3 Staffing and Resources
65. The staffing and resources of the OBR are closely
related both to its functions and to the need to establish its
independence.
66. The staffing of the interim OBR was determined
by the need to produce pre and post-Budget forecasts within a
very short space of time. Accordingly, the interim OBR consisted
of an independent BRC heading up an organisation consisting of
a secretariat of eight, based in the Treasury building and relying
on government analysts.[61]
Sir Alan Budd and his colleagues have stated that emphatically
their work was free from ministerial involvement.[62]
However, the set-up of the interim OBR is not compatible with
the perception of independence required to ensure the permanent
body's credibility.
The dilemma
67. The majority of fiscal councils comment externally
on government forecasts or produce their own forecasts. They are
not, therefore, involved in the policy-making process leading
up to the publication of a Budget. The information they use is
for the most part in the public domain. The staff of the council
are employed entirely by the council itself.
68. The OBR is in a more difficult position. In the
run up to the Budget it is producing the official forecasts for
government, in the light of policy options that have not yet been
settled —let alone made public. The requirements for confidentiality
and access to internal government information and knowledge are
therefore much higher. The question is, how to ensure these requirements
are met without compromising the OBR's independence?
69. Sir Alan Budd described the dilemma as the most
difficult facing the OBR. He put it like this:
If one of the core activities of the OBR is to produce
on Budget Day a fully articulated fiscal forecast with all the
detail provided in the Red Book, then the involvement of officials
working in the Treasury, HMRC and DWP is absolutely inevitable.
They command the detailed knowledge of the policies and programmes;
they work on the policy changes, if any; and they are the experts
on the effects of those policy changes. Of course, all their
forecasts are subject to the scrutiny of the OBR, and the OBR
makes all the judgments and accepts responsibility for those forecasts,
but the officials are essential to the process, so the challenge,
Chairman, is as follows: how does the OBR perform this task which
has been allotted to it, which involves using departmental officials,
whilst ensuring its independence and satisfying the world that
it is independent?[63]
70. Sir Alan identified around 100 staff in the Treasury,
HMRC and DWP who are involved in drawing up the Budget forecasts.
The Treasury has subsequently given us a breakdown of their grades
and functions.[64] Sir
Alan was emphatic that these posts could not simply be taken out
of the Treasury, nor duplicated in the OBR:
Not only would it be a waste of money, Chairman,
they could not do it because so many of these 100, the people
I think of as the expert analysts, are only able to do it because
they work in the departments and help produce the policies and
monitor the forecasts. They are part of these departments and
that is where they gain their knowledge, so if they were not there
they would not be able to perform that role.[65]
71. Not all witnesses have accepted this argument.
The submission from IMF Staff is representative of several that
call for a significant expansion of OBR staff sufficient to allow
it to perform all its functions without external resources.[66]
The Social Market Foundation point out that a small core organisation,
such as the interim OBR, will suffer major information asymmetries
when dealing with the Treasury. However their preferred proposal,
an OBR with a larger core staff, but falling short of the 100
or so officials involved in the process, only restates the problem.
How large should the OBR be?[67]
72. Sir Alan Budd argued that it
would not be cost-effective or practical to duplicate or move
into the OBR all the officials who spend some of their time on
the Budget forecasts. We accept that there is a trade-off between
delivering the most robust independence and perception of independence
and making the most efficient and effective use of resources.
73. In this chapter we look at the core staff the
OBR will need; we consider the terms on which it should have access
to staff within government in Chapter 4.
Core staff
74. At the heart of the OBR there should be a core
of staff who are employed full time and work exclusively for the
OBR. This core of staff needs to be sufficient to provide enough
independent oversight of the forecasting process that the OBR
can credibly 'own' the forecasts.[68]
The core staff also need to be able to produce the annual sustainability
report, undertake 'spot-checks' of departmental data and models
and undertake other research and commentary as required, and to
maintain a dialogue with other forecasters. It has also been accepted
by the Treasury that the OBR should control its public relations
function.[69]
CHALLENGE
75. If much of the information and analysis underpinning
the forecast will continue to come from civil servants working
within government departments, then the OBR needs to have the
powers and resources to challenge the forecasts and to review
the way data is collected and used in producing those forecasts.
Sir Alan considered the members of the BRC had performed this
task effectively themselves.[70]
However, when we asked:
do you think there would be any merit in putting
together a small team in the OBR who were very capable people
who might even draw on highly specialist outside advice if necessary,
to go in and challenge a specific piece of the forecast. Would
the fact that you had a hit squad of that type act as a deterrent,
because people would know that there is a very small risk that
this group might descend on them if your successor concluded he
was not happy with the figures he was receiving?
Sir Alan responded:
It is an extremely interesting idea. At the moment
we are the hit squad and we have others who assist us in this
role. It might be helpful to augment our role in one way or another
but perhaps I will ask my colleagues what they think.
Mr Parker: I very much agree. We already do that.[71]
76. The
core staff of the OBR should be sufficiently large to support
an investigative team which would be able to go into a department
and scrutinise the data a department used or the way a particular
part of the forecast had been drawn up. The OBR should also have
sufficient resources to hire outside contractors to look into
particular aspects of the forecast data.
77. Section
156 of the Finance Act 1998 gives the Comptroller and Auditor
General a right of access to all relevant Government documents
he may reasonably require to carry out his audits of budget assumptions,
and the right to have explanation of those documents. We recommend
that, with the exception of material related to individual taxation,
the OBR should have similar rights of access to all relevant documents.
FORECASTERS
78. Sir Alan Budd in his evidence suggested there
were three compiling and co-ordinating posts that he would like
to see moved to the OBR permanently. Graham Parker said he would
like to see slightly more of those posts moved over:
[...] there are people in the Treasury who do spend
the great majority of their time on forecasting issues, and it
probably makes sense for them to be in the OBR. They do not just
compile, they do not just add up numbers; they also perform the
same kind of challenge function that we are going to do in this
forecast and already have done that.[72]
79. The Treasury's memorandum identifies ten officials
who spend a majority of their working time on the June forecasts.
The amount of time spent on the forecasts, along with the nature
of their role (being the centre of expertise on forecasting) suggests
these are the posts whose status vis a vis the OBR
is most important.[73]
80. There are then a further 20 HM Treasury staff
who spend approximately 50% of their time on economic analysis
and issues. Professor Wren-Lewis told us that the OBR would not
have special expertise in macroeconomic forecasting compared to
the forecasts produced by the Bank of England and others and argued
that the OBR should focus its resources on fiscal forecasting
and sustainability issues.[74]
The OBR will certainly need macroeconomic expertise, not least
to satisfy itself that the material provided to it is satisfactory.
However, providing the BRC is satisfied it has the expertise
it needs, many of these posts might remain in the Treasury.
81. A total of 30 Department of Work and Pensions
staff are involved in the forecasts. We do not consider that these
posts need to be under the direct control of the OBR. Indeed it
is unlikely that the necessary expertise could be built up outside
DWP. As long as the OBR has the staff needed to enable it to
challenge departments' forecasts, and, when necessary, check the
underlying data, these posts should remain within the DWP.
RESEARCH FUNCTIONS
82. Although we do not consider the OBR should have
the leading role in economic research which some of our witnesses
suggested, it is clear that it will need some sort of research
function, both to ensure that the economic models and sub-models
used to produce the forecasts are as good as possible, and to
help in its wider role. Not all this research need be conducted
in-house, but some sort of research budget will be needed. A specific
member of OBR staff should be responsible for directing the organisation's
research programme.
STAFF NUMBERS
83. Although many of those who submitted evidence
called for the OBR to have adequate staff resources (and in one
case, "a substantial executive staff")[75],
few of our witnesses quantified the numbers required. However,
drawing upon international comparators, Professor Besley thought
that a "team of around 20 economists in total would be enough
to establish an esprit de corps, to cover relevant expertise etc."
[76] Professor Simon
Wren-Lewis suggested that between 20 and 30 staff would be reasonable.
As he said:
You are never going to match the resources which
the Congressional Budget Office have; I think they have between
200 and 250 personnel, but they do a lot more than we are thinking
the OBR will do. So I would have thought 20-30 is a reasonable
number.[77]
84. The
model chosen by the Chancellor means that the OBR will not be
the full time employer of many of the people supplying information
and analysis which it will, after challenge, use in making its
forecasts. Nevertheless, the permanent OBR will need to be larger
than the interim organisation, and to command more resources.
It will also need to be able to draw on expertise within the
Treasury, the DWP and HMRC. We do not attempt to suggest precise
numbers for core staff, as the OBR might choose to hire people
for specific tasks, or contract out some research, but note that
in addition to the 10 Treasury staff whose functions should move
to the OBR, we have also identified a need for a research director,
macroeconomic expertise, and some sort of investigative team
to ensure data are properly used. The BRC must be confident that
the OBR has the core staff it needs. The safeguards over funding
we propose in paragraph 112, and the independent directors we
propose in paragraph 96, should ensure that any concerns are raised
with us as part of its budget procedure, as outlined by Mr Chote
on 16 September.
DUPLICATION
85. We
accept that the Treasury may wish to replace some of those staff
who we propose should be moved to the OBR. Given the limited number
of posts involved, we consider that the advantages of independence
are well worth the costs of any duplication. The staffing of the
OBR should be one of the subjects examined in the five year review
we recommend.
61 Advice from the Interim OBR to the Chancellor, paras.
43-44, http://budgetresponsibility.independent.gov.uk/d/ obr_permanent_body_advice_120710.pdf Back
62
See above, para 44 Back
63
Q 1 Back
64
Ev 36 [HMT Supp] Back
65
Q 3 Back
66
Ev W20, Para 5 [IMF] Back
67
Ev w10, para1 [SMF] Back
68
Q 30 Back
69
Q 14 Back
70
Q 19 Back
71
Q 19 Back
72
Q 11 Back
73
Ev 36 [HM Treasury Supp] Back
74
Q 106 Back
75
Directorate General EU Back
76
Ev 33 Back
77
Q 98 Back
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