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Budget Responsibility and National Audit Bill [Lords]

We have had an interesting debate and it would be fair to say that there has been some consensus from both sides of the House that it is right and proper for us to establish the Office for Budget Responsibility. I am grateful to my hon. Friends the Members for Cities of London and Westminster (Mr Field), for Elmet and Rothwell (Alec Shelbrooke), for Macclesfield (David Rutley) and for Bristol West (Stephen Williams) for expressing their concerns about the state of the public finances and the record of the previous Government. However, I am also grateful for the comments of Opposition Members, such as the hon. Members for Glasgow North East (Mr Bain), for Wirral South (Alison McGovern), for Stretford and Urmston (Kate Green) and for Edinburgh East (Sheila Gilmore), who supported the concept of the Office for Budget Responsibility. As my hon. Friend the Economic Secretary to the Treasury said at the start of this afternoon's proceedings, fiscal responsibility is the overriding priority of this Government. The deficit that we inherited, the debts that the previous Government amassed and the fiscal forecasts that accompanied both have clearly shown the inherent weaknesses that plagued the old way of doing things. The reputation of the Government's forecasts in recent years was that they had a bias towards optimism. After all, a balanced budget was always just around the corner. In 2003, the budget would be back in balance by 2005. In 2004, it would be back in balance by 2007, and in 2006, by 2008. In 2007 we would have a balanced budget by 2009, and in 2008, we would reach the balanced budget in 2011. It is perhaps apposite to quote Robert Chote in his previous capacity as the man in charge of the Institute for Fiscal Studies, who said that this was a"““sustained display of conviction forecasting””." Indeed, the over-optimistic approach to the public finances of that era is not purely a thing of the past. We recently learned, for example, that the shadow Chancellor continues to believe that there was no structural deficit in the UK economy in advance of the credit crunch. How wrong can one be? The fact is that there was a perception that, all too often, the temptation to nudge up a growth forecast here or reduce a borrowing number there proved all too great. Governments would preach the principle of prudence while in reality the onus was always on optimism. That serves no one's interests. Economic policy needs to be based upon the reality—grounded in fact and not fallacy—and to be able to stand up to external scrutiny when put under the spotlight. Credibility must be restored. It is worth pointing out that the previous Government attempted to do just that with the notorious Fiscal Responsibility Act 2010. I looked up what Chris Mullin, the former Member for Sunderland, South, said about it in his diaries. In his entry for 5 January 2010, he writes that he came into the Chamber to listen to the debate, describing the proposal as:"““Surely the most pointless piece of legislation ever devised.””" He continued:"““To be fair to Alistair””—" the former Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling)—"““this is not his doing. It shows every sign of having been dreamed up in the fun factory at Number 10. He managed to keep a straight face throughout as George Osborne shredded it mercilessly.””" We have come up with something somewhat better, because we need to demonstrate to the British people that the Government can be relied upon to tax and spend sensibly. The Office for Budget Responsibility will do exactly that. This fully independent body is bringing integrity back to the official forecasts. With full access to all the data, assumptions and economic models needed, the OBR is making the key judgments that underpin our economic and fiscal decisions. Let me touch on the issue of independence, which a number of hon. Members raised. It is right that the OBR has access to all the numbers. We believe that the relationship with the Government strikes the right balance. The OBR will perform a core executive function in providing the official forecasts and a published assessment of the likelihood of the Government's meeting their fiscal mandate, but it will do so independently of Ministers, with all judgments and methodology questions being at the complete discretion of the budgetary responsibility committee. That model has been supported by a range of external commentators, including the Institute for Fiscal Studies. It is also worth noting that Lord Turnbull said on Second Reading in the other place:"““What is proposed is a pragmatic and, in my view, well judged hybrid””.—[Official Report, House of Lords, 8 November 2010; Vol. 722, c. 22.]" The OBR will appoint its own staff and will have a budget responsibility committee confirmed by the Select Committee on Treasury. That process of confirmation will ensure that the right staff are appointed to the BRC. The non-executives will be required to report regularly on the extent to which the OBR has been able to perform its duties, with complete discretion through the annual report. That is an important safeguard for the OBR. Let me touch on the issue of Parliament's role, which was raised by the hon. Member for Wirral South and my hon. Friend the Member for Macclesfield, who is a member of the Treasury Committee. The OBR will submit all its findings to Parliament, with each forecast and report being laid before the House, as was the case for the economic and fiscal outlook produced by the OBR in November. To ensure accountability, any written questions from hon. Members will be passed directly to the OBR, which will respond in the usual manner. All members of the budget responsibility committee, as well as the OBR's non-executive directors, will also be available for Select Committee hearings. The evidence that OBR representatives have already given to the Treasury Select Committee has been widely welcomed by hon. Members. I want briefly to mention the National Audit Office. As we have heard, the measures in the Bill largely reflect the provisions in the previous Government's Constitutional Reform and Governance Bill. There was no time for the other place to consider those provisions before the general election, and this Bill represents the earliest opportunity to bring them before Parliament and to implement the recommendations of the Public Accounts Commission following its review of the National Audit Office's corporate governance. This, too, has been welcomed on both sides of the House. The provisions in the Bill will restore confidence and responsibility to our country's fiscal framework. For too long, there was suspicion about the reputation of the forecasts produced by the Treasury: to put it kindly, they were suspected of optimism. What we now need is stronger institutions. We need to allow for expert scrutiny of the public accounts. We need improved economic governance, and much-improved transparency, and this Government are taking great steps towards achieving that. This is the right course of action for our economy, and for our country. I commend the Bill to the House. Question put and agreed to. Bill accordingly read a Second time.