---

Budget Responsibility and National Audit Bill [Lords]

The Bill makes changes to the responsibilities exercised by the Treasury in fiscal policy making, establishes the interim Office for Budget Responsibility on a permanent statutory footing and modernises the governance arrangements of the National Audit Office. I wish to make it clear at the outset that we support the sensible changes to the governance of the NAO which, as the Minister pointed out, are proposed in parts 2 and 3 of the Bill. We do so not least because they were our reforms. As she was good enough to observe, we set them out in the Constitutional Reform and Governance Bill towards the end of the previous Parliament. As someone who has served three times as a member of the Public Accounts Committee—once in opposition, once in government and once as a Treasury Minister—I am glad to see the reforms getting on the statute book, despite the extra obstacle presented by the intervention of a general election. I also wish to thank the Minister and the Government for the open mind that they showed to Labour amendments during the passage of the Bill in the Lords. I hope that she will show a similar approach to the amendments that we will table in Committee. The creation of the OBR seeks to apply to one narrow part of the UK's fiscal institutions some of the autonomy that Labour brought to monetary policy when we made the Bank of England independent—of course, we took steps to make the Office for National Statistics independent too. As the House of Commons Library has pointed out, there are examples of similar bodies in other countries. Austria, Belgium, Canada, Denmark, Hungary, Holland, Slovenia, Sweden and the USA all have some arrangements for independence in forecasting and analysis of the national fiscal situation. The reform was initially sold by the Chancellor, with much fanfare, as one that would take the politics out of economic forecasting. In doing that, he gave the entirely false implication that previous Ministers had somehow been instructing hapless officials in the Treasury to produce incorrect but politically convenient forecasts. The reality is that the previous Government published a range for gross domestic product growth, and in all the years before the crash on only two occasions did growth fall below the range that the Treasury published. In the other years, the figure fell either within the range or above it, thus showing that we were exercising caution. We were not fiddling the figures. That level of accuracy is about all that any of us can expect from economic forecasting, which is a notoriously unreliable art rather than an objective science. Let me share a quote with the House:"““Economic forecasting, by its very nature, is subject to uncertainty. Our judgement is that, at this stage of the economic cycle, the outlook is even more uncertain than usual.””" That was the OBR's comment on its forecasts in June 2010. However, I have found evidence of one occasion when a Chancellor overruled the Government's forecasters, and the House may be interested to hear about it. In 1996, the then Chancellor, who is now the Secretary of State for Justice, was reported to have increased the growth forecast from 2.5% to 3% in order to make way for pre-election tax cuts. The chief forecaster he overruled was, by some odd coincidence, Sir Alan Budd, the curiously short-lived first head of the interim OBR.