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Baroness Byford: My Lords, I feel great timidity in following such eloquent speeches from my noble friend Lord Brooke and the noble Lord, Lord Moser. However, I would like to begin by thanking my noble friend Lord Marlesford for introducing this debate tonight. When it came up, I thought that I would be totally inadequate and unqualified to speak in this debate so I wish to make my contribution in a slightly different way.
The primary aim of the Office for National Statistics is:
"To provide an accurate, up-to-date, comprehensive and meaningful picture of the economy and society, [and] to support the formulation and monitoring of economic and social policies by government at all levels".
I reflected on how that affected the work that I do in leading for the Opposition on the environment, food, farming and rural affairs.
My noble friend rightly referred earlier to the difference between the Government's position and that of private business. In some cases, if cash flow were allowed to run as rampant as it is in private business, some businesses would be in closure much earlier, so it is important that statistics are correct and that various government departments can assess and control their public spending in the correct manner.
There is also, as another noble Lord said, an opportunity for parliaments, citizens, local governments and many other outside bodies to judge what the position is in various aspects of government business. My noble friend was right to give the example of the IACS scheme where more money has been spent on delivering the system than has been paid to those who it is supposed to help. That is nonsense.
This debate gives me the chance to reflect on some of the questions that I have asked the department over the past few years and which I would like to share with noble Lords tonight. One Written Question that I asked was about the assessment,
"made of the extra cost of providing public services in rural areas in England compared to urban areas".
"no overall assessment has been made of the different costs of providing public services in rural areas in England compared with urban areas"".—[Official Report, 10/05/02; col. WA 206.]
If not, why not? A BMA report has just come out that highlights the difficulties of getting coverage within rural areas.
Another Question was about the account that the Government will,
"take of the extra cost of providing public services in rural areas in the local government grant distribution formula in or England".
"this included issues of concern to rural areas, such as the treatment of sparsity. We will consult on options for reform over the summer and will consider the responses when we come to take decisions".—[Official Report, 8/05/02; col. WA 183.]
I wonder how much further that matter has moved on.
There was another question about incorrect statistics. I accept what the noble Lord, Lord Moser, said—but that does not help us when we are trying to judge the department and what is going on if the statistics are wrong.
In August 2002 I raised two questions with Defra. My first was about why capital spending in terms of actual out-turn and planned out-turn for 2002–03 and 2003–04 is in every case more than £1 million above the departmental expenditure limit. It seemed a perfectly straightforward question.
I was told that there was an error. The tables that I was asking about had,
"complications with compiling historical information following the recent Machinery of Government changes, and the restructuring of DEFRA with its revised objectives that followed".
Delay would surely have been better, rather than producing incorrect figures. Here I do not necessarily agree with the noble Lord, Lord Moser, but his experience is much better than mine.
I turn to another subject that I find extremely worrying. In February this year I asked how many consultations have been issued by the department since its inception. I was told that some 222 consultations had taken place and 193 were completed. The reply went on to say that the Government do not hold information centrally on how many have resulted in a formal action, but many have led to proposals being changed in response to the stakeholders' comments.
I wonder why an overall impact assessment was not done. Surely this has implications for the department's budgetary action.
I shall return to rural proofing and give another example. When I asked the Government which departments had failed to achieve their rural proofing in the last full year, the answer came that the Countryside Agency published its report on its first full year of rural proofing in April and that table 2 in the report commented individually on how far rural proofing had been effectively implemented in each of the departments. The answer went on to say that the report does not explicitly categorise some departments as having succeeded and others as having failed. What then was the purpose of the exercise?
I again turn to regulatory matters. I asked a Question on the costs of what is called the WEEE directive, the Waste Electrical and Electronic Equipment Directive. In his letter, the noble Lord, Lord Sainsbury of Turville, replied:
"A partial regulatory impact assessment to assess the financial and other impacts of the . . . Directive . . . was completed in March 2002. A further assessment will be carried out once the Directive has been adopted. Any indirect costs which Local Authorities might face as a result of the UK's approach . . . would be an important factor in agreeing the best legislative framework".
Was it only a partial assessment and not a full assessment? It seems strange.
I turn to another issue that I have been following for many months. I asked the same department, Defra, how many consultants and professional advisors were employed by the department in each of the years from 2000 to 2003. The letter I received in response from Defra stated:
"The information requested cannot be provided as it is not held centrally. The Department is in the process of compiling a central list for the future, but this will take some time to complete and will not be retrospective".
Is it just me who wonders how you can run a department if you do not know the costs that you are incurring? How can one budget for that? Surely you would need to know that necessary information.
In raising these issues, I have tried to highlight some of the reasons why statistics are very important to all of us, whether we are in government or in opposition, but I suspect they are more important to those of us in opposition. The Government, after all, have their civil servants to do a lot of the work for them.
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I end with one more example, where I think that the Treasury has made a big mistake. This is on the question of the introduction of the horse passport scheme. My question was why value added tax registration was not considered during the setting up of this particular scheme. The letter answering that stated:
"VAT is specifically a Treasury matter and was, therefore, not included in the consultation carried out by this Department regarding the proposals to extend horse-passport requirements to all horses. However, Customs and Excise are considering representations".
That is highlighted because now that it has gone out to organisations, VAT has to be paid on it, whereas if it has been a government scheme, such as the cattle scheme, there would have been no VAT on it. Surely there should be joined-up government and departmental understanding.
I again thank my noble friend for raising this issue. I am sorry that my tack has been slightly different from that of other noble Lords, but I have highlighted the difficulties some of us have our job in the way that we feel we should be doing it.
Lord Northbrook: My Lords, I am grateful to the noble Lord, Lord Marlesford, for initiating this important debate on the adequacy of official statistics for determining policy. I particularly enjoyed the contribution of the noble Lord, Lord Moser, having been at the coal face.
A year or so ago this would have seemed a rather arcane subject to be debating, but it has been getting rather more publicity recently. Indeed, Saturday's Financial Times gave it front page coverage. It is with that article that I would like to begin. The article starts:
"The Treasury was embroiled in a row over 'fiddled figures' last night, after government statisticians said they would reclassify public sector accounts before the budget in a way that could save the Chancellor from breaking his self-imposed rules on borrowing".
In a footnote to the public finance figures, the ONS said that it would make a "substantial" reclassification of road maintenance expenditure.
On page 2 of the same edition of the Financial Times, the headline to a further article was:
"Buried within yesterday's press release from the Office of National Statistics was a potential bombshell, which could save Gordon Brown from embarassment over the public finances but risk damaging the national statistician's reputation for independence".
The article goes on to say, as referred to be other speakers, that the ONS had decided that some government current spending on roads should be classed as capital expenditure. That was, said the Financial Times,
"supremely convenient to the Chancellor, who is expected to have to raise taxes after the election if he is to meet his golden rule".
The article goes on to say that the Chancellor has made meeting his fiscal rules an issue of political credibility and, with the Budget and the general election coming up, would not want his grip on the public finances to appear shaky. That is why, the article continues, it would not be surprising if the Treasury were to fudge the way the rule was calculated and why the ONS announcement raised eyebrows among some unnamed economists who said, according to the Financial Times, that the impending reclassification was an example of government "jiggery-pokery" with the accounts.
Richard Alldritt, chief executive of the Statistics Commission, the watchdog set up by the Treasury in 2000, said:
"The timing issue looks potentially uncomfortable so we will be askng the ONS what triggered it and to clarify why it was wrong to classify some of this spending as current in the past. We reiterate the need for demonstrable independence in official statistics".
The ONS then rushed out a statement asking more questions than it answered, saying that the Treasury
With great respect, that would seem to refute the comments of the noble Lord, Lord Moser, that Ministers knew nothing about it. Peter Spencer of the independent Item Club said that the move was likely to show how close the Government were to meeting or breaking their fiscal rules.
Finally on this subject, I am sorry that the ONS could not have published the reasons for the change in time for this debate. Surely if the office made the change, it must know why in advance—or was it compelled to do so in such haste that it had to think of the reasons for it afterwards?
That latest episode led me to recall some other interesting examples of the Government adjusting statistics. Last year the Treasury was accused by some economists of a fudge because of a change in presenting the golden rule. Instead of simply subtracting deficits in one year from surpluses in another—a method referred to by the Chancellor in the past—the Treasury has calculated those budget balances as proportions of gross domestic product. This means, as I understand it, that past surpluses gain relatively more weight compared to current deficits.
The National Institute of Economic and Social Research warned two years ago of the likelihood that the Government would have encouraged a careful analysis of the constituents of current and capital spending. Martin Weale, its director, said last week:
"It is perfectly reasonable for the ONS to look at this but part of the trouble is that it is not completely independent—it reports to the Treasury rather than to Parliament—so the risk is that people will assume that there has been political pressure. If we had statistical independence, that concern would be allayed".
The Conservative Party has just such plans, which I will come on to later.
I can further recall earlier examples of the Government ensuring that much of their transport expenditure was classified as capital rather than current. In the 2003 review of railway finances, the Department for Transport put in a late request to the
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then rail regulator, Tom Winsor, to pay rail subsidies in the form of grants to Network Rail rather than subsidies to rail operating companies. And why was that? Because grants count as capital expenditure in government accounts, while subsidies are classified as current expenditure. The regulator said that it was,
But he granted the request, which will help the Government meet the golden rule in future by about £6 billion.
The Government have not been consistent about what should or should not be on the books. Take, for instance, foundation hospitals: the Chancellor insists that they should stay on the government books and not be allowed to borrow on their own account because the Treasury would have to bail them out if they went bust. Yet the Treasury has been very happy to take a very different view in cases where to admit that it was lender of last resort did not suit it—for instance, with Network Rail. While the Treasury has recently agreed to include Network Rail's £21 billion debt in the whole of government accounts, which are to be published for the first time in 2005, the Chancellor still refuses to include the debt in his own calculations of whether he is meeting the golden rule.
Sir John Bourn, Comptroller and Auditor-General, has insisted that Network Rail borrowing be included as a form of public debt. In a letter to the Statistics Commission late in 2002, Sir Andrew Turnbull, the Cabinet Secretary, indicated that the Government would accept Sir John Bourn's demand. But in a bizarre twist it will be included in the whole of government accounts but not in the golden rule calculations. That in my view is clearly nonsense.
These inconsistencies show the huge need for a more independent statistics monitoring regime. The Government were clearly mindful of that when they published their framework for national statistics in August 2000. It was full of laudable statements such as that the Government believed national statistics should provide an accurate, up to date, comprehensive and meaningful description of the UK economy and society. They said that it would,
"be used by government, Parliament and the wider community and in decision-making and debate, and will offer a window on the work and performance of government itself".
That sounds all well and good.
Also in 2000, the Government created the Statistics Commission, as,
"an independent non-departmental public body to help ensure that official statistics are trustworthy and responsive to public needs".
It operates independently of Ministers and the producers of statistics and does so openly, with all its papers normally available publicly. Since being set up it
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produced a report in May 2004 entitled Legislation to Build Trust in Statistics. In summary, it recommended legislation that,
"will require government departments and agencies to follow a new statutory code of practice enforced by a statutory commission. This will help ensure we have a statistical service in the United Kingdom which serves, and is seen to serve the public interest".
In the minutes of a meeting to discuss how to take forward its report, the commission states how it expects the Government to respond. It said that,
"a formal government response is expected but is unlikely to contain any promises. Our informal understanding is that the door remains open for discussion and that the relative simplicity and evolutionary nature of the proposals are strong selling points. Less helpfully the issue is seen by some as encouraging criticism of the government and of official statistics".
Without such a framework, the ONS continues to be put under pressure.
The Atkinson report, commissioned by the ONS was a welcome inquiry into the measuring of government output in the national accounts. Time prevents me discussing it in as much detail as I would like, but I shall quote its conclusion that,
The report also urged the Office for National Statistics to be transparent.
The Conservative Party plans to make the Office for National Statistics independent of Ministers. We believe that it could be run according to the structure of the independent National Audit Office. I shall leave it to my noble friend Lady Noakes to describe our plans in more detail, but I should like to say that I believe they offer a much more sensible, honest, and transparent system for national statistics than we have today.
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