Clause 7

Budget Responsibility and National Audit Bill [Lords] – in a Public Bill Committee at 6:15 pm on 1 March 2011.

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

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

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.

Photo of Duncan Hames 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.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

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.

Photo of Thomas Docherty 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.

Photo of Alec Shelbrooke 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.

Photo of Thomas Docherty 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.

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

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?

Photo of Thomas Docherty 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.

Photo of Alison McGovern 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?

Photo of Thomas Docherty 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.

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

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.”

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury 6:30, 1 March 2011

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.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

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?

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

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.

Photo of Thomas Docherty 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.

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

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.

Photo of David Nuttall 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.”

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

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.

Photo of Thomas Docherty Thomas Docherty Labour, Dunfermline and West Fife

I saw the civil servants scribbling like mad as they tried to dig themselves out of a hole. I know that the Liberals are very fond of legal advice being published, but if the argument from the civil servants is that the words cannot be taken out—as the hon. Member for Bury North has reasonably suggested—will the Minister publish for the Committee’s benefit the specific legal advice that says if the words “aim to” are taken out, the Bill would somehow be illegal?

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

I do not think it is fair to say that we have had specific legal advice per se. As I pointed out earlier, we are talking about a standard provision, which has gone not just into this part of the Bill, but other parts. This is not a case of smoke and mirrors, as the hon. Gentleman seems to be suggesting. If he is interested in the concept of reasonableness in the context of the law courts, I advise him that I am absolutely certain that the House of Commons Library has entire books both on how over the years the concept of reasonableness has become enshrined within the framework of our legal system, and on the value of giving some flexibility to enable a judgment to be made on what is reasonable, based on the merits of a case. I am absolutely sure that if he leaves the Committee Room and heads down to the Library, he will be able to read all about reasonableness and get a better understanding of the background to how the clause is phrased.

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.