Clause 2

Budget Responsibility and National Audit Bill [Lords] – in a Public Bill Committee at 11:15 am on 1 March 2011.

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Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury) 11:15, 1 March 2011

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 Does the Minister have in mind a set of circumstances whereby a Budget would take place in secret and not be published?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.

Photo of Thomas Docherty Thomas Docherty Labour, Dunfermline and West Fife 11:30, 1 March 2011

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.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

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.

Photo of Alison McGovern 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.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

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.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury 11:45, 1 March 2011

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.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

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?

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

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.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

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.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

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.

Photo of Sheila Gilmore 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.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

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.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

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.

Photo of William McCrea William McCrea Shadow Spokesperson (Justice), Shadow DUP Spokesperson (Home Affairs), Shadow DUP Leader of the House of Commons

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.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

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.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

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.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

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.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

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?

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury 12:00, 1 March 2011

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.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

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.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

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.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

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.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

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.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.