Budget Responsibility and National Audit Bill [Lords]

Public Bill Committee, 1 March 2011.

William McCrea (DUP, South Antrim)

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.

Justine Greening (Conservative, Putney)

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 (Labour, Bristol East)

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.

William McCrea (DUP, South Antrim)

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

Clause 1

Kerry McCarthy (Labour, Bristol East)

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’.

William McCrea (DUP, South Antrim)

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

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 (Labour, Bristol East)

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.

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 (Conservative, Putney)

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.

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 (Labour, Bristol East)

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.

Thomas Docherty (Labour, Dunfermline and West Fife)

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.

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 (Conservative, Putney)

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 (Labour, Dunfermline and West Fife)

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 (Conservative, Putney)

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 (Labour, Bristol East)

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 (Conservative, Putney)

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 (Labour, Bristol East)

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 (Conservative, Putney)

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 (Labour, Bristol East)

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.

Thomas Docherty (Labour, Dunfermline and West Fife)

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 (Labour, Bristol East)

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 (Conservative, Putney)

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 (Labour, Bristol East)

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.

Kerry McCarthy (Labour, Bristol East)

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 (Conservative, Putney)

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 (Labour, Bristol East)

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 (Conservative, Putney)

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.

Clause 2

Chris Leslie (Labour, Nottingham East)

I beg to move amendment 6, in clause 2, page 2, line 11, at end insert—

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.

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 (Labour, Dunfermline and West Fife)

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 (Labour, Nottingham East)

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 (Labour, Wirral South)

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.

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 (Conservative, Putney)

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.

Justine Greening (Conservative, Putney)

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 (Labour, Nottingham East)

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 (Conservative, Putney)

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 (Labour, Nottingham East)

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 (Conservative, Putney)

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 (Labour, Edinburgh East)

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 (Conservative, Putney)

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 (Labour, Nottingham East)

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.

William McCrea (DUP, South Antrim)

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 (Conservative, Putney)

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 (Labour, Nottingham East)

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.

William McCrea (DUP, South Antrim)

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

Chris Leslie (Labour, Nottingham East)

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.

Chris Leslie (Labour, Nottingham East)

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?

Justine Greening (Conservative, Putney)

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 (Labour, Nottingham East)

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 (Conservative, Putney)

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 (Labour, Nottingham East)

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 (Conservative, Putney)

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.

Clause 3

Kerry McCarthy (Labour, Bristol East)

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

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?

Alison McGovern (Labour, Wirral South)

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 (Conservative, Putney)

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 (Labour, Bristol East)

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 (Conservative, Putney)

It is independence.

Kerry McCarthy (Labour, Bristol East)

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 (Conservative, Putney)

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 (Labour, Wirral South)

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 (Conservative, Putney)

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 (Labour, Bristol East)

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 (Conservative, Putney)

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

Kerry McCarthy (Labour, Bristol East)

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 (Conservative, Putney)

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.

William McCrea (DUP, South Antrim)

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 (Conservative, Putney)

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 (Labour, Bristol East)

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.

Kerry McCarthy (Labour, Bristol East)

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.

Clause 4

Chris Leslie (Labour, Nottingham East)

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

William McCrea (DUP, South Antrim)

With this it will be convenient to discuss the following:

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

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

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

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

Chris Leslie (Labour, Nottingham East)

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 (Conservative, Putney)

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 (Labour, Nottingham East)

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 (Labour, Bristol East)

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 (Labour, Nottingham East)

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 (Labour, Wirral South)

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 (Labour, Nottingham East)

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.

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 (Liberal Democrat, Chippenham)

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 (Labour, Nottingham East)

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 (Labour, Bristol East)

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 (Labour, Nottingham East)

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 (Conservative, Putney)

Thanks to our measures.

Chris Leslie (Labour, Nottingham East)

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.

William McCrea (DUP, South Antrim)

I remind the Committee that with this we are discussing 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—

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—

Graeme Morrice (Labour, Livingston)

May I add to the plaudits that we heard this morning with regards to your benevolent chairmanship, Dr McCrea?

I want to comment on amendments 12 and 13, tabled by my hon. Friends the Members for Bristol East and for Nottingham East. Amendment 12 places a duty on the Office for Budget Responsibility to 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. I wholly concur with my hon. Friend the Member for Nottingham East, who moved the amendment. He said that if we are serious about making a difference in society then there can be no better cause than the eradication of child poverty. To do that we must ensure that the targets and ultimate goal in the 2010 Act are met. As my hon. Friend the Member for Bristol East reminded us earlier, the current Government have yet to publish a national child poverty strategy, so there is nothing in place at the moment to ensure that the requirements of the Act are implemented. What would be better than a duty placed on the OBR to ensure that that happens?

As my hon. Friend the Member for Nottingham East so eloquently stated, it is important that we move away from the mindset of structures, processes and inputs that sometimes become the dominant force in much of what we do towards a culture of outcomes and putting people first. I say that in a non-partisan fashion as we can all be guilty of that, regardless of party politics. The important thing is to recognise it so that we make the changes to bring about the difference. On the basis of my positive outlook and reasoned argument, I am sure that the Minister will now discard her shackles, denounce her fetish and accept the amendments as tabled—or perhaps not.

Seriously, child poverty is a scandal. I recently met John Dickie, the head of the Child Poverty Action Group in Scotland. I was shocked to learn that despite the country’s undoubted wealth, a staggering one in four of our children live in poverty. The latest official statistics suggest that recent progress in reducing child poverty has stalled. I fear that with the Government’s deficit reduction measures, that situation will only get worse.

I have little doubt that we all agree with the objective of eliminating child poverty by 2020. That is vital to the well-being of the country and a true mark of a decent and civilised society. Why not give that objective the credibility that it deserves and place it firmly within the remit of the OBR?

Amendment 13 places a duty on the OBR to examine and report on the impartiality of the local government finance settlement in England. This is an important amendment due to the highly partisan nature of this issue, regardless, to be fair, of which Government are in power. With the abolition in England of the Audit Commission, which is a great mistake by this Government, there is now a significant gap in the independent, authoritative and impartial assessment of local government finance in England. That contrasts sharply with the situation in Scotland in which the Accounts Commission is highly regarded by both local and national Government and works well. With the abolition of the Audit Commission in England, it makes sense to place a duty on the OBR to conduct an impartial assessment of the English local government grant settlement, thereby greatly reducing the partisan rhetoric on this issue by all parties.

Finally, although it is not mentioned in the Bill as far as I can see, will the Minister address the proposed relationship between the OBR, which is a UK body, and the devolved Administrations, particularly the Scottish Parliament with its fiscal powers and those proposed by the Scotland Bill?

Thomas Docherty (Labour, Dunfermline and West Fife)

I apologise for not being here for the very end of this morning’s debate—the hon. Member for South West Norfolk and I attended a Westminster Hall debate. I regret missing the chance to serve under your stewardship for that half hour, Dr McCrea, and it also appears that I missed a fascinating debate about fetishes. I look forward to receiving the record, so that I can see how the issue was discussed.

I shall speak briefly to amendment 13, which centres on local authorities. I shall stay away from the issue of Scottish Ministers, because I fear that if I addressed that debate for too long, you would rule me out of order, Dr McCrea. I shall keep my thoughts on that until we get to the clause stand part debate.

The local authorities of England spend billions of pounds each year, despite the best efforts of the Secretary of State for Communities and Local Government to slash their budgets by 56%. Unlike many colleagues in this room, I have never had the privilege or honour of serving as a member of a local authority—some colleagues present have acted as leaders of councils and conveners. I would not, however, wish to be a councillor in the coming financial year, because incredibly difficult and painful decisions have to be made. I am sorry to dissent from the remarks of my hon. Friend the Member for Livingston, but the level of pain will be much worse under this Government than it would have been under a Labour Government, because of the Secretary of State’s heartless and callous decision to make brutal cuts to the funding of local authorities.

Graeme Morrice (Labour, Livingston)

I totally concur with that comment.

Thomas Docherty (Labour, Dunfermline and West Fife)

I am grateful for that clarification.

Anne Marie Morris (Conservative, Newton Abbot)

I am absolutely fascinated by everything that the hon. Gentleman has to say, but I am concerned about its relevance. If the OBR took on all the duties suggested by the Opposition, it would not be focused and I am not convinced that it would do the job that we want it to focus on. I would appreciate the hon. Gentleman’s comments on that.

Thomas Docherty (Labour, Dunfermline and West Fife)

I am grateful for that intervention, and I might address the issue in a moment.

It is interesting that the well-known hard-left newspaper, The Times, which is owned by the Marxist revolutionary, Rupert Murdoch, made it clear a few weeks ago, just before Christmas, that the 10 local authorities in England that suffered the most brutal cuts were all Labour-controlled councils in the midlands or the north of England, while the councils that had the best settlement—indeed, one or two received a rise in their funding settlement—were all under Liberal and Conservative control in the south of England.

Alec Shelbrooke (Conservative, Elmet and Rothwell)

The problem with the hon. Gentleman’s statements is that they are based on a snippet of time. It may well be true that Labour councils have had larger cuts inflicted on them than Liberal and Tory councils, but if we look back over history, we will see that those councils were starved of money. Certainly, my own council—Leeds city council—had by far the lowest settlement of any of the metropolitan councils when it was under a Tory-Liberal administration. Neighbouring administrations as close as Wakefield and, of course, Manchester had almost double the settlement per head of Leeds.

Thomas Docherty (Labour, Dunfermline and West Fife)

I am grateful to the hon. Gentleman, but I am concerned that he seems to be suggesting that the Secretary of State has sought an element of retribution against those councils.

Alec Shelbrooke (Conservative, Elmet and Rothwell)

I take issue with the word “retribution.” That is not the word; the word is “rebalancing.”

Thomas Docherty (Labour, Dunfermline and West Fife)

The Secretary of State has many words for it. There is a fascinating debate to be had about funding settlements for local authorities over the past 30 or 40 years. I believe that it would be within the bounds of the debate to say that we had exactly the same problems in the 1980s, when urban, northern councils were starved of funding. The motivation behind some of those decisions in the 1980s was political, on the part of the Secretaries of State for the Environment, as they were known at the time—before a fancy new title came along. In the 1990s and the early part of the past decade, under a Labour Government, a rebalancing of the deficit that those local authorities had suffered from was absolutely right. I can assure the hon. Gentleman that retribution and revenge were not behind the actions of Mr Prescott—now Lord Prescott—and others on the funding settlement, which is not the case with the Secretary of State for Communities and Local Government.

Moving on to the issue raised by the hon. Member for Newton Abbot—the role of the OBR—I was lucky enough to go on an exchange programme organised by the British-American Parliamentary Group in September last year. Its work will be familiar, and many Government Members will have the opportunity to go to the United States on that useful exchange programme, which is funded by the State Department and the Foreign Office. I was there with the hon. Member for Bristol West who, unfortunately, does not seem to have been able to join us yet in Committee.

We had an opportunity to meet with the US Congress and to get a better understanding of the role of the Congressional Budget Office and the other scrutiny mechanisms. They have quite a wide remit, in terms of what they look at in the States, both in the federal set-up and at the state level. It is correct, as my hon. Friends the Members for Nottingham East and for Bristol East have said and tried to achieve in their amendments, to widen the scope of the OBR’s remit somewhat, but not dramatically. It is probably fair to say that the local authorities in England spend more collectively than almost any other Department, except perhaps for the national health service and the Ministry of Defence—I seek clarification from the Minister if I have got that wrong.

Anne Marie Morris (Conservative, Newton Abbot)

I hear what the hon. Gentleman says but, because something works in the US, it will not necessarily work here. I am not sure how child poverty, important as it is, and local government can be picked out as the two prime examples. Taking his argument to its logical conclusion, we should be taking on a number of other things, but we then get to the point where we are dealing not only with the Treasury but with a number of other Departments and the situation becomes completely unmanageable.

Thomas Docherty (Labour, Dunfermline and West Fife)

I am grateful to the hon. Lady who, with her probing questions, is clearly giving some thought to how she will be voting.

Such scrutiny is absolutely right for local authorities, given what a huge part of the Budget they take from the central Government. Local authorities can also raise their own revenue. One of the key aspects of the OBR is looking at the financial stability of public institutions, and I can think of no better example of a public institution with revenue-raising abilities but an uncertain financial future than the local authorities. Also useful, as the carefully worded amendment 13 makes clear, is the fact that such scrutiny would take some of the rhetoric and debate out of the issue.

Justine Greening (Conservative, Putney)

The hon. Gentleman is absolutely right that local authorities should be scrutinised in that way—presumably by the OBR. Does he want the OBR to have a scrutiny role and then to pass some kind of judgment? How does he square that with the need for the OBR to be totally independent?

Thomas Docherty (Labour, Dunfermline and West Fife)

I am not sure why we cannot have scrutiny and independence at the same time. Perhaps I have misunderstood the Minister’s question, but surely the point is for the OBR to provide Parliament with independent analysis of the financial footing of local authorities.

Something I learned from my visit to the US is that individual states are basically going bankrupt, because they are spending more money than they are bringing in from their various revenue streams, whether from federal funding or what they raise through taxation. There is a strong suspicion—I stick purely to England for the purposes of the amendment—that many local authorities are in grave danger of going bankrupt in the next 12 to 24 months. We see local authority after local authority having to make painful decisions. Even the smallest local authorities and Conservative councils are having to lay off huge numbers of staff. It is right to have an independent body to scrutinise fiscal policies at local authority level and determine, first, whether they are able to deliver services, and secondly, whether their projections for expenditure match those for income. I struggle to understand why the Minister does not think a body can be independent and take that scrutiny role. If she could clarify what she meant I would be happy to take another intervention.

Justine Greening (Conservative, Putney)

The bottom line is that the amendment the hon. Gentleman is proposing does not talk about that. It talks about a role for the OBR in determining whether the local government finance settlement is impartial. He may have a point, but it is not related to the amendment he is apparently supporting.

Thomas Docherty (Labour, Dunfermline and West Fife)

I am a huge admirer of the Minister, but I draw her attention to page 2 of the explanatory notes, which I assume she had some part in preparing. It says:

“Clause 4 describes the functions of the Office. Its main duty will be to examine and report on the sustainability of the public finances.”

I therefore struggle to understand why asking the OBR to do a report into the sustainability of local authorities’ public finances does not fall within that scope. That is on page 2 of the document she has in front of her.

Justine Greening (Conservative, Putney)

The hon. Gentleman makes an interesting comment, but that is not what his amendment says. [ Interruption. ] I can see him taking advice from his Front-Bench team and I am happy to listen.

Chris Leslie (Labour, Nottingham East)

The Minister’s comments are illuminating, as she is obviously melting to the persuasive argument my hon. Friend is making. Perhaps he can encourage her to table a more refined, finessed amendment if she feels that just talking about the impartiality of the settlement is insufficient. Perhaps it should be widened to include the sustainability of local public finances as well. Surely that would be the best way forward.

Thomas Docherty (Labour, Dunfermline and West Fife)

I am grateful to my hon. Friend. What confused me, Dr McCrea, was that earlier this morning, prior to the fascinating debate about fetishes, we had a clear indication from the Minister that she felt that one could be over-prescriptive in an amendment. Perhaps in my youthful naivety I had assumed it was a given that, as part of the work on local authorities, financial sustainability would be looked at. I am deeply sorry if that is not the case.

Alec Shelbrooke (Conservative, Elmet and Rothwell)

If the hon. Gentleman will indulge me, I would like to intervene and then come back again. First, does he feel that the Audit Commission kept local government finances in check and working as efficiently as they should have?

Thomas Docherty (Labour, Dunfermline and West Fife)

According to my first-hand experience of Scotland, it certainly did. Do I think that it perhaps lost its way somewhat? Of course I do. Do I think that simply scrapping it will help the public finances? Of course it will not. I very much hope that the Secretary of State, even at this late stage, will reconsider his decision to abolish the Audit Commission.

Alec Shelbrooke (Conservative, Elmet and Rothwell)

The hon. Gentleman is being most generous in giving way and I am grateful for that answer. We could look at the settlement that has just happened in the Leeds metropolitan council. The Audit Commission identified a huge amount of money being wasted in the purchasing of stationery and so on, simply because council employees purchased it willy-nilly from a catalogue. If it had been added to the bulk order, a 70% discount would have been available. The amendment refers to

“the impartiality of the local government…settlement”.

A truly independent OBR would look at the settlement being given and the structures in place and probably agree that the settlement was reasonable. The recent amendment to the Leeds budget to save 10% on the stationery budget to keep the leisure centres open was voted down, but I am sure that the OBR, with its full independence, would consider that reasonable and might imply that the Government were not impartial in the local government settlements.

Thomas Docherty (Labour, Dunfermline and West Fife)

I am grateful to the hon. Gentleman for that. I have been slightly confused. I have always believed that some Members on the Government Benches—there are no Liberal Democrat Members here—are quite consistent, and I am surprised he does not support his party’s document published in February 2009. I thought that that would be the basis for the Government’s thinking, particularly with no Liberal Democrat Members around—perhaps they have forgotten that they have a job to do today. That document says:

“The Audit Commission will be given a specific duty to report on whether the basis for allocation is”—

wait for it—

“transparent and in accordance with objective criteria set out by Ministers.”

I appreciate that compromises have been made, and Labour Members want to help our Conservative colleagues. Given that the Audit Commission is being scrapped, we want to provide the next best thing—the OBR and the specific promise that the hon. Member for Elmet and Rothwell gave to his constituents to have transparent and independent auditing of the funding settlement.

The Minister made an excellent point about the wording, and I am sure that if she introduces such an amendment later during the Committee or, if that is not practicable, on Report, my hon. Friend the Member for Nottingham East could be charmed into withdrawing his amendment.

Sheila Gilmore (Labour, Edinburgh East)

I should like to speak to amendment 8 and briefly to amendment 12. It is important to examine sustainability as broadly as possible, without being so broad that it is outwith the realms of what the Office for Budgetary Responsibility will do. If we concentrate narrowly on deficit and financial issues, other issues are, in my view at least, ignored. Much has been made at various times—we have touched on this briefly—about the intergenerational issue and intergenerational fairness.

A frequent argument for reducing the deficit as fast as possible is intergenerational fairness, but there are other aspects of such fairness. One is whether more intergenerational unfairness will arise if people do not have jobs and there is no economic growth. We know that long-term unemployment, particularly youth unemployment, has a marked effect on people’s entire future life, and an impact on such things as social inequality. All parties seem to believe that that is an important issue, and have sometimes spoken about it passionately. We must look seriously at how to achieve such fairness. Just using the words is not enough. My argument on sustainability is that we must look seriously at a range of issues. Amendment 8 would clarify sustainability, and provide a definition that would allow us to take into account a range of matters, including economic growth and employment.

Amendment 12 involves part of the whole issue of intergenerational fairness. If we are serious about tackling social inequality, as well as family poverty and particularly child poverty, which is one aspect of that, we must ensure that we measure and take account of whether we are achieving what we say we are achieving. Much criticism has been levelled, particularly at the previous Government, for measuring too much and having too many targets, but if we do not measure, how will we ever know whether we have achieved what we want to achieve? There may be better ways—obviously, the Minister may be able to suggest some—to measure and assess the obligations under the Child Poverty Act 2010 than by giving the task to the OBR, but, at the moment, it seems that there is a gap and that that will not be looked at in as much detail as it should.

We are setting set up a body which I hope will be truly independent, which can look both forward and back at some of the decisions that are made, and which can give a projection of the likely effects of some of the steps that are taken. I would argue that it needs a slightly wider framework.

Justine Greening (Conservative, Putney)

We have had interesting debates before and after lunch. I shall briefly run through the amendments in turn to address the issues that have been raised, but I would say to Opposition Members that they cannot have it all ways. We are about to come on to clause 5, which deals with the key principles on which the OBR will run—basically, they are objectivity, transparency and impartiality—which I believe we would all agree are critical. However, the amendments are starting to prescribe what the OBR should do, in spite of the desire to which the hon. Member for Edinburgh East just referred for it to be completely independent. It cannot be completely independent if it is being told what to do in the kind of detail contained in amendments 12 and 13. I shall come to them in a little more detail in a second.

On amendment 8, which is about sustainability, it is right, as the hon. Lady just said, that sustainability is a broad concept that has a multitude of different dimensions. That was debated in the other place. I want to reassure members of the Committee that the Government intend to amend the charter to require the OBR to set out how it will approach sustainability in each of its reports. Hopefully, we can maintain the OBR’s independence but encourage it to be clear about sustainability and how it considers it.

Chris Leslie (Labour, Nottingham East)

I am interested to hear that the draft charter for budget responsibility is likely to be amended to broaden the sustainability concept. Will the Minister state clearly that if the OBR wishes to study the impact of Treasury policies on, for example, child poverty, she will have absolutely no qualms about that but will in fact welcome it?

Justine Greening (Conservative, Putney)

I welcome the hon. Gentleman’s intervention, which shows clearly that although the previous Government did not think of setting up an office for budget responsibility, now that the idea is in a Bill, the Opposition have all kinds of ideas about how its remit could be expanded and developed.

At this point, we want to ensure that the core issues of objectivity, impartiality and transparency are bedded down. The hon. Gentleman has some ideas about what the OBR should find important to look at, but we believe that it should be completely independent. It should be able to look at what it wants to look at. I agree that it should scrutinise Government policy only—it is not there to look at different scenarios. Its expertise is in fiscal forecasting. At this stage, it does not have expertise in distributional analysis, for example, so he is getting slightly ahead of what it is doing at present. What is critical is that it is entirely independent and able to do the analysis it wants to do.

Page 11 of the charter sets out the OBR’s remit, which can be modified over time. We have debated the process by which that would happen—a resolution must be agreed by the House to change the charter. The key point is that the OBR has to be entirely independent, and be seen to be so. That point was made clearly by the Treasury Committee. As we will go on to discuss shortly, it is one of the reasons why we have been so careful to develop a good process for choosing the chair of the OBR. We have been careful to ensure that that person goes through a process of pre-appointment scrutiny and is approved by the Treasury Committee.

Thomas Docherty (Labour, Dunfermline and West Fife)

I was in this very room less than a month ago during the Armed Forces Public Bill Committee’s discussion of the military covenant. The Minister’s colleague, the right hon. Member for South Leicestershire (Mr Robathan), who is the Minister with responsibility for veterans’ affairs, specifically cited three examples for inclusion in the covenant report. He made it absolutely clear that a report could be fully independent even if Parliament laid down some examples. So I am puzzled. Why has one wing of Government said that the Government can lay down specific examples without ruling out other things? This Minister seems to be suggesting that the Government cannot do that.

Justine Greening (Conservative, Putney)

I am talking in the context of the Office for Budget Responsibility, which we are addressing in the Bill. Clearly, the purpose of the OBR is to take a process—the forecasting of public finances and the sustainability of public finances—that used to be delivered by the Treasury and to put it in an entirely independent body separate from the Treasury.

We always had a problem with the figures’ lack of credibility. We would get to each Budget and the figures would be presented in the Red Book, but there would be no consensus on whether they were robust. The Bill sets up an Office for Budget Responsibility, which means that that forecasting is done by an entirely independent group of people. Of course, it needs to work with the Treasury—it is trying to assess the impact of Treasury policies contained in a Budget—but the point is that it is doing that independently. That is why I do not think it is right for us already to be telling the OBR that it needs to do explicit, additional work.

We have addressed the issue of sustainability in the charter. Members have raised their concerns. Many of them have talked about the importance of those issues in the context of the economic environment. Things change, of course, and had we introduced the Bill at a different time, someone would have said that we had to make absolutely sure that it covered some other area that was particularly important at that time.

We are trying to ensure that the House does not get into the business of being explicit about the things that the OBR should be looking at. We want to make it very clear that the OBR should be looking at broad forecasting and responding to particular queries from the Government for independent analysis. The OBR should be in charge of producing Government forecasts in the way that the Treasury did in the past.

Chris Leslie (Labour, Nottingham East)

I think I understand the logic behind the Minister’s keenness to resist the expansion of the duties listed in clause 4. However, as my hon. Friend the Member for Dunfermline and West Fife has already said, adding a duty to test the impact of Treasury policy on child poverty would not in any way jeopardise the OBR’s independence.

Is the Minister saying that it would be more appropriate to look at the charter’s objectives and the mandate for those specific elements of sustainability? After all, the objective mentions intergenerational fairness and the effectiveness of monetary policy. To the degree that the charter is specific, is she suggesting that it would be more appropriate to amend the charter to include, for example, the duty to test the child poverty impact?

Justine Greening (Conservative, Putney)

The answer to that is no.

Thomas Docherty (Labour, Dunfermline and West Fife)

For my benefit, will the Minister clarify that point? I think she is saying that she is somewhat reluctant explicitly to give additional powers. Suppose that the wording of the amendment tabled by my hon. Friend the Member for Nottingham East stated that the office “may also examine” child poverty or local authorities, rather than “shall also examine”. Would the Minister be content that that was a suitable form of words that made it clear that the option was there while also guaranteeing the independence for the body to make its own decision?

Justine Greening (Conservative, Putney)

There is no need to make that change. The Bill enables the Office for Budget Responsibility to fulfil its duties entirely in the way it sees fit. We will soon come to clause 9 on the right to information, under which it can request the information that it thinks it needs.

I will return to my original comments, although I am conscious that I must make progress and respond to the points raised by other amendments. We must allow the OBR to have its independence, and the Bill sets out the context and the duties that it will have. The key to success—the critical point—is that it will have the independence to get on and do its job as it sees fit. The Treasury Committee, quite rightly, flags up the issue of independence as key. If we get to the position where the OBR is not seen as independent, that will fundamentally undermine its ability to deliver what we want, which is credible forecasting that people agree is robust.

Thomas Docherty (Labour, Dunfermline and West Fife)

Going back to the point raised by the hon. Member for Elmet and Rothwell, my concern—which I suspect is shared by my hon. Friends the Members for Nottingham East and for Bristol East—is that if we do not indicate in some sort of formal manner that the OBR may choose to examine these or other issues, a future Government who are more callous than the Minister may cut the funding off at the knees. The Secretary of State for Communities and Local Government did that to the Audit Commission because he does not like its policies. If we do not write down that the OBR has the power to look at child poverty, local authorities or other areas, is there not a danger that a future Government might claim that it has overstepped its remit?

Justine Greening (Conservative, Putney)

I go back to my original comments. It is clear in the Bill and the charter that the OBR can fulfil its duty in the way that it sees fit. I would be concerned if, at some point in the very, very distant future—we hope—the hon. Gentleman’s Government were ever to change and challenge that. That is why we decided that it is important to have parliamentary scrutiny to ensure that any modification of the charter goes through a resolution and is approved by the House of Commons.

I do not accept what the hon. Gentleman is saying. The Bill makes it clear that the OBR is independent and needs to be impartial, and that it has to remain objective at all times. We have set it up to enable it to do that. However, I think that we will come to some additional amendments that may undermine that.

Kerry McCarthy (Labour, Bristol East)

I am slightly confused, as is my hon. Friend the Member for Nottingham East, about why giving the OBR the task of looking at whether the child poverty target has been met would in any way compromise its impartiality. Does the Minister suggest that it would get embroiled in making political decisions about the child poverty targets? Surely it is a simple matter. We have the Child Poverty Act 2010 and there are four different tests set out in that. That is clear and requires empirical analysis as to whether the target has been met. I do not understand why that would compromise impartiality or integrity.

Justine Greening (Conservative, Putney)

I am sorry that the hon. Lady and her colleagues are confused. We do not want to accept the amendment because the role of the OBR is to

“examine and report on the sustainability of the public finances.”

That is its key duty, so its analysis has to be pursuant to that principal duty. The hon. Lady wants to broaden its remit into an area for which it does not have the expertise.

My other point is a fundamental point of principle. Including amendments 12 and 13, which pick up specific policy areas, and saying that the Office for Budget Responsibility must look at them, is by definition starting to compromise its independence in carrying out its job pursuant to what we are setting out in the Bill. I know that the Opposition do not agree with that.

As with many good ideas from Conservative and Conservative-led Governments, I worry that the Opposition will seek to tamper and interfere—in their eyes, try to make better—and undermine what is a very strong idea to set up an independent Office for Budget Responsibility to provide independent forecasts. For too long, this country had a Government who did not produce independent forecasts and did not therefore have a credible fiscal policy, but were able to try to mask the fact that they were taking our economy from being prosperous to being fundamentally weakened with a structural deficit. We now have to spend time addressing that deficit with some very difficult choices.

I was interested to hear the debate on child poverty and local government finance. We know that one of the determinants of child poverty is whether families have jobs, and I merely note that Opposition Members left government with unemployment higher than when they came in.

I also note that their former Chief Secretary to the Treasury left a message for his successor that said that there was no money left. That is a very difficult thing for Opposition Members to keep hearing, but the reality is, even if the shadow Chancellor denies that Britain was left in a financial mess, it actually was. There is no getting away from that.

If Opposition Members are to be taken seriously on the economy, they need to start to outline their alternative. Their refusenik approach to policy so far has been evidenced today in their bleeding-hearts response to what is going on in Government policy. Well, Government policy is in direct response to the utter mess in which the Opposition left our public finances.

My other observation is that if the Opposition want to be credible, they will at least have the guts to admit what they were planning to do, which was to start cutting public expenditure in April. In fact, they were going to cut it by about £2 billion less. If they want to be taken seriously, perhaps at some point during the next three weeks they will set out where their cuts would be made. At the moment, we have not had a penny from them.

Chris Leslie (Labour, Nottingham East)

You’re in government.

Justine Greening (Conservative, Putney)

Is it any wonder? What the British people recognise is that we had a plan for tackling the deficit, whereas the party that created it does not even admit that it existed. [ Interruption. ]

William McCrea (DUP, South Antrim)

Order. I remind all hon. Members that I am not in government, so you should not say “you’re” anything. I am the Chair. I have the privilege of being totally independent.

Justine Greening (Conservative, Putney)

Having set out why I think that the Office for Budget Responsibility needs to stick to its core task, for which we have set it up—

Kerry McCarthy (Labour, Bristol East)

rose—

Justine Greening (Conservative, Putney)

I shall not take any more interventions at present; I have taken an awful lot, as I think the Opposition will recognise.

Let us briefly discuss amendment 9, which would require the OBR to produce sustainability and accuracy reports twice each year. There are good reasons for keeping both reports on an annual basis. On the accuracy report, sufficient new out-turn data must be available to merit a new assessment of forecast accuracy, and a second report in a year would benefit from very little new data with which to analyse accuracy.

The sustainability report will have the broad scope that we have said it needs. The OBR has set out the range of issues that it intends to consider, including changes to the uprating of pension benefits and to the public sector work force. Such changes will require substantial work, which will take time.

An annual reporting requirement provides the OBR with the necessary time to produce the analysis, whereas with a biannual report there would be a risk of its not having sufficient time for such rigorous analysis. Because we want the OBR to be independent, however, there is nothing to stop it producing additional analysis on a more frequent basis, should it wish to.

Again, amendment 10 goes in the wrong direction, because it would require the OBR’s sustainability report to focus only on the next five years. The OBR has said that it intends the report to include long-term analysis on the sustainability of the public finances, which will include projections over the next 40 years to allow a full analysis of long-term trends. That is consistent with the sustainability analysis produced by other international forecasting councils. We do not want to accept an amendment that, far from allowing that, would prescriptively curtail it.

Amendment 11 would give the OBR an explicit role in informing public debate, but the OBR has been designed to produce a broad range of reports that are accessible to everyone. It is required to act transparently to ensure that all its work, assumptions and methodology are set out. We in this House have already spent a lot of time debating OBR reports. I note that the Opposition have become fond of cherry-picking various statistics from such reports, so they are clearly ones that people will use and scrutinise.

A careful balance must be struck between the OBR’s publishing and disseminating the most credible analysis possible, and its having an advocacy role that might result in its being brought into political debates. The last thing we want to do is risk its impartiality and hence its credibility. The OBR will be a force for good only if it is deemed credible, and the Treasury Committee agrees:

“The OBR’s contribution to public understanding should not be confused with self promotion. This commentary function should be one of informing public debate through disseminating better understanding of fiscal policy and long-term economic trends, identifying possible risks in the structure of the economy and provision of data.”

The spirit of the amendment is already achieved through the OBR remit. Through producing the best possible fiscal analysis, and doing so in a transparent manner, the OBR will promote a wider public understanding of sustainability issues.

On amendments 12 and 13, the OBR has been explicitly established to examine a report on the sustainability of the public finances, but, subject to that statutory duty, it is afforded complete discretion in doing so. To ensure that it is credible, it must operate objectively, transparently and impartially. Both amendments seek to give the OBR responsibility. Amendment 12 proposes doing so in measuring child poverty, which would significantly and inappropriately expand its role.

The OBR has an expertise in macro-economic and fiscal analysis, not in examining the distributional effects of Government policy. That would require a significant expansion of the OBR’s capability, which would not be consistent with its responsibilities regarding the sustainability of the public finances. The amendment would bring the OBR into a different analytical territory from the one that it is designed to consider.

Amendment 13 would give the OBR a role in assessing local authority finance settlements. I wish to remind members of the Committee that the OBR is not a policy-making organisation. Policy does—and, indeed, should—remain the domain of the Government. Our decisions regarding the local government finance settlement are the domain of the Government and elected Ministers. The impartiality or otherwise of such decisions is inevitably a subjective and potentially political judgment. Given that we all look at its inquiry with real interest, the Treasury Committee said:

“The OBR should avoid being drawn into seeking to apply political pressure through its commentary—even thought many commentators”—

I am looking at Opposition Members—

“will encourage it to do so. The OBR, is not and should not be, running fiscal policy.”

I agree with that. It would be inappropriate for the OBR to police the Government’s decisions or determine the “impartiality” of those decisions or otherwise. That is more properly a role for Parliament.

Chris Leslie (Labour, Nottingham East)

The hon. Lady says that she does not think that the OBR has a role in policing the Government’s decisions, yet they are asking the OBR to analyse and assess the sustainability of public finances. Will she now turn specifically to the point that I asked her to address in respect of the “Control Shift: Returning Power to Local Communities” document? Obviously, the Prime Minister’s face is in the foreword to the document in which the Conservative party committed only two years ago to have an Audit Commission. There is no longer an Audit Commission, but the OBR seems the best alternative to be

“given a specific duty to report on whether the basis for allocation”—

of local government finance—

is transparent”

in accordance with objective criteria set out. If the Government now no longer stand by that commitment, that is fair enough, but I would like to hear it from the Minister. Where does she stand on that particular promise, which was made before the election?

Justine Greening (Conservative, Putney)

As the hon. Gentleman knows, the local government finance settlement was debated in Parliament on 9 February. That is the appropriate vehicle for Parliament to decide on matters. As for the way in which local government funding is allocated and the debate that he is interested in having on whether that happens on an impartial basis, many Members of Parliament would have their own opinion on whether the settlement their council gets is fair and whether the Government are treating their council impartially.

The hon. Gentleman will be pleased to hear that the local government resource review will be a fundamental look at the future of local government finance. I am sure that he will want to have his say, and stakeholders will have the opportunity over the next few months to put their views on funding for local authorities from 2013 to 2014. There will be a forum and a vehicle whereby impartiality can be considered.

Just down the corridor, the Localism Bill is being discussed in Committee, too. Those on the Government Benches have always been keen on localism and giving local communities more control over what happens to them. I hope that down the corridor the hon. Gentleman’s party is finally embracing the need to move away from central diktat to more locally driven decision making.

With that, I have covered the issues raised by the Opposition Members. I do not accept their amendments. Perhaps some were well intentioned, but they would take the OBR down a route that risks the fundamentals of what it will be set up to achieve: impartiality, objectivity, transparency and making sure that people see it as absolutely independent.

Chris Leslie (Labour, Nottingham East)

Dear, dear. The sound that you can hear, Dr McCrea, is barrels being scraped as arguments against the amendments are accrued as much as possible. All credit to the officials that the hon. Lady has with her today. It must have taken the phalanx hours of hard work to come up with the argument that we cannot assess the impact of Treasury policy on child poverty because that would jeopardise the independence of the Office for Budget Responsibility.

The hon. Member for Putney is a talented Minister who will go a long way in the years ahead, but that argument was not her finest hour. Perhaps she read on in her notes and got to the point where it said that the issue was outside the remit of the OBR and she tried to avoid saying it. But she did say it eventually.

The reason why she was logically trying to avoid saying that child poverty would be outside the remit of the OBR was that it implies, at a certain level—I am sure this is not true—that she does not regard child poverty as part of responsible budgeting and responsible public financial stewardship.

It is a great pity if the hon. Lady takes that view. For all the points she makes that the OBR does not have the expertise to look at these issues, I am not sure that that is necessarily the case. It is a pretty broad-minded and well skilled organisation. As I said before, if we are to start looking at this concept of responsibility we have to start thinking about outcomes; otherwise we are merely bean-counting and measuring inputs. I had thought that her Administration were against that sort of approach in public policy management, but perhaps I am wrong.

It would be perfectly reasonable to set out in the Bill that the OBR should have this responsibility. That would in no way jeopardise its impartiality or independence. The fact that the Minister eventually had to resort to the arguments that it would risk the fundamentals of the OBR to do so and would be inappropriate for the OBR to have this duty is testament to the lower order priority the Government are showing when it comes to addressing child poverty issues.

Kerry McCarthy (Labour, Bristol East)

Does my hon. Friend share my suspicion that the real reason why the Government do not want this provision to be included in the Bill is that, given their track record on the Budget and the spending review and the impact of that on children and families, they have no intention of meeting the child poverty targets and they want to brush under the carpet the fact that this Child Poverty Act and these targets are in existence? Obviously if we had this provision in the Bill it would force them to do something about child poverty.

Chris Leslie (Labour, Nottingham East)

Indeed. Something like a year from the commencement of the Child Poverty Act, which is around 25 March, a report must be produced on progress towards meeting the child poverty targets. Our suspicion is that the Government may well trigger the provisions in the Bill that provide that fiscal circumstances mean that they cannot meet those targets as they pile on the VAT, cut tax credits and education maintenance allowances and so on and so forth. This is the direction of policy that the Government are taking. Whatever those policy objectives may be, let us have somebody independently assess their impact so that people do not have to take our word for it as politicians. We want to have someone else to do it. The whole construct of this arrangement is in part about having an independent body audit the things that the Government want to be audited and assessed, but anybody else’s opinion about what should be audited or assessed, well that is outside the remit of the Bill.

Anne Marie Morris (Conservative, Newton Abbot)

I question the hon. Gentleman’s argument about logic. I do not agree with his summation of the Minister’s logic, but I must question his logic. Just because we do not put a specific reference to child poverty in the Bill does not mean that the Government are not concerned it. Of course we are concerned about it. This is just the wrong place to do it and we would not do it justice.

Chris Leslie (Labour, Nottingham East)

In a way, the hon. Lady succinctly makes the argument that the Minister took about 20 minutes to make. The Minister said that it would jeopardise the independence of the Office for Budget to have it looking at child poverty, whereas the hon. Lady has said that it is the wrong measure and not the right organisation to do that. The Minister eventually came round to saying that. If that is what they believe, that is the Minister’s judgment. She takes a different definition of responsibility than we would. We are looking at responsibility in terms of the things that matter to our constituents. If she were to talk to the people out in her or my constituency and ask them what a responsible budget is, they would want to know what the impact is on the ground on the lives, living standards and so on of real people. That is simply the point I am trying to make through this set of amendments.

On amendment 13, that barrel-scraping activity continued again when the Minister was pressed on her party’s commitment to have an audit body that is given a specific duty to report on whether the basis for the local government financial settlement is “transparent and in accordance with objective criteria set out by Ministers.”

Clearly, the Minister did not want to address that particular commitment. At no point did she say, “Yes, we stand by that commitment, but we are finding a different vehicle through which to adhere to it.” She did not say, “Actually, because of the coalition and the Liberal Democrats, things are different. What we said before the election no longer counts.” That is sometimes what the Government say when they change their mind on various things. We therefore almost had a stealthy U-turn by conspicuous logic, rather than it being stated verbally. By ignoring the issue, she simply implied that it was no longer relevant. That is a great pity. We will probably have to return to the matter at a later date in the consideration of the Bill.

Thomas Docherty (Labour, Dunfermline and West Fife)

Another reason might be that the Minister has spent too long with the Lib Dems and she has forgotten what her job is.

Chris Leslie (Labour, Nottingham East)

I cannot imagine the way that Ministers work in this day and age. It is certainly a mystery to most of the country. I thought that the notion of trying to create a vehicle to assess local budget responsibility and the impartiality of the settlement would be something we could engage with the Government on, given that they had shown through their words and policy documents an interest in that. However, obviously, that is not the case. As I say, we will have to find another opportunity to look at those particular issues.

The Minister says that a review of local government resources is coming up and that there is a Localism Bill. However, those are not the correct vehicles for assessing the transparent and objective criteria used for a local government financial settlement, because they will not be creating an independent body in statute, such as the Audit Commission or the Office for Budget Responsibility. She may well have a number of her cronies in mind that she wants to appoint to that resources review, but the Localism Bill certainly does not touch on these issues. Therefore, we await with interest to see the Government’s ability to address their promise made before the general election.

The other amendments in this chain have a number of merits. I heard what the Minister said about several of them. My hon. Friends who spoke earlier made good points about the necessity for a broader definition of sustainability. When challenged, the Minister did not say at any point, “Well, the OBR mustn’t look at child poverty or the local government settlement.” We have to hope that it will at some point regard those things as issues that matter. I hope that the fact we have debated them in Committee will send a signal to the OBR that scrutiny of such issues would be very welcome.

I am happy to withdraw amendments 8, 9, 10, and 11, but we want to press amendments 12 and 13 to a vote.

Chris Leslie (Labour, Nottingham East)

Clause 4 is one of the central provisions in the Bill. We have already debated the limits of subsection (1), but the clause also sets out the consequential reporting arrangements that the Office for Budget Responsibility must make in respect of its duties. We have discussed, to a certain extent, the fact that there are several occasions on which reports must be prepared on fiscal and economic forecasting. There is, however, the anomaly of having twice-yearly reports on fiscal and economic forecasting and the fiscal mandate, but only on one occasion each year would the Office for Budget Responsibility make

“an assessment of the accuracy of fiscal and economic forecasts prepared by it”.

Does the Minister think that there is any problem with a corporate body such as the OBR assessing the accuracy of its own forecasts? In clause 4(4)(a), there is a provision that, every year, a navel-gazing operation will take place, and, presumably, a document will be published that says something in the order of, “Yes. We looked at these figures and published our assessment of them, and our assessment was good and accurate. By saying that, therefore, we comply with the provisions in the Bill.”

I do not want to give the impression that I am somehow sceptical of the necessity of every line in the Bill, but one sometimes gets a sense that it is slightly flabby legislation and that there are several provisions that are padding the legislation out to make it look slightly grander and more important than it perhaps is. Asking an organisation formally to review its own work annually seems slightly circuitous. Perhaps the Minister feels that that is an especially worthwhile exercise. It may be what, in modern management parlance, they call a 360° review. It is a horrible process for anyone in management where everyone around them is asked how well they are doing, but maybe it is something that Ministers should do more frequently. But for the OBR this is its fate—the measure is now in the Bill. However, never let it be said by a Minister in this Committee that we cannot have a measure in the Bill because it is extraneous, unnecessary or not part of the legislation. There are plenty of examples in the Bill of measures that go slightly beyond necessity.

By and large, we feel that there is merit in creating a body to provide this analysis and assessment. We also feel that the duties of the OBR and the issues that it should take into account are fairly uncontroversial, other than the unnecessarily narrow definition of “sustainability” that Ministers seem to be imposing through the drafting of the Bill. As I say, however, by and large we think that there are important provisions in the Bill and we understand where the Government are coming from on this issue.

William McCrea (DUP, South Antrim)

I call the hon. Member for Dunfermline and West Fife.

Alison McGovern (Wirral South) (Lab) rose—

Thomas Docherty (Labour, Dunfermline and West Fife)

Ladies first.

Alison McGovern (Labour, Wirral South)

My hon. Friend says, “Ladies first,” but I would perhaps say, “Age before beauty.”

I hope that the Minister can help me with a question about sustainability. The clause is central to the Bill as it establishes that the OBR will

“examine and report on the sustainability of the public finances.”

First, for the record, I want to raise a problem with the clause because “sustainability” is a highly contested term. Our debate on the amendments to the clause revealed the contestable nature of the idea of “sustainability” in relation to the public finances.

I will give an example to show the Committee why I think this idea of “sustainability” might be problematic and why we need to be clear about it. The financial services sector commissioned a number of academic reports prior to the 2008 financial crash that demonstrated that collaterised debt obligations and credit default swaps promoted economic stability. Some academics in various economic departments around the world found that those financial instruments were effectively promoting financial stability because of their dispersal of risk. Of course, we all know what happened.

Justine Greening (Conservative, Putney)

Obviously the hon. Lady is aware that the shadow Chancellor was City Minister when much of this failure of regulation took place. Does she think that he was one of the people who read those reports and was taken in by them?

Alison McGovern (Labour, Wirral South)

The shadow Chancellor has played a great role in the economic history of this country from the mid-1990s and through the crash. I suppose that the Minister is asking me to account for why the previous Government did not take regulatory action to disallow the financial instruments that I have just mentioned. The implication of her point is that when the shadow Chancellor was City Minister, he ought to have acted in some regulatory manner to prevent those instruments from being used. Knowing what we know now, we can all go back, pick over history and say, “Perhaps such a Minister should have regulated there,” or, “Perhaps such an Opposition should not have called for light-touch regulation,” as the Conservative party did. Throughout my living memory, the Conservative party has been calling for light-touch regulation of the City of London, and it did so all the way through its time in opposition. I would happily discuss at length with the Minister the point at which she thinks the former City Minister should have regulated, and at what point she called in Parliament for that very regulation, but I fear that such a discussion might test your patience, Dr McCrea. The question is important, however, and I wish that we had more information.

The point I am driving at is that our recent history shows that conflicting evidence has been produced, with worthy academics saying that a particular instrument or a certain approach to the economy promotes stability. How will the OBR know how it is to fulfil its legal duty

“to examine and report on the sustainability of the public finances”

when that notion is so heavily contested? It will be very difficult to achieve that without reference to academics, information, economic theorists and public finance experts. I am sure that it will refer to those sources, but I would find it helpful if the Minister could explain how she interprets sustainability of the public finances and how she expects the OBR to do so. Our debates on clause 4 have actually been about the job that we expect the OBR to do. Sustainability is not a concept that can be easily understood or defined straightforwardly. Will the Minister give us more information about how she expects the duty to be fulfilled?

Thomas Docherty (Labour, Dunfermline and West Fife)

First, I shall to pick up on the Minister’s earlier question about regulation. As she will recall, after Northern Rock collapsed in 2008, her own boss spoke in the City—I suspect it was at a fundraising bash, because the Tories held many of those. He said, “You want less regulation and we”—the Tories—“will deliver it.” Labour Members will not take a lecture on a light-touch regulatory approach from Conservative Members.

I agree with my hon. Friend about the wishy-washy, unclear and not very substantive approach on some of the wording in the clause. There is, of course, a Lib Dem in the Treasury team, so given the Minister’s precise mind, such a wishy-washy phrase that does not mean anything at all must have come from the pen of the Chief Secretary to the Treasury rather than her.

The specific issue that I would like the Minister to clarify is whether the OBR will have the funding and ability to carry out studies into the devolved Administrations throughout the United Kingdom. At the moment, Scottish Ministers—when they have not given away the powers—have the ability to set business rates within Scotland and to vary income tax at the basic rate by up to 3p in the pound. Those revenue-raising powers are significant, and Scotland receives a not inconsiderable block grant from the UK Government. From next Monday, the Committee of the whole House will consider the Scotland Bill, so I look forward hearing to the hon. Members for Witham and for Bury North championing the causes of further devolution and handing powers to the Scottish Parliament then. We know that they fully support those things and agree with their Prime Minister that the Scottish Parliament is a great institution. Without wishing to prejudge their excellent contributions on the issue of greater fiscal powers for Scotland, it is clear that, in future, the Scottish Parliament will have greater revenue raising powers. It has been suggested that it might even raise up to 50% of its income stream from its own people through its powers.

You, Dr McCrea, and your colleagues in Northern Ireland have successfully articulated the concerns of the people there about the current funding settlement. I am aware of particular concerns about the Treasury’s failure to guarantee the security of Northern Ireland under the ludicrously small settlement. It would be entirely appropriate for the OBR to investigate not only whether the Administrations of Northern Ireland, Scotland and Wales have the correct funding settlements to carry out their duties, but whether they have sustainable funding settlements—to use the wishy-washy term of the Chief Secretary to the Treasury.

Will the OBR be able to carry out a thorough, independent investigation into the sustainability of the devolved Administrations? If so, to echo the point made by my hon. Friend the Member for Wirral South, over what period does the Minister think that the sustainability should be examined? Is it the period of a strict 12-month settlement, over the three years of a normal funding settlement, or over the lifetime of a UK Parliament?

Justine Greening (Conservative, Putney)

Clause 4 sets out the main duty for the OBR, so it is obviously a key clause. That main duty is to examine and report on the sustainability of the public finances. I will respond to some of the points made the hon. Member for Wirral South shortly, but given the range of dimensions to sustainability, the OBR will be required to clarify its focus in each report and to set out how it has approached the question of sustainability.

The Bill requires four specific pieces of analysis. First, the OBR will have a duty to prepare fiscal and economic forecasts on at least two occasions for each financial year. Those are expected to act as the official forecasts for the Budget and for the autumn. Handing over the duty to produce those forecasts represents a major step forward for the credibility of the UK’s economic and fiscal forecasts and policies. That has been recognised widely, from the CBI to the International Monetary Fund. That said, it is consistent with the Treasury Committee’s report that this and future Governments retain the right to disagree with the OBR’s forecasts. If such a situation arose, the Chancellor would provide reasons to Parliament.

Secondly, alongside the forecasts, the OBR must produce an assessment of the extent to which the fiscal mandate has been, or is likely to be, achieved. It will make an independent assessment of the probability of the Government achieving their mandate, which will add further credibility to the Government’s fiscal policy. Thirdly, the OBR will, at least once for every financial year, prepare an assessment of the accuracy of the fiscal and economic forecasts it prepared previously. The purpose of that duty is to require the OBR to review its previous forecasts, which will allow it to consider any possible forecasting errors within its models and judgments, thus potentially strengthening its forecasting process.

The fourth and final specific duty is to produce, at least once for each financial year, an analysis of the sustainability of the public finances. We intend that that analysis will promote wider understanding of medium and long-term fiscal pressures, both within the Government and more widely. For each report produced under the clause, the OBR is required to explain the factors that it took into account when preparing the report, including the main assumptions and risks.

Beyond its statutory duties, the OBR will have complete discretion to determine its wider work programme. The hon. Member for Dunfermline and West Fife asked how the OBR will work with the devolved Administrations. It can work with them if there is a decision to analyse any relevant issues that are consistent with the OBR’s remit. For example, the hon. Gentleman mentioned the Scotland Bill, and once the Calman report is implemented, the OBR will be the forecasting authority for Scottish tax receipts, which I am sure he will be pleased to hear. The OBR can choose to do whatever work it wants, subject to its statutory duty, so if it decided to analyse the economy in Scotland or Wales—

Thomas Docherty (Labour, Dunfermline and West Fife)

Or Northern Ireland.

Justine Greening (Conservative, Putney)

Indeed. We would expect the OBR to discuss such analysis with the devolved Administration concerned, but it would be free to carry it out.

Thomas Docherty (Labour, Dunfermline and West Fife)

I am grateful to the Minister for that clarification. Will she also tell us whether the time over which the OBR measures sustainability will be a single year, the period of a three-year funding settlement, or the lifetime of a Parliament?

Justine Greening (Conservative, Putney)

As I said earlier, one reason why we did not want to accept the Opposition amendment to make the forecasts cover a five-year period is that we want to see sustainability over the medium and longer term. In fact, the OBR has said that it wants to look over a time period of 40 years, so one aspect of its work is a long-term forward look at the sustainability of public finances.

As I have said, the OBR has complete discretion. That means that although the Government, parliamentary Committees and any other body can ask it to carry out a specific piece of work, it is for the OBR alone to determine its wider work programme.

On the OBR’s ability to look at sustainability and the use of experts, and its independence, which was raised by the hon. Member for Nottingham East, there will be non-executive directors as part of the broader OBR governance structure. On a day-to-day basis, they will ensure its independence and provide a fresh input into how it is working, including on the relevance of its forecasts.

Although the Treasury previously did the forecasts that will now be carried out by the independent OBR, it also used to assess whether its forecasts were accurate and published a report on that once a year. We propose to align that assessment of accuracy with what the OBR will do, and given that both the forecasting and the assessment of that forecasting used to be done by the Treasury, we will put both in the OBR.

The review of the OBR will be strengthened on a day-to-day basis by non-executive directors and by the fact that the members of the Budget Responsibility Committee will be experts. Everybody in this House would agree that Robert Chote, as chair of the OBR and the Budget Responsibility Committee, is well respected in the area. The OBR intends to establish an advisory committee of experts to support its work. Transparent analysis and the publication of its assessment of the accuracy of its forecasting, which is part of what it plans to do, is a key feedback loop to ensure that it improves its forecasting over time.

Finally, as I have said, the non-executive directors will commission an entirely independent review of the independent OBR every five years. Those measures mean that there are clear and effective safeguards in place to ensure that the OBR’s forecasting is analysed internally year on year and also externally. The ongoing scrutiny of OBR reports not only in Parliament, but by outside commentators, will also form part of the overall process of looking at how accurately the OBR is able to forecast.

Chris Leslie (Labour, Nottingham East)

As I understand it, only three members of the Office for Budget Responsibility are in place so far, while two non-executives have not been appointed. Why have they not been appointed and when will they be appointed?

Justine Greening (Conservative, Putney)

We are going through an appointment process for those non-executive directors, who of course are just the initial non-executive directors. We have said that we think that there should be at least two. We recognise that over time—Labour Members clearly have their own ideas—the Office for Budget Responsibility may feel that it needs more non-executive directors. The Bill gives the OBR the flexibility to recruit further non-executive directors. The advertisements for the positions will go out later this year. We hope that people will be in post by the end of the year. At that stage, we will have a full Office for Budget Responsibility group on the Budget Responsibility Committee and in terms of non-executive directors.

Thomas Docherty rose—

Justine Greening (Conservative, Putney)

I can see that the hon. Gentleman is keen to jump in.

Thomas Docherty (Labour, Dunfermline and West Fife)

The Minister will obviously not have forgotten that there are 10 months of this year left, so could she be a little more specific about what “later this year” means?

Justine Greening (Conservative, Putney)

At this point, we do not intend to take too long to put in place the initial non-executive directors. I have tried to give an overall timeline that I am confident that we can meet, and I assure the hon. Gentleman that we want to get the Office for Budget Responsibility on a statutory footing, with all the people in place, as a matter of urgency. That is one reason why I rejected the amendment that would have created a delay, with a long-drawn-out public consultation that would have pushed back the whole process. We are very keen to get on with this, and I understand that we expect to have appointments in place by, in fact, the summer. However, before we can advertise, we need to agree the statutory role of the non-executive directors, in Committee and then in the remaining stages of scrutiny in the House. I can see that the hon. Gentleman wants to intervene one more time.

Thomas Docherty (Labour, Dunfermline and West Fife)

I do. I want to hoist the petard very gently. When the Minister says, “summer”, does she mean by the summer recess? Will we have the chance to have a statement from the Treasury before the House rises on 19 July? The date might help the civil servants to work out whether that can be done.

Justine Greening (Conservative, Putney)

I cannot at this stage give the precise date by which we will have the non-executive directors in place. We clearly want people whom we think will be appropriate, and the Bill has to complete its parliamentary scrutiny, which is what we are all involved in today. At that stage, having created the roles statutorily and having advertised them, we will have to wait to see who applies. We clearly have to go through a process, but I can assure the hon. Gentleman that that process is under way and that we do not want any delay.

Chris Leslie (Labour, Nottingham East)

I apologise to the Minister, as I know that she was finishing her speech on the clause, but I would like to know how many non-executive posts will be advertised before the summer.

Justine Greening (Conservative, Putney)

We will be putting in place two.

Clause 5

Kerry McCarthy (Labour, Bristol East)

I beg to move amendment 15, in clause 5, page 3, line 3, leave out ‘(2) and (3)’ and insert ‘(2) to (4)’.

William McCrea (DUP, South Antrim)

With this it will be convenient to discuss amendment 14, in clause 5, page 3, line 8, at end add—

Kerry McCarthy (Labour, Bristol East)

Amendment 14 is consequential upon amendment 15, so we do not need to discuss it in any detail. The amendments reiterate some of the points that my colleagues and I made earlier and that we will address in substantially more detail when we consider how the office will be set up under schedule 1 and how it will be run on a day-to-day basis. This is about whether the relationship between the Office for Budget Responsibility and the Treasury and Government will be truly independent and about how we can ensure the greatest possible transparency in the office’s activities and accountability for what it does and how it goes about doing it. In other words, we are considering how the office can fulfil the requirement under subsection 2 that it must perform its duty under clause 4 “objectively, transparently and impartially”. I have already flagged up my concern about the relationship between the Treasury and the OBR in comments on earlier amendments that were rejected by the Minister.

The Minister has, as we would expect, said that there is nothing to worry about, that the Treasury has no problem with the OBR doing the job that it has been set up to do and that if the OBR criticises or challenges the Government, or even makes them look incompetent and foolish—perish the thought—the Minister, her boss the Chancellor and everyone in the Government from the Prime Minister down would be perfectly happy with the state of affairs and happy for the OBR to challenge, criticise and embarrass the Government in that way and would never reach a stage where they think that a spanner needs to be thrown into the OBR’s works. I am sure that the Minister will forgive those of us in the Opposition who are perhaps a little more, not cynical, but sceptical about how the Government’s undoubtedly good and honourable intentions will end up working in the cold world of realpolitik. We therefore seek to put some additional checks and balances into the Bill, and amendment 15 is one of them.

We think that it would be proper and appropriate for the office to publish details of any contact that it has with Treasury Ministers and officials. In the wider political context, there has been a lot of debate about whether Members of Parliament should publish details of all their meetings with lobby and campaign groups.

Justine Greening (Conservative, Putney)

Although the OBR will move into a separate building, so it will not be anywhere in the Treasury, Robert Chote and his team are still in the Treasury at the moment. To help me understand the proposal, if I were to pass Mr Chote in the corridor—he might be on his way to a meeting—and I said hello to him, and the hon. Lady wants us to publish full details of all contacts, is she saying that that contact should be published by the OBR? That would be the meaning of “all contact”.

Kerry McCarthy (Labour, Bristol East)

Obviously, we are looking towards the time when the OBR will be based in another building. The reason why it is important that it is based in another building is distance. We are also looking at other suggestions, such as the idea that staff from the Treasury should not be seconded. The amendment would reinforce the idea of a certain formality in the relations between the OBR and the Treasury. Obviously, it could get into the realms of ridiculousness. If the Minister, as she says, met Robert Chote by the water machine, said hello and perhaps discussed what was on “EastEnders” the night before, we would not expect that to be documented and published, although I am sure that it would be fascinating to know what their conversation consisted of. We are talking about formal contact and meetings to get some idea of how much influence the Treasury seeks to exert.

As I was saying, people have floated proposals seeking to get to the bottom of the influence of lobbyists, campaign groups and commercial organisations on MPs, saying that the details of all our meetings with such groups should be published. For example, if I were to meet the Child Poverty Action Group or one of the organisations that has lobbied on child poverty, that should be a matter of public record. Other people have countered that by saying that if the requirement was that meetings on the parliamentary estate should be made public, anyone seeking to hide something would simply meet off the parliamentary estate, or they would meet over a quiet drink in an informal setting. I appreciate that it is not the easiest thing in the world to record, but it is a starting point.

The principle of a formal distance and the idea that there should be no informal or behind-the-scenes efforts to influence the OBR’s work are important. One could imagine a scenario where, if the relationship becomes tenser, people from the Treasury might make phone calls to the OBR saying, “We aren’t happy with what you are doing,” and try to bang people’s heads together. We want to avoid that situation, which is why we are suggesting that there should be a formal record of contact.

Justine Greening (Conservative, Putney)

The hon. Lady makes some valid points. She hit the nail on the head, when I asked her to be clear on exactly what contacts she envisaged as needing to be reported. Her amendment refers to publishing full details of all contact. It was helpful for her to clarify that it referred to formal contact and meetings. No doubt, she will welcome the fact that the OBR already publishes a log of substantive contact with Ministers, special advisers and private offices during the forecasting process. In fact, that is its decision; it can publish information relating to its contact with Ministers and officials in the way that it wants.

The amendment is in line with the Government’s objective to ensure that the OBR operates transparently. Clause 5(2) enshrines that and states:

“The Office must perform that duty…transparently”.

We agree that there needs to be some transparency on contact with Ministers, special advisers and private officers. That is what the OBR will publish. In the run-up to the Budget, when the OBR is scrutinising the impact of the Chancellor’s policy provisions, details of those meetings can be commercially sensitive if released and might harm the formulation of Department and Government policy.

Publishing all details would place the OBR under an unreasonable burden, but I can assure her that, like all public bodies, the OBR is required to operate under the Freedom of Information Act. Alongside that, it has the standard approach of looking at exemptions. When the hon. Lady’s party was in office, practice was developed on how to strike the balance between transparency for the public and the need for any Government to go through a process of discussing policy without prejudicing that process.

In November 2010, the OBR published a log of all substantive contacts with Ministers, special advisers and private office staff, during the forecasting process shortly after the economic and fiscal outlook. The issue is therefore covered in the Bill, which is why I do not support the amendment, although I welcome the spirit in which it was tabled. I assure the hon. Lady that substantive contact will be published by the OBR, although, because it is independent, it will be its decision to do so.

Kerry McCarthy (Labour, Bristol East)

I thank the Minister for her response. On that basis, I beg to ask leave to withdraw the amendment.

Clause 6

Kerry McCarthy (Labour, Bristol East)

I beg to move amendment 16, in clause 6, page 3, line 13, at end insert—

Clause 6 deals with the issuing of guidance on how the main duty of the OBR will be performed. The main duty is set out in clause 4, while the detail of how that duty is to be performed is set out in clause 5. Clause 6 is about the guidance that then informs how that duty is carried out. Our concern is that it sets out guidance that may be included in the charter. I do not want to revisit all the territory that we have already discussed about the fact that the charter is not before us in a finalised form today; but obviously, the fact that some guidance is contained in the charter, rather than in the Bill, gives us less ability to scrutinise, amend and challenge it.

We are concerned that the issuance of guidance contained in the charter would be used as a back-door way of seeking to control or direct what the Office for Budget Responsibility does. On the one hand, the Minister stressed the impartiality of the OBR and that it will be independent, deciding how it works, what it does and how it performs its duties. That duty is set down in the legislation, and there are details in clause 5 about how it will be performed. The detail of that guidance, however, starts to sound prescriptive and as though the Treasury or the Government are keen to dot the i’s and cross the t’s in terms of what the OBR does on a day-to-day basis.

We tabled the amendment to provide a safeguard. It states that the guidance that may be issued under the charter for budget responsibility

“shall not prevent the Office from preparing any forecasts, assessment or analysis at a time of its choosing.”.

That is motivated by concern that the guidance, as suggested in subsection (1), is

“guidance to the Office about how it should perform its duty under section 4, including (in particular) guidance about the time at which it is to prepare any forecast, assessment or analysis required to be prepared under subsection (3) or (4) of that section.”.

The Minister said that the OBR is perfectly capable of making its own decisions and deciding its own work load, and that it ought to be left to make those decisions. She made that point very strongly when she said that it should not be our job to tell the office that it ought to be looking at local government finance, child poverty or whatever.

On the one hand, the Minister has said, “Leave the OBR alone; it knows what it is doing.” On the other hand, the Government now seem to want to tell the office at what time it should prepare forecasts, assessments or analysis. Surely, if the experts are in the office doing the work on a day-to-day basis, and have already been told under clause 4 that they should prepare forecasts twice a year and make an assessment of the accuracy of the forecast once a year, there is already a degree of prescription from the Government as to how often they should do things. It seems to be going slightly too far in subsection (1) to state that further guidance should be issued about the timing of

“any forecast, assessment or analysis”.

That is why we feel that there should be a caveat, or a safeguard provision, which says that if we accept that the Government are telling the office at what time it should prepare forecasts, that should not preclude the OBR exercising a degree of independence if it wants to do anything else at other times of the year. That is just a caveat to the provision. I would not have thought that the Government would have a problem including that as a safeguard, but I look forward to hearing what the Minister has to say.

Justine Greening (Conservative, Putney)

I hope that I can clarify the situation for the hon. Lady. Clearly, we want to ensure that the guidance helps the OBR in clarifying its duty and how it will work in practice. It is also worth pointing out that when the Chancellor comes to produce the Budget, he will rely on the OBR to produce the context for his fiscal policy decisions. The OBR’s forecasts will, therefore, be a very important part of the Budget, so it is important that that aspect of what it does is produced in a co-ordinated manner. Otherwise, we could end up with a Chancellor having to take decisions without independent analysis from the OBR. The public and Parliament could end up with no forecast alongside the Budget that the Chancellor presented to Parliament. We want to ensure that the OBR fulfils its core executive function, which is to produce the official forecast, and to do so when Parliament and the public need to see it. Part of that is the OBR’s analysis of the likelihood that the Government will meet their fiscal mandate.

There is a need for the OBR to co-ordinate with the Treasury regarding the timing of that analysis, which means that the OBR forecasts are the most relevant for the Chancellor’s policy decisions. However, that does not undermine the OBR’s ability to act independently of Ministers. How it approaches that forecast—its judgment and methodology—remains at the complete discretion of the OBR, and clause 6 makes that clear. Clause 6 is also very clear that the charter cannot include guidance on how the OBR should produce its forecasts. Apart from that, subject to fulfilling its own executive functions, the OBR can provide additional analysis to its own publication timetable, as stated in paragraph 4.21 on page 14 of the charter for budget responsibility.

Other than the example that I have just set out, the OBR can publish at a time of its choosing its assessment of the accuracy of its fiscal and economic forecasts, which it will do at least once a year. The analysis that it will make of the sustainability of public forecasts will also be done at least once a year along with any other analysis consistent with its duty to examine and report on the sustainability of the public finances.

The charter for budget responsibility sets out that relationship and the timing of the particular official forecasts that the Chancellor and Parliament need. It also sets out that the Chancellor will provide “reasonable advance notice” ahead of any forecast publication date, so there is some co-ordination; it is set out in the charter how that will work.

I hope those comments have provided some reassurance about why that piece of the guidance and the charter works in the way they do.

Kerry McCarthy (Labour, Bristol East)

I am slightly confused as to why there is a need for the provision in subsection (1). It would seem a matter of common sense that if the Chancellor has given the OBR reasonable notice of things that are likely to appear on the political calendar, which is a sensible way to conduct the relationship between the organisations, the OBR—if it takes its role seriously, as I am sure it will—will get to work and start doing the analysis and assessments that are required. I am not sure what would be gained by additional guidance about the timing in the charter. I am not sure what sort of wording would appear in the charter that would be useful, especially as if the charter is revised, it would have to be laid before Parliament. In such a case, there would obviously be a significant time delay before anything in the guidance would become binding.

Justine Greening (Conservative, Putney)

The hon. Lady advances one argument that can be made. If we had not put in a safeguard to ensure that the OBR did not have to produce official forecasts to coincide with core fiscal updates to Parliament by the Chancellor and to feed into that policy-making process with its independent assessment of the impact of policies on the financial situation and the long-term sustainability of public finances, I suspect that the Opposition would quite rightly have wanted to table an amendment to say that we should have such a safeguard. When Sir Alan Budd, who was the interim chair of the OBR, was asked to provide advice on how the OBR should work, he said:

“As a minimum requirement, the permanent OBR will need to produce one Budget forecast each year to coincide with, and include all of, the Budget measures.”

The hon. Lady is right. Arguably, we could have left that provision out, but it would have been wrong. The role of the OBR is so important that we must take on board comments from people such as Sir Alan Budd. Our view was that, on that particular aspect, we should be prescriptive, not just for the Treasury and the Chancellor to have the OBR feed into the process and then report on it, but for the transparency that we need for the OBR and its role in aiding robust scrutiny of the public finances. I hope that has provided the hon. Lady with some reassurance.

Kerry McCarthy (Labour, Bristol East)

I have nothing further to add. I beg to ask leave to withdraw the amendment.

Kerry McCarthy (Labour, Bristol East)

Will the Minister elaborate on the form that the guidance on how the Office for Budget Responsibility performs its duty, particularly in relation to clause 5, will take? That clause seems to be dealing with a similar issue—how the main duty is to be performed—and clause 6 deals with guidance as to how the main duties are to be performed. Presumably, the charter and the guidance that it contains will build on the contents of clause 5.

We are particularly concerned about the role of the Office for Budget Responsibility. The Minister touched on that concern when she quoted the Treasury Committee’s report, which stated that the Office for Budget Responsibility should not be a policy-making body. It is important that it is not, but we need clarity about where the dividing line is. In its duty under clause 4(3) it will prepare “fiscal and economic forecasts” and assess

“the extent to which the fiscal mandate has been, or is likely to be, achieved.”

In particular, the wording “is likely to be achieved” strays into the territory of expressing an opinion. That opinion might be based on data and facts rather than political ideology, but it would certainly lead the office into that sort of territory. If it produces critiques of what the Government have done, a question arises as to whether it will stray into political territory.

Will the Minister tell us whether the guidance will deal with the question of what would be considered as having regard to Government policies, as set out in clause 5, and as not considering

“what the effect of any alternative policies would be.”?

Imagine that the Government proposed a rise in income tax of 1p in the pound. The Office for Budget Responsibility would play a role in considering the impact that that would have on the sustainability of the public finances. In considering that, would the office be able to pass judgment on or assess the impact of a 2p rise in income tax, or of the impact of no rise? If one is looking at the impact of a rise in income tax in the context of the sustainability of the public finances, it would seem eminently sensible to consider the consequences of different levels of income tax rise. If the rise in income tax were to be offset by cutting VAT, various scenarios and combinations of rises in direct taxation and cuts in indirect taxation might be considered, or one might look at the alternative, namely whether there should be rises in indirect taxation and cuts in direct taxation.

Given the vagueness of clause 5 on that issue, perhaps the guidance that will be included in the charter under clause 6 should give more guidance to the Office for Budget Responsibility on when it would be deemed to be straying out of its territory and when it would be deemed to be fulfilling its duty. Perhaps the Minister can give us some reassurance on that point.

Thomas Docherty (Labour, Dunfermline and West Fife)

I want to focus particularly on subsection (4), on which we seek guidance as to the Minister’s thinking. I will provide some specific examples of concern that I hope she can help to deal with. We are concerned about the designation of 28 days, which on the face of it appears to be a perfectly reasonable period of time; I do not object to the principle of four weeks’ notice. However, the Minister will be aware that a series of events over the next 12 months will eat up quite a lot of the House’s sitting time, and that Ministers may not always be available. I am not sure whether the Minister is one of the 200 MPs who has had an invitation to the royal wedding. I certainly have not, and I am not sure whether any other Opposition Members have. The hon. Member for Bristol West shakes his head.

I was told yesterday that 200 MPs have received invitations. I do not know whether any of the royal household’s Chamberlains or Comptrollers and Vice-Chamberlains have been invited in one capacity or another, but obviously Ministers may be distracted in the build-up to the wedding. The House will not be sitting. I understand that some hon. Members have their own wedding plans. They are to be congratulated on that, but I do not know whether they will need similar preparations.

There will be a series of events. The Easter recess lasts for three or four weeks, and I am sure that Members will be out and about in Bristol, Chippenham and elsewhere, campaigning hard for their coalition colleagues. If the idea of having 28 days is to allow Ministers and Members pre-consultation with interested bodies, it is reasonable to suggest that the Government may struggle to have genuine consultation.

Then there is the summer recess. I do not know what plans the Minister has for a holiday, and whether she will be joining the Chancellor in Klosters or wherever they go. I am not sure what are the best ski resorts in the height of summer. Perhaps the Minister will clarify the Chancellor’s thinking on that. Ministers and Members may not be around to take meetings, and the Christmas and new year recess will eat up another two weeks or more.

I am genuinely concerned about the 28-day period. We have not tabled a specific amendment, because we hoped that the Minister would clarify the matter. However, she will appreciate that if we do not feel that we have received a robust response we reserve the right to table an amendment, perhaps on Report. I hope that the Minister will give us clarity on that question.

I am a new Member and seek guidance from the Minister as to the procedure for laying the charter before Parliament under clause 1(6). Will she clarify what the period for formal debate and consultation will be? I cannot speculate on what the Chair of the Treasury Committee may wish to do, but if he felt that it would be useful to take evidence, would that be built in? What guarantees are there on the period of formal statutory consultation? Does the Minister envisage it being done through a statutory instrument, or in an order to be debated by the House?

I would be grateful if the Minister would clarify both those issues: the 28 days, and the process for formal parliamentary scrutiny and debate of changes to the charter.

Justine Greening (Conservative, Putney)

The charter for budget responsibility may include guidance to the Office for Budget Responsibility on how it should perform its duty, and the OBR is required to act consistently with it. However, the guidance must relate only to the functions conferred by the Bill. I must make it clear that the guidance cannot add to or distort the OBR’s remit as set out under the Bill, which is a safeguard.

As we heard earlier this afternoon, the charter can include guidance on the timing of the forecast assessment and analysis required under subsections (3) and (4) of clause 4. The Chancellor will commission the OBR to produce its fiscal and economic forecasts on a particular date, to ensure that the forecasts are produced in line with the Government’s timetable for the Budget and autumn forecast; that requires considerable co-ordination across Departments. Other work will be produced by the OBR, at times determined solely by the OBR, with release dates set out in advance to ensure transparency.

Equally, the charter must not provide guidance on the methods that the OBR may use in producing its forecasts, assessments and analysis. That provision is vital, because it ensures that the OBR has complete discretion over the methods that it uses, and that the Budget Responsibility Committee has complete freedom to determine how best to produce its independent forecasts, assessments and analysis.

Finally, if the Treasury wished to modify the guidance to the OBR in the charter, a draft of the modified guidance would need to be published at least 28 days before the modified charter is laid before the House for consideration. That addresses one of the questions raised by the hon. Member for Dunfermline and West Fife. That 28-day timeline is consistent with the 28-day procedure for statutory instruments, and, as I just stressed, it is a minimum amount of time. There would be the potential to lay an instrument earlier if, as he pointed out, there were mitigating circumstances. Taking all those things together in the clause means that there should always be time for appropriate parliamentary scrutiny of the charter.

The hon. Member for Bristol East had concerns about how the OBR will undertake its assessment of whether the Government are meeting their fiscal mandate, and how it will judge sustainability. It is for the OBR to undertake such analysis, and it will assess the likelihood of the Government’s meeting the fiscal mandate that they set out for themselves in the charter. Alongside that, part of the Bill and the guidance in the charter sets out that the OBR has to be very transparent about how it approached that analysis, the risks that it took into account, and its assumptions and methodology. Its assessment will set out whether the Government are on track to meet their fiscal mandate—the fiscal objectives that they set themselves—and there will be transparency so that people can look at how the assessment was carried out and take a decision on whether it could be improved, and its shortcomings. It is clearly more challenging for any forecasting organisation to do its job in times of uncertainty than in times of incremental economic change.

Thomas Docherty (Labour, Dunfermline and West Fife)

I am conscious that the Minister is trying to wind up the debate. Could she clarify the formal parliamentary process once the modified charter is laid before Parliament? Would it be a statutory instrument, or some other mechanism?

Justine Greening (Conservative, Putney)

We expect it to be handled like a statutory instrument in terms of timing and scrutiny, but, ultimately, there will be a parliamentary procedure that the usual channels will go through to decide precisely how it will be handled.

Going back to my comments on whether the OBR should look at different policies—this was raised by the hon. Member for Bristol East—we do not think that it should be in the business of looking at alternative policy scenarios. It should simply provide forecasts that are based on the policies that the Government are pursuing and have announced in the Budget. If it starts to stray into analysis of alternative policy scenarios, it inevitably risks undermining its independence, impartiality and objectivity.

Kerry McCarthy (Labour, Bristol East)

I appreciate entirely what the Minister is saying, which is why I raised the issue. It would be wrong if the OBR were to see its job as passing a verdict on anything that might be kicking around in the political sphere as a possible move that the Government could take. However, there is a difference between that and using comparisons with other possible scenarios to pass judgment on what the Government are actually doing.

That is why I used the example of the Government looking at a 1p rise in income tax; it would be difficult to assess the impact of that on the sustainability of public finances without the charts that are normally produced in such circumstances and which have always been produced by Robert Chote in his former role at the IFS, looking at how much would be raised by a 2p rise and how much by a 3p rise. I want some assurance that the OBR’s remit could enable it to cast its net slightly broader than just looking at exactly what the Government have done and to make comparisons with other things that the Government might have considered when they made their decision.

Justine Greening (Conservative, Putney)

To be clear, the Office for Budget Responsibility will not do that. It will not look at alternative policy scenarios, because its role is to provide an independent forecast of the economic and fiscal policy decisions of the Government, with the economic forecasts going out into time.

The hon. Lady gave the example of the OBR forecasting alternative scenarios for income tax. If it did that, it would inevitably lead to a debate about whether a Government could go further and still have sustainable public finances in relation to income tax decisions. That would take the OBR into a sphere where it could be embroiled in a political debate about income tax policy, which is absolutely not what we want for the OBR. We want it to look at the policy decisions of the Government, to model them, to give its assessment on forecasting for the economy and public finances; and, alongside that, to say whether it believes the Government are likely to meet the fiscal mandate and objective they set themselves in the light of the policy decisions taken and the expected trajectory of the forecasts.

The hon. Lady suggests an alternative way for the OBR to work but, if we went down that route, it would undermine the most important aspect of the OBR, which is to have something that is independent and that achieves that through being impartial, objective and transparent.

Thomas Docherty (Labour, Dunfermline and West Fife)

The Minister is very generous in taking our genuine interventions. Let us go back to Treasury questions just before Christmas, when, as she will recall, no fewer than five Conservative MPs independently asked what assessment she and her colleagues had made of the graduate tax. Mr Speaker let those questions in because he said that obviously the Government must have considered the graduate tax and discounted it when they were deciding on the hike in tuition fees that the hon. Member for Chippenham tore up his pledge card and supported.

Kerry McCarthy (Labour, Bristol East)

And the hon. Member for Bristol West.

Thomas Docherty (Labour, Dunfermline and West Fife)

I think that the hon. Gentleman abstained. He kind of stuck to his principles and abstained. Surely if the Government have made an assessment of something and discounted it, it is reasonable that the OBR would take a look at that policy area? I understand what the Minister said about going off at a tangent and doing some blue-sky or original thinking, but if it is a policy, whether a graduate tax or an income tax rise, that the Government have admitted they have considered but discounted, does she not think the OBR should be able to look at that?

Justine Greening (Conservative, Putney)

The hon. Gentleman makes an important point. The OBR plays a role of robustly and independently looking at the impact of policy decisions as they might affect the public finances and their sustainability and the long-term forecasting of economic indicators.

Of course, the OBR like any other public body will be subject to the Freedom of Information Act. Although clearly each case is different, the situation that he raises would be likely to fall under an exemption of policy in development. In other words, it would simply be impossible to publish a blow-by-blow analysis of how the Budget was being pulled together. It would not be in anybody’s interests for all that to be put into the public domain. However, the OBR is, of course, subject to the Freedom of Information Act, like any other public body.

Thomas Docherty (Labour, Dunfermline and West Fife)

I think that perhaps the Minister has misunderstood me. If that is the case, I apologise deeply. The example that I was trying to give is of the Government having considered a taxation policy and discounted it. Does she not think that if the Government have discounted a policy, it is right for the OBR, when it measures the validity of the policy that the Government have adopted, to compare the two like for like? Is that clear?

Justine Greening (Conservative, Putney)

We come back to my original comments. First, apart from performing core executive functions of fiscal and economic forecasting, it is up to the OBR to decide what other forecasting to do and how and when to publish it. My response is much the same as it was to the hon. Member for Bristol East: I think that it would be against the spirit of what we are trying to achieve in setting up the OBR to put alternative policy scenarios into a post-Budget analysis, because it would inevitably end in the OBR being pulled into a debate about what the right policy was. We do not think that that is the OBR’s role. It is right for Parliament to debate different policies, as we did on tuition fees, but that is the role for us as Members of Parliament elected by our constituents.

It is important that the OBR not only is independent but is seen to be independent. We need only witness how the Opposition reacted to what they felt was the inappropriate timing of a publication. I reassure Members that there was no Government involvement, but it shows how important and sensitive the issue is. That is one reason for the set-up of the clauses in the Bill and the charter supporting it, and it is why it is so important not just for the OBR to be independent but for it to be seen to be independent. We can already see that it will always be a concern, so we must put it beyond doubt. That is what we are trying to do by saying that we do not think that the OBR should analyse alternative policy scenarios. With that, I support the clause.

Clause 7

Chris Leslie (Labour, Nottingham East)

Given the general scepticism that some hon. Members will have spotted in my previous comments, I do not wish to be a cynic about the Bill, but it is sometimes difficult to avoid when I look at how the clauses are set out. If Members turn to page 3, they will see that clause 7, “Efficiency etc.”, contains a single sentence:

“The Office must aim to carry out its functions efficiently and cost-effectively.”

That is clearly a crucial instruction for the Office for Budget Responsibility. Of all public bodies, quangos and agencies, clearly it needs to be told on the face of the Bill that it should conduct its functions efficiently and cost-effectively.

Why is the clause needed? Will the Minister elaborate on whether it is a necessary piece of primary legislation? Can she explain how such provisions would be enforced? In particular, I presume that the OBR will be subject to audit. I think that the budget for its running costs is open to scrutiny by the National Audit Office, but I may be wrong so will she confirm whether that is right? How will we measure efficiency and cost-effectiveness in this context? This is a new body that will be under intense scrutiny, and if it is anything less than frugal, or if it is extravagant in any way with its office equipment, furniture, real estate costs and so on, I am sure that members of the public, the fourth estate and others will take an interest.

Duncan Hames (Liberal Democrat, Chippenham)

I am sure that they would, but I am not sure whether that would be sufficient. I am sure that the hon. Gentleman is, like me, a great supporter of the establishment of the Independent Parliamentary Standards Authority, or IPSA, yet I suspect that, in hindsight, we would have considered a clause such as this to be beneficial to the Bill that established it.

Chris Leslie (Labour, Nottingham East)

Mentioning that four-letter acronym is a bit like mentioning the Scottish play. I could not agree more. Indeed, I fear mentioning the authority’s very existence on the record, so I will steer clear of it, not least because it probably would not be in order.

Will the Minister give us an estimate of the budget that will be available to the OBR? It would be useful to know what it will cost the taxpayer. On the concept and notion of the words “efficiently” and “cost-effectively”, the Bill is laden with a number of ill-defined adverbs—in fact, I sometimes wonder whether we should have an office for adverb definition. The Treasury might consider establishing that unit at some point. Such adverbs litter the legislation, yet there is no firm interpretation clause to define them. I hope that the Minister can tell us why the OBR is necessary, how it will be enforced, measured and audited, and how much it will cost.

Thomas Docherty (Labour, Dunfermline and West Fife)

Sometimes I wonder whether Liberal Democrats have much say in the Treasury and on economic policy. We often see the Parliamentary Private Secretary to the Chief Secretary sitting on the Liberal Democrat Benches rather than behind his boss; he is never confident enough to be there for Treasury questions or statements. However, when I see a statement such as that in clause 7, which means absolutely nothing to anybody and is complete waffle, I have confidence that Liberal Democrats have a real role in drawing up legislation. It is almost embarrassing for the House to have such a phrase in a Bill.

I should declare that one of my wife’s relatives is a constituent of the hon. Member for Bury North, and she tells me that he is a real champion in Bury of less regulation, of cutting back needless bureaucracy and of less Government waste on the printing of meaningless documents. If there was ever a statement in a document that was utter nonsense and tripe, it is that in clause 7. It is such waffle that it states not that it “will” carry out its functions efficiently and cost-effectively, but that it will “aim” to do so.

Alec Shelbrooke (Conservative, Elmet and Rothwell)

We are all enjoying this part of the debate. We have been here for two and a half hours, and things have livened up at this late stage. To return to a point made earlier in relation to the Audit Commission, it must be recognised that there was a huge amount of waste in the commission. That is what the sentence under discussion relates to. It is worth mentioning that the way in which some bodies progress over time creates large amounts of waste.

Thomas Docherty (Labour, Dunfermline and West Fife)

I am grateful to the hon. Gentleman, because that leads me to a point that I will make in a moment. I shall first finish expanding on this point. The provision is a waste of paper and ink, and a prime example of rhetoric in Opposition not being shown in practice. This is the kind of nonsense civil service-speak that we have come to expect from the Treasury over far too long a period. It should not be there.

The hon. Gentleman rightly raises the issue of how to measure waste. Although I would not fully agree with his description that the Audit Commission had incurred too high a level of waste, I do agree in respect of some of the things that the Audit Commission and others have done. Apart from the fact that it says it will “aim” rather than “will”, the clause does not give a single measure or performance indicator or any standard by which to judge whether the OBR will be carrying out its functions.

Justine Greening (Conservative, Putney)

The hon. Gentleman just said that the clause should not be there. Can I take it from that that he is going to push it to a Division and vote against it?

Thomas Docherty (Labour, Dunfermline and West Fife)

I am hoping that when the Minister responds she will be able to articulate, as successfully as she has all day, exactly why the clause has been written. I am sure that she gave that more than 30 seconds’ thought when she read over the Bill and when it was being drawn up. I am confident, given her skills over the past nine months, that she will more than best me in my arguments. Up to that point, I would like to spout a bit more.

The hon. Member for Elmet and Rothwell was entirely right to say that we should not have waste in Government. The clause fails to give a single measure by which it will judge the success or otherwise of the OBR. I am with the hon. Member for Bury North that we should have better government and no meaningless regulation.

Alison McGovern (Labour, Wirral South)

Does my hon. Friend agree that this is an important debate, given that we have just seen the so-called cull of the quangos? There is a real possibility that that will end up costing the country more than when we had those organisations operating. We all want to get the OBR right. How does he feel the context of the clause needs to be understood in terms of the cost-effectiveness that we are trying to instil in the Bill?

Thomas Docherty (Labour, Dunfermline and West Fife)

My hon. Friend is entirely right. On the cull of the quangos, it is interesting that the Secretary of State for Communities and Local Government eventually had to bow to some pressure.

When the Minister is Chancellor—a position I am sure she will have before too long—or when, in four years and three months, there is a Labour Government, or any future Government, they may dislike the OBR and may, for quite logical, political reasons, decide to scrap or change substantially its responsibilities.

I gently suggest to the hon. Member for Elmet and Rothwell that the Secretary of State for Communities and Local Government has hidden—as far as the right hon. Gentleman can hide—his hatred of any sort of quango behind a smokescreen of efficiency and he claims that the Audit Commission is not efficient. If one does not spell out how to measure the efficiency of the OBR, it is vulnerable in future to a politically motivated Government saying that they want to get rid of it because they do not like the reports that it produces. The Minister has clearly given this sentence a great deal of thought, and I look forward to her explaining what she means by it.

Justine Greening (Conservative, Putney)

I have to say that I did not think that clause 7 would be controversial. Perhaps comments have proved that wrong. I think we are right to have clause 7 in place because it requires the OBR to

“aim to carry out its functions efficiently and cost-effectively.”

Thomas Docherty (Labour, Dunfermline and West Fife)

Will the Minister give way?

Justine Greening (Conservative, Putney)

Perhaps I can get to the end of my first sentence, the hon. Gentleman will find it helpful. To continue: and cost-effectiveness and efficiency should be an important consideration for every public body. I know he thought that was all waffle, but I assure him that, to us accountants, those words are important and mean an awful lot. I will say a little about the OBR’s budget and how we will ensure that it operates cost-efficiently and effectively.

The Office for Budget Responsibility must have the maximum credibility in its operations. If the hon. Gentleman looks at clause 21, he will see the same provision in relation to the National Audit Office. Hon. Members will be relieved to hear that ensuring that organisations run in an efficient, cost-effective way is a standard provision.

Kerry McCarthy (Labour, Bristol East)

The Minister pre-empts me—I was flicking through the Bill to ensure that a similar clause was in the second section of the Bill about the National Audit Office. Is that something we will find in every Bill that sets up a new Government-related body?

Justine Greening (Conservative, Putney)

The reason it is important in this Bill is that clause 5, which we have just debated, sets out that the OBR has complete discretion over how it fulfils its duty; in many respects, clause 7 is the quid pro quo to that. The OBR has some independence and can decide how to set about fulfilling its duties, but that must be done in the context of working efficiently and cost-effectively.

The hon. Member for Nottingham East was right. The National Audit Office will be able to look at how the Office for Budget Responsibility is working. The Treasury Committee stated that

“the OBR should be subject to the same sort of NAO scrutiny as any other part of Government.”

We agree with that and think it is important enough for it to be in the Bill.

The budget for the Office for Budget Responsibility is now set as part of the spending review. We have set a budget for the whole of the spending review period, so it will not be something that we come back to over the course of that period. Part of that is about ensuring that the OBR knows it is independent. The risk outlined by the hon. Members for Nottingham East and for Dunfermline and West Fife, that the OBR could be penalised for producing awkward reports and have its budget cut, has been tackled by giving the OBR a spending review settlement for the whole period. That settlement provides an annual budget of £1.75 million and Robert Chote, the chair of the OBR, agrees that such a deal provides the OBR with adequate resources. We are confident that the clause provides for the OBR to act in a way that is cost-effective and efficient. Furthermore, alongside the spending review settlement it will have the budget over the course of this Parliament to get on with the work that it needs to do.

Thomas Docherty (Labour, Dunfermline and West Fife)

I am slightly concerned. If I have heard correctly, the Minister is suggesting that future Bills that set up a new body, from the Department of Health for example, will not contain that magical, wonderful sentence. Is she saying that the OBR and the NAO need to behave in a cost-efficient manner and therefore that has been written down, but if other Departments do not do that, the impression is that the Treasury does not care much if the Department of Health does not run its bodies in a cost-efficient manner? Surely we should either have that sentence as a matter of course in every Bill concerning public bodies, or not at all.

Justine Greening (Conservative, Putney)

Well, as the hon. Gentleman pointed out, we are in the business of getting rid of as many ineffective public bodies as we can—he talked about what he called the quango cull. We are, of course, talking about a new body that has an important role to play. In the context of this new body—we do not aim to set one up every day of the week, which arguably is a change from the previous Government—we have inserted this clause because, as he recognises, perhaps never more than now, it is incredibly important to ensure that the Government is run in a cost-efficient and cost-effective way. As I said, the other reason the provision is in the Bill is because a core aspect of how the OBR needs to work is its independence. The provision is the quid pro quo for the OBR having the level of discretion it has—in other words, complete discretion.

David Nuttall (Conservative, Bury North)

I am sure that all hon. Members agree that every body should be efficient and cost-effective—there is no doubt about that—but would the clause not be even more effective and useful if it simply omitted the words “aim to”, so that it stated that the office “must” carry out its functions efficiently and cost-effectively? I worry that the wording might give the body a bit of wriggle room because it will be able to say, “Well, we aren’t very efficient, but we aim to be.” That is my worry. I am happy with the wording in this Bill, but in future perhaps the Minister could say, “Look, knock those words out. We’re telling you that you’ve got to be efficient, not just aim to be efficient.”

Justine Greening (Conservative, Putney)

My hon. Friend makes a powerful point. I can assure him that the form of words we have used in no way lets organisations off the hook. In fact, there is a legal reasonability test in the way it is phrased. We are passing a Bill that will become law, and the clause will ensure that the measure can work. However, he is absolutely right that we have to demand value for money. He will be pleased to hear that one of the things we are doing in the Treasury is not just looking at the Government’s policies in terms of value for money, but making sure that we have better tools in place to gather core financial data that will help us do that over the coming years.

The rest of the debate is in Hansard.