are receiving. Nottingham, where my constituency is, is ranked the 13th most deprived authority on the index of multiple deprivation, but it will receive the 21st largest fall in spending power for upper tier authorities. The fire authority in Nottinghamshire is getting the second worst settlement in the country, whereas it ranked ninth out of 45 fire and rescue services by total numbers of fires. 

The local government finance settlement is arbitrary and has a sense of disproportionality. The OBR ought to have a responsibility to check and test that settlement, because local budgets are just as important in many ways and to many people as national Budgets. The Government’s approach of removing ring-fencing and ending a number of grants meant that the quantum of reduction in other, un-ring-fenced grant arrangements caused problems for many authorities, in particular with the supporting people budget, which is used for the most needy in society—tackling homelessness and so forth. Despite many exchanges of correspondence with the Secretary of State councils throughout the country have simply been unable to get clarity on the truth about the settlement. Many Members know from their own local authorities that there is a sense of obfuscation,

and that the clouds that have descended over the local government financial settlement have brought into disrepute the process of allocating grant fairly from central Government to local authorities. One can add into that the double-counting effects that different Departments are pursuing; for example, there is the health and social care budget, which appears in PCT budgets at the same time as it appears in local authority budgets. This is clearly a settlement and a grant-giving process that is prone to partisan interference. 

Duncan Hames (Chippenham) (LD):  Does not the hon. Gentleman accept that his assertion that the process has been brought into disrepute relies on the fundamental premise that it was somehow held in high regard before? 

Chris Leslie:  I am merely trying to hold the words of the hon. Gentleman’s new-found friends to account, to see whether the Minister agrees with previous statements. I do not know about the Liberal Democrats, because perhaps they take a different view, but the Conservative party has stated: 

“We need a more transparent system for allocating local government funding.” 

It said that there should be independent audit, with a 

“new duty to report to Parliament on the draft Local Government Finance Settlement each year”. 

The hon. Member for Chippenham may disagree that that is necessary, but it is essentially the amendment that we are looking to pursue today. If the Minister has forgotten that that was a recent commitment made by her colleagues, I will happily withdraw the amendment, and, if she then wants to come back with a slightly finessed version, that is fine. To simply ditch it, however, and say that “We’re now in control, so we will pull the strings and play with the levers to our political hearts’ content,” would be wrong, especially given the Conservatives’ apparent discontent with the arrangements under previous Governments. 

I would not go as far as to say that, when it comes to the local government grant settlement, everything has always been perfect in all preceding Administrations. There is a reasonable case for greater transparency, which is precisely why we have tabled the amendment. I hope that the proposal will not be rebutted, but I know that Ministers often have the word “RESIST” written in big, black letters on their brief. On the brief that is before the Minister today, however, that would not be good, so I hope that we will see some progress from her on that particular point. 

Amendment 8 seeks to define the term “sustainability” more appropriately and to allow the OBR greater latitude there, so that it might include public sector net borrowing, as well as debt, growth, employment and wider risks to the UK finances. As with my comments on amendment 12, the amendment recognises that there are positive elements of the draft charter for fiscal responsibility. Confidence in the economy is one such objective. Intergenerational fairness should be looked at, as should the effectiveness of monetary policy and so on. There is, however, too little focus in the draft charter on growth and jobs. 

As the Minister knows, one of the primary anxieties that we have about the Government’s policies is that there is no strategy for growth. Even though unemployment is rising, they seem to care very little about that and they are taking few steps to stem rising unemployment. Similarly, the economy appears to be shrinking and not

enough is being done to stop that. For the OBR, defining “sustainability” in that wider macro-economic sense would give it an ability to conduct its analysis and assessments as they apply to other important areas of public policy. Clearly, that would be a sensible step, and I hope that the Minister will view the amendment positively. 

Amendment 9 proposes that the OBR publish its analysis and assessments twice each year rather than simply once. If the OBR is so significant an organisation, a twice-yearly publication of its analyses does not seem particularly unreasonable to me. Historically, as we have noted in previous debates, the Treasury typically has autumn statements, pre-Budget reports and so forth that can take place on a number of occasions within a financial year. We should, therefore, have an analytical cycle that matches the Treasury cycle. To have an aligned arrangement where the OBR has an obligation to make its analysis only once a year seems slightly odd. 

We know, of course, that Government policies can change quite rapidly, as can the economy. A week is a long time in politics, as it is for the economy. To have only one analysis within a calendar year seems out of kilter with economic realities. Obviously, growth can take a turn for the worse, and therefore an OBR set of assessments and analysis on a six-monthly basis would seem more appropriate to us. 

Kerry McCarthy:  Before my hon. Friend moves on to the next amendment, I point out that the other important thing addressed by amendment 9 is the fact that, in clause 4, the OBR is required twice a year to prepare fiscal and economic forecasts, and an assessment of the extent to which the fiscal mandate has been achieved or is likely to be achieved. But only once a year is it obliged to prepare an assessment of the accuracy of the fiscal and economic forecast previously prepared by it. It seems slightly strange—if it is producing forecasts twice a year, why does it have to look at the accuracy of those forecasts only once a year? 

Chris Leslie:  Indeed, and I think this particular clause was debated in the other place when the Bill was considered there. This disjoint seems to indicate a lacuna in the drafting of the legislation. It would be useful if the Minister were able to address it. 

Amendment 10 is short and simple. It seeks to ensure that the sustainability of public finances is measured over a five-year period. That seems to be the suggestion made in the charter for budget responsibility, but we felt that there was logic in extending that provision in the Bill as well. Amendment 11 seeks to ensure that the OBR positively promotes a 

“public debate on fiscal sustainability”. 

The Government have a history, sad to say, of showing perhaps a little too much partisan bias when it comes to definitions of sustainability. In their eyes, sustainability is a pretty cold and calculated thing. I have mentioned that they are obsessive about the deficit to the point of ignoring issues that are quite critical in the broader economy, and their elevation of deficit closure issues, which many suspect is a device to shrink vital public investment. Many in the Conservative party may have come into politics with the intention of doing that all along. It is often felt that there is insufficient evidential basis for many of the claims that they make about the sustainability of public finances. The Chancellor of the Exchequer famously claimed that we were on the brink of bankruptcy, even though our triple A rating by the credit rating agencies never changed. 

Justine Greening:  Thanks to our measures. 

Chris Leslie:  Well, the Minister asserts an opinion. The problem with the Government is that they interpret opinion, mood and general assertions as though they are absolute hard and fast facts, as though we should drive our public finances arbitrarily on the basis of such suppositions and opinions, separate from and outwith the actual economic evidence that we see before us. Sustainability is an important issue. It needs to be debated more widely, and I hope that the Minister will agree. 

1 pm 

The Chairman adjourned the Committee without Question put (Standing Order No. 88).  

Adjourned till this day at Four o’clock.