Schedule 1

Budget Responsibility and National Audit Bill [Lords] – in a Public Bill Committee at 9:00 am on 3 March 2011.

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Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury) 9:00, 3 March 2011

I beg to move amendment 19, in schedule 1, page 11, line 13, at end insert

‘, with the approval of the House of Commons Treasury Select Committee.’.

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

With this it will be convenient to discuss amendment 23, in schedule 1, page 12, line 16, at end insert

‘and approved by the House of Commons Treasury Select Committee.’.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

Yet again, may I say how happy we are to be under your benign leadership this morning, Dr McCrea?

The amendments are fairly straightforward. We seek to understand the Treasury’s logic in respect of the appointment of the non-executive members of the Office for Budget Responsibility. I have some questions for the Minister that I hope will give us a better understanding of why the Bill is framed as it is.

Paragraph (1) of schedule 1 sets out arrangements for appointing the members of the OBR. The chair is appointed with the consent of the Treasury Committee, as are two of its members; but two other members—as I read it, they are non-executive members—are appointed without the consent of the Treasury Committee. It seems slightly strange that some members of the OBR should be appointed under different rules. It would surely be more sensible for the Treasury Committee to have oversight of all appointments to the OBR, as all its members will have relevance to its work. To exclude the Treasury Committee from giving consent to the appointment of two members seems unusual, as it could give rise to the notion that the other two members were special; or, indeed, even that they were supplied by the Chancellor of the Exchequer.

The schedule provides for the direct appointment of all members by the Chancellor, but removing the Treasury Committee’s role for some may mean that it could be easier to make the allegation that there is a more direct connection to the Treasury for some members than for others. That would be unfortunate. If the purpose of the legislation is to demonstrate beyond doubt—beyond even the perception of doubt—that the Treasury was pulling the strings, it would be better to insert that parliamentary safeguard in respect of all the appointments. Could the Minister set out her logic on that?

In an earlier debate, we discovered that at least two non-executive members were due to be appointed in the summer. I believe that we concluded in that debate that it would be early summer rather than late summer. Therefore, there is time for the Treasury Committee to have a role in the appointments. It is not that we are legislating out of any urgency.

Perhaps the Minister could explain the two-tier arrangement, if she has an opportunity, and explain for the benefit of the Committee exactly what she envisages as the role of the non-executives on the OBR. I am not sure whether they will be remunerated or have allowances, but they will have a role, and it would be useful to get a flavour of what exactly they will do. I would be grateful for a response from the Minister.

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

The amendments would require that the appointment of the OBR’s non-executive members be subject to the same veto by the Treasury Committee as the expert Budget Responsibility Committee appointments. The Select Committee’s veto over the BRC appointments is exceptional. It is in place because it is appropriate to ensure the independence of those appointments in view of their executive responsibilities for producing the forecast. Non-executive members also have an important role in safeguarding the independence of the OBR, but it is actually the executive BRC that has responsibility for performing the core functions of the OBR. It is neither appropriate nor necessary for the non-executive member appointments to be subject to the same exceptional process involving a Treasury Committee veto.

The hon. Member for Nottingham East suggested that somehow the Treasury Committee had been excluded from involvement in the process. In fact, when it carried out its inquiry and reported on how the OBR should work, it explicitly asked for a role in vetoing any member of the BRC, but it did not ask for a role in respect of the non-executive directors. We aligned the Bill with that, and there are also the other reasons that I have just given. Additionally, the independence of the non-executive positions is already provided for through the appointment process.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

Would the Minister consider whether there would be protection for the Government themselves in having those appointments approved by the Treasury Committee, just to remove any suggestion that the people who are put in place are not truly independent?

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

I take on board the hon. Lady’s point, but I go back to my previous comment. The Treasury Committee itself clearly did not feel that it wanted to be involved in that matter. Obviously, hon. Members would have to approach the Chair of the Select Committee to find out what discussions took place about whether the Committee should be involved in the process. It may be that it felt that extending its remit—I know we shall debate future amendments about the Treasury Committee’s involvement with payments, for example—was becoming incredibly prescriptive, and that it would prefer the flexibility to spend its time carrying out inquiries, as it ordinarily does. Of course, the Select Committee would always have the flexibility to carry out inquiries into whether it believed the independence of the OBR was working effectively.

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

Perhaps I could make just a few more points which I hope will provide some reassurance. The practice of delegating responsibility for identifying candidates is common to many bodies. The Committee will be aware that the Treasury Committee does not have a role in appointing the Monetary Policy Committee and the Governor of the Bank of England, so its role in relation to the Budget Responsibility Committee is, as I said, absolutely exceptional.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury) 9:15, 3 March 2011

The Treasury Committee might not have asked about the non-executive members at the time, perhaps because of an oversight, but may now express an interest in doing so; it seems natural that it might. Will the Minister look favourably on an amendment being tabled, perhaps before Report? It seems a simple concession to make; if the Treasury Committee made such a request, would she be happy to accede to it?

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

I am not sure that we would be able to accept amendments that were so fundamental at this stage. The hon. Gentleman says that it is possible that the Treasury Committee may have had an oversight when carrying out its exhaustive and helpful inquiry into the workings of the Office for Budget Responsibility, when it took evidence from a range of people who were knowledgeable about how the OBR might work. We should have confidence in the process rather than second-guessing the outcome of the inquiry.

I hope that I have answered all the questions raised by the Opposition.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I know that it is early in the morning, but I was hoping for a slightly more consensual approach from the Minister. Given that the word “Resist” always appears in big black letters at the top of Ministers’ speaking notes, she has certainly done her job diligently. However, her argument relied on two principal pillars.

The Minister argued that for the Treasury Committee to have oversight over executive appointments was exceptional, and that having such oversight over the other two, non-executive, members would be beyond the pale; it was not possible, because the Government were making an exceptional concession by allowing—how generous—Parliament the ability consent over the three executive appointments. I am not sure that the argument that an exception in those three cases prevents there being an exception in five cases is necessarily a strong one. It is almost as though the Minister is saying, “We’ve been very generous so far, but that’s it. No more.” That is almost treating Parliament in a childlike way. Surely there can be no harm to the Treasury, and certainly not to Parliament, in ensuring that the oversight and consent extends to all members of the OBR, particularly given the possible perception that the two non-executives are the Chancellor’s narks, keeping a beady eye on what goes on and undermining the independence of the office.

It would be far easier for the Minister to concede that simple point and remove all doubt about whether the non-executive members—on behalf of the Chancellor—were sitting on the shoulder of the chair of the OBR and keeping a beady eye on what he does. I do not want that accusation to be made, but it could be made by people who may disagree with what the OBR does or who feel that it is being steered implicitly by Treasury orthodoxy. The argument about exceptional circumstances does not hold.

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

I understand that the hon. Gentleman wants to continue speaking to the amendment, but he is labouring the point. His minor irritation might be better directed to the Treasury Committee, which he clearly believes did not do a good enough job in its original  inquiry because it somehow managed to miss the fact that it should have a veto over the non-exec appointments. Does he believe that the Treasury Committee is doing an adequate job, or does he suggest that it was not performing well when it failed to spot a role that it should have had? Perhaps it would be better if he directed his comments to the Chair of the Select Committee. However, when the Select Committee put out its press release on the OBR, it said:

“These would give the OBR a good prospect of entrenching its independence.”

It was talking about the terms of reference, which cover all aspects, including the non-exec appointments.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I understand that the Minister is moving from the exceptional argument to one about the Treasury Committee. She says that it welcomed the consent over the three executives, but what the Treasury Committee did not do was say, “We don’t want consent over the non-executives.” Earlier, as the record will show, I asked her what would happen if the Treasury Committee said, between now and Report, that on reflection it wanted oversight over the two non-execs. She said that it would not be appropriate or helpful to make amendments to the Bill. Even if the Treasury Committee says that it wants oversight over the two non-execs, she has ruled that out as well. She makes the point that the Treasury Committee did not want oversight, but that even if it did she would not give it. The point about the exceptional argument does not hold water either.

Photo of Graham Jones Graham Jones Opposition Assistant Whip (Commons)

It is a pleasure to serve under your stewardship, Dr McCrea.

Does it not undervalue two people on the OBR Committee if they are there on different terms? The relationship between the five members of the OBR may prove difficult because they are not on the Committee under the same terms of reference. If there are conflicts, they would come out through the proposed mechanism, which can only add to the issue.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

Absolutely. There are occasions in Committee when we have political differences over fundamental points of principle, but there are other occasions when small, simple concessions are suggested by the Opposition in the course of scrutinising and improving the Bill to try to ensure that the legislation is stronger after going through the parliamentary process than it was before.

There are times when Departments want a clean-skin Bill to slip through Parliament in all conditions unaffected and untrammelled. I hope that, on reflection, the Minister will recognise that it is far easier to ensure that the Treasury Committee has that oversight, to put beyond doubt the suggestion that two of the three members of the OBR are directly appointed by the Chancellor. [Interruption.]

The Minister was on the verge of intervening, but she has changed her mind. Perhaps that is sensible for the time being, because she is being more thoughtful about the proposal and I am sure that most of the Committee will welcome that. It should be something on which she reflects. It will be useful to consider the issue again on Report when we would be happy to support a Government  amendment. I will have a conversation with the Chair of the Treasury Committee about this point to find out his views.

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

Is the hon. Gentleman saying that although he has made a proposal in relation to the Treasury Committee, he has not yet asked the Committee whether it wants it?

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I assumed that the Government had other reasons for excluding the Treasury Committee.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

If the Minister said in her argument that the Committee did not particularly request that oversight, I now have the duty to find out what happened. Perhaps it did not consider the issue at that point in time. She asks me whether I have consulted the Treasury Committee, but she knows that there are no formal means for me, as an Opposition spokesperson, to consult the Committee. We have a parliamentary process; it has a Committee stage and a Report stage. Her reason for resisting the amendment seems to rest entirely on the fact that I, as the person who is making the amendment, have not gone through the process of formally consulting the Treasury Committee. In the rule book of ministerial arguments, that really is on the very back page, in one of the annexes.

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

I do not agree at all with the hon. Gentleman. The Treasury Committee has been part of the consultation on setting up the OBR. As part of its inquiry, it took evidence from a range of people who have been involved. We have taken many of the Committee’s proposals and suggestions about how the OBR could be improved and built them into the Bill.

The hon. Gentleman has tabled an amendment about the Treasury Committee’s role that does not reflect anything that it asked for when it went through the exhaustive process of conducting an inquiry into how the OBR should work. It now turns out that he has not even found the time to consult or have a brief conversation with the Chair of the Select Committee, yet he is telling me that I should be more open-minded.

The Government have done absolutely the right thing. We have responded to a formal piece of work that the Treasury Committee bothered to do, but the hon. Gentleman is completely ignoring it.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I am so sorry that the Minister is taking this stick-in-the-mud view of our reasonable suggestion. I am asking her to address the dangerous perception that could arise that two of the members of the OBR are the Chancellor of the Exchequer’s place people. The fact that she protests so much for retaining his right directly to appoint those members is starting to make me think that there might be something in that perception. I hope that is not the case, and that the non-executive members of the OBR are not the Chancellor’s narks, but if she is absolutely of the view that it would be impossible for Parliament to have a role in approving them, people will be suspicious.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

If the Minister will address that point, yes.

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

I will. I am sure that if the hon. Gentleman actually bothered to read the Bill, he would realise that the non-exec members will be nominated by the OBR. If he is saying that it will not be independent enough to carry out that role, I would be interested to hear that, but the nomination process will be absolutely transparent and open. He is pushing his argument beyond what is sustainable, but I await his further comments.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

The Bill makes it clear that the Chancellor of the Exchequer will make the appointment. They will be his appointees; that is the process. As it is felt appropriate to give the Treasury Committee a double appointment role—in essence, a concurrent ability—in respect of the executive members, it does not seem to me that our amendment is unreasonable. Why not the two non-executives? Yet the full force of ministerial edict has landed firmly on this Committee to resist it in all circumstances.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

That makes me doubly suspicious that something is up. I am not naturally a suspicious person. I am sure that the people who may be applying over the next few months for the two non-executive roles and who will be appointed will be decent and honourable, but the suspicion will linger in the air. It would have been so simple, and would have involved no cost at all to the Minister, simply to extend the approvals. I cannot understand why she would resist that.

Photo of David Nuttall David Nuttall Conservative, Bury North

I have been listening carefully to all the hon. Gentleman’s points, but it seems to me that if the issue is so vital to him it would have surely been picked up by the Treasury Committee. Looking at the matter totally objectively, I am prepared to accept that the fact that it did not do so is conclusive evidence that it was not concerned about the issue. Therefore, we should rest assured that the Treasury Committee is satisfied on this point.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury) 9:30, 3 March 2011

As hon. Members know, absence of evidence is not evidence of absence. We do not know for sure that the Treasury Committee has conclusively said, “We don’t want a role in the appointment of non-executive members.” We have to find that out before we get to Report. This is a genuine, non-partisan point. After all, we are not secretly trying to give Opposition Members a role in the appointment process—there is a Government majority on the Treasury Committee—or trying to confect something. The principle has already been established, because there is already oversight and consent for the three executive members. Why, therefore, can the Minister not have an open mind on Report?

If the Treasury Committee says that it does not want that oversight, that it is too onerous and that three is sufficient in terms of time for pre-appointment hearings or whatever, I am quite happy to concede and say that  that is the balance that should be struck. We should, however, have the opportunity to allow Parliament to extend its view over this important office, particularly given that it would be such a cheap and easy thing to do; it would have absolutely no cost and would go beyond reasonable doubt to disprove that the appointments were somehow ministerial. That is the only point that I am making. I think it is reasonable. The Minister does not. We should test the view of the Committee.

Question put, That the amendment be made.

The Committee divided: Ayes 6, Noes 9.

Division number 2 Decision Time — Schedule 1

Aye: 6 MPs

No: 9 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

I beg to move amendment 20, page 11, line 18 [Schedule 1], at end add—

Amendment 20 was suggested by the Institute of Chartered Accountants in England and Wales in a helpful brief that it circulated before the Committee stage. It is fairly obvious where the institute is coming from, and it is something that, with its members’ long experience of working as chartered accountants and coming up against the views of economists, shows slight scepticism about how rooted in the real world economists are when compared with members of the institute. The suggestion is that at least one person appointed to the OBR, either under paragraph 1(1)(a) or paragraph 1(1)(b) of schedule 1, should not be an economist and should actually have experience in public finances, accountancy and fiscal sustainability issues. At this point, I wish that I could remember the joke of my hon. Friend the Member for Dunfermline and West Fife about how many economists it takes to change a light bulb, which would have illustrated my point quite well, but I cannot remember the punch line, so it is probably best not to go there. The OBR should not be full of academic economists who take an intellectual view of things; it should have at least one voice on it that has real experience of working in public finances.

Photo of David Nuttall David Nuttall Conservative, Bury North

How would the hon. Lady define exactly who is an economist?

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

The hon. Gentleman makes a good point, and that was something that we wrestled with when we drafted the amendment. Obviously, it could be  somebody who has experience in public finances, but who has a degree or masters in economics. Does that make them an economist? This is a probing amendment, but it presses the point that, given the OBR’s remit, particularly its task of passing judgment on the sustainability of public finances, perhaps—at the risk of offending the economists or self-defined economists in the room—a voice from the “real world” should have a say in those matters. I am interested to hear what the Minister thinks.

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

It would be very hard to define an economist in law, although that would certainly create an interesting debate. I speak as one of those indefinable people, having done an economics degree and then become a chartered accountant, so I do not know where I would fit into the paragraph. The amendment refers to someone who would

“not be an economist, but have experience”,

but I sure that someone can be an economist and have experience in public finances.

The hon. Lady is correct that there should be a broad range of experience on the Budget Responsibility Committee. I understand that, but we should not fetter its discretion over whom it ultimately appoints. No doubt, its officials will read transcripts covering the issues raised by hon. Members and peers, but we should allow the BRC and the chair to take their own decisions about what mix of skills they need. I also refer the hon. Lady to the points made by her and her hon. Friends earlier in the week about how the role of the OBR might develop—for example, by its considering specific issues such as child poverty or local government finance. The danger of prescribing a skill set is that that would make it harder for the OBR to have flexibility.

Photo of Duncan Hames Duncan Hames Liberal Democrat, Chippenham

I thank the Minister for giving way, and I thank you, Dr McCrea, for your patience while I briefly intervene.

As a Member of Parliament, an economist and a chartered accountant, I am conscious that most of my accountancy experience is not in the technical area of tax accountancy. I wonder whether an amendment that would require the appointment of an accountant per se, despite the broad range of my Chartered Institute of Management Accountants qualification, actually meets the objectives sought by the Institute of Chartered Accountants.

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

The hon. Gentleman makes the broad point that it is hard to define not only an economist, but an accountant or the holder of his set of skills.

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West

I thought that we might as well flaunt our qualifications. As someone with a degree in economic history and as a member of the Chartered Institute of Taxation, I endorse what my hon. Friend the Member for Chippenham said. It is apposite that we are discussing this matter on the day that the National Audit Office has published a report which again, as when it was last raised five years ago, shows that some Departments still do not have enough fully qualified accountants looking after the public finances. If the Minister is sympathetic to the amendment moved by the hon. Member for Bristol East, that will send a good signal to the rest of the civil service.

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

I hope that I have made sympathetic comments about the amendment. I agree that the Government need to look at whether we have the right financial skill set across the civil service to ensure that not only in Departments are there strong finance functions to control spending, but in policy making in the civil service generally there is a good sense of financial management and the ability to manage resources flowing from proposed policies and decisions—but I digress.

I fully accept what the hon. Member for Bristol East has said about the amendment, but it is not right to fetter the ability of the BRC to achieve the right mix of skills, as it sees fit, because that would compromise its independence. No doubt, the ability to scrutinise exercised by those such as the Treasury Committee—and, in its case, the ability to veto appointments—means that there will be safeguards to ensure that the prospective skill set will enable the BRC to fulfil its statutory duty.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

We may have just heard several job applications or markers being put down, perhaps not for this round of appointments but when it comes to reappointments. It is quite rare these days for me and my neighbour the hon. Member for Bristol West to agree on things, so I am glad that he shows some support for me on this point.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

The hon. Gentleman suggests that we are in agreement on AV, although in a rather unenthusiastic way on my part and a slightly more enthusiastic way on his.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

Exactly. We digress. I accept the points the Minister made. It is obviously quite difficult to prescribe this in law. The amendment was tabled to put it on record that we think there should be a broad skills set. We hope that when the appointments are considered that is taken into account. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

I beg to move amendment 21, page 11, line 20, leave out ‘5’ and insert ‘3’.

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

With this it will be convenient to discuss amendment 22, page 11, line 23, leave out ‘5’ and insert ‘3’.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

The amendment deals with the period of appointments. The Bill states that appointments should be for five years and in the case of the two members appointed under paragraph 1(1)(c), for no more than five years. We suggest that five years is slightly on the long side and that a period of three years should be considered. The Minister will be aware that the external members of the Monetary Policy Committee are appointed for a period of only three years. Where did the period of five years came from?

We will come later to amendments that talk about the review period. The other place debated whether the review period should be five or three years and we  tabled amendments to suggest that it should be three. Obviously the period of appointments would reflect that to an extent. The OBR is in its infancy and its role will naturally evolve over time. The nature of its work and what will be required of a member is a moveable feast at the moment. If people are appointed to the committee now who turn out not to meet the skills set that is required, having them there for five years will not give us much flexibility to change the committee’s composition and appoint people who really can meet its remit.

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

The first thing to say is that the initial appointments are staggered. For example, Robert Chote has been appointed as chair for a five-year term. Graham Parker has been appointed as a Budget Responsibility Committee member for a four-year term and Steven Nickell for a three-year term. One of the reasons why we have done that is to avoid having a full slate of new appointees all at the same time. Indeed, we expect that the initial non-executives will also be appointed for staggered terms of three and four years so that their appointments do not expire simultaneously either.

I take on board the hon. Lady’s point that we could have had a shorter term. Ultimately we can have the debate about how long a term we need for the BRC and the non-executives, but our sense was that five years as a fixed-term limit was the right term to make sure that the committee could build, use and then retain its expertise before reappointments were necessary. Members are allowed to be reappointed only once. Reducing the term to three years might result in six years, which might not be as long as we would want to maintain the committee’s expertise. Five years will allow them to build deep expertise on the necessary issues.

On the non-execs, the five-year term is, obviously, a maximum. There is nothing to prevent a shorter term. Again, we felt that if the Budget Responsibility Committee believed that five years was right to meet the need to build up deep expertise, we did not want to limit that unnecessarily by setting too low a cap. That is why we chose five years. In terms of independence, the shorter the time period, the more risk of undermining independence as the question of reappointment comes up. We have tried to strike a balance. I think that five years is the right amount, but as I said, non-execs’ terms can be shorter in practice.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury) 9:45, 3 March 2011

I thank the Minister for that explanation. It is useful to put on record the terms of appointment that are envisaged, particularly for non-execs. It goes to the heart of the point that I was making in the first instance that a fixed appointment of five years might be excessive. She has said that members might serve for three or four years and that one of the executive directors will be in place for only three years.

On the Minister’s point about concern over reappointment, and the possible impact, one would hope that the sort of people appointed to the Office for Budget Responsibility would not be so concerned about their prospects of reappointment, and that the checks and balances built in about how appointments are made would not affect them. However, I appreciate that when appointments to public bodies are made, there is  always a balance to be struck between doing a robust and vigorous job of holding the Government to account and being aware that the Government have some say in whether someone will be allowed to continue doing so. The Minister made the valid point that a longer term will give people more freedom and independence to speak their mind, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I beg to move amendment 24, page 12, line 23 [Schedule 1], at end insert—

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

With this it will be convenient to discuss the following: amendment 25, page 12, line 29 [Schedule 1], leave out from ‘a’ to end of line 30 and insert

‘compensation payment to the person in accordance with sub-paragraph (3).

Amendment 26, page 12, line 30 [Schedule 1], at end insert—

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

Paragraph 4(1) details the remuneration arrangements for members of the Office for Budget Responsibility. We feel that the drafting is slightly weaker at a couple of points than it could be. Amendment 24 would ensure that the Treasury reviews the remuneration of members of the OBR annually and publishes that review.

We think that it is important generally, in this day and age, for increasing care to be taken about remuneration in quangos and public bodies. All public bodies are under more scrutiny, but we think that the Office for Budget Responsibility in particular must take the lead among public bodies and across the public sector. We feel that even more transparent remuneration arrangements would be a good thing.

I understand that Robert Chote currently takes a salary equivalent to the Prime Minister’s £142,000. I think that he is working as a consultant, so the Treasury pays VAT on top of that and adds a 20% pension contribution. Those terms and conditions are quite generous; I am sure that many Members of Parliament who earn considerably less look up to those dizzy heights from the foothills and feel that it must be an exceptionally important and august appointment.

Will the Minister tell us on what basis the judgment was taken to pay the chair of the OBR that relatively generous level of salary? Will there be changes to that remuneration when the new financial year begins in April? I am not sure when the Bill will receive Royal Assent, but a new financial year will start in any case. Is there an expectation that the salary of the chair of the OBR will invariably be tied to that of the Prime Minister?  Will there therefore be a pay freeze for the chair of the OBR? Will the 5% ministerial salary reduction that the Prime Minister has conceded roll across to the chair of the OBR as well? Can the Minister explain the logic for not enshrining an annual review process? I am not sure why it is not in the Bill, because it seems a sensible thing to put in legislation.

Amendments 25 and 26 relate to paragraph 4(2), which states:

“Where…a person ceases to be a member of the Office otherwise than at the end of the period for which the person was appointed”,

or, if

“it appears to the Office and the Treasury that there are circumstances which make it right for the person to receive compensation”— presumably misconduct or malfeasance, but who knows?—

“the Office may make a payment to the person of such amount as the Treasury may determine.”

Those are broad terms; it is left entirely to the Treasury as to what the amount could be.

Government Members will recall that their good colleague, the Minister for the Cabinet Office—is he the Chancellor of the Duchy of Lancaster as well?—brought the Superannuation Bill before Parliament. The Superannuation Act 2010 adapts many of the provisions on civil service compensation, on severance arrangements and so forth, so that the untrammelled pay-offs, compensation and golden handshakes, which can escalate and have brought the public sector into disrepute historically, are reined in. The Act makes it clear, as the amendment sets out, that when there is compulsory severance for misconduct and so forth, it should never be for more than an amount equivalent to 12 months of salary. When there is voluntary severance, it should never be for an amount equivalent to more than 15 months of salary.

Amendment 26 cuts and pastes provisions from the Superannuation Act and would apply them to the OBR as well. That seems a reasonable read-across. As the OBR is supposed to be the standard bearer of budgetary responsibility, it would seem absolutely proper, and best practice, to enshrine the self-same limitations in its compensation and severance arrangements.

I hope these are helpful amendments, and I am more than happy to withdraw them if the Minister wants to adapt or vary them. We want a sense from the Treasury as to why such provisions were not included.

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

Amendment 24 seeks to have an annual review by the Treasury of the amount that members of the OBR are paid. It is not desirable for the Treasury to review the OBR remuneration on an annual basis, for a number of reasons. First, it will create uncertainty for OBR members, and it could undermine their independence if at the beginning of every year, their salaries were to be re-reviewed. Secondly, it is unnecessary, because the terms of contract for OBR members are fixed for five years, and that includes their pay. That information is already made public and those contracts and terms, and letters of appointment, are already publicly available on the Treasury website, which I am sure the hon. Gentleman can find.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I am grateful for the Minister’s clarification. If somebody’s salary is fixed in a contract for five years, is there a provision for increasing it over that time?

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

I was about to come to that point. Under the terms of those five-year contracts, for the first two years, as with other public sector pay, salaries will be frozen; thereafter, they will rise in line with the consumer prices index. The way the salary works across the course of that appointment is already set out and publicly available, so there is no need for the Treasury to return to it every year. Doing so would undermine the Budget Responsibility Committee members.

Photo of Alison McGovern Alison McGovern Labour, Wirral South

It would be helpful to have a further point of clarification on the record. Paragraph 4(1) refers to “pension, allowances or gratuities”. As Members of Parliament, we are only too aware of the difference between allowances and expenses. Will the Minister put on record how the contract terms will interpret such allowances? Will they be funds allocated for costs expected, or cost reimbursement of expenses incurred?

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

As the hon. Lady knows from our debate earlier this week, the OBR has a budget, from which it runs its activities, as does any non-departmental public body. Its individual members have contracts of employment, which clearly specify pay and how it will change over the term of the contract. Interestingly, it specifies that there will be no bonus for those members.

It has been pointed out that the roles are pensionable, as we might expect. Other than that, however, the expenses of running the office will be part and parcel of the usual spending review allocation that has been given to it to run its duties.

Photo of Alison McGovern Alison McGovern Labour, Wirral South

Is the expectation that allowances will be allocated to OBR members on the basis of actual costs incurred, as are our expenses, rather than as a general allowance? Some organisations, for example, have a housing allowance, which would not apply to OBR members, of course. There might, however, be subsistence allowances rather than subsistence expenses. I would be grateful for the Minister’s clarification on that point.

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

The allowances will be comparable to those for senior civil servants. The hon. Lady can look at the list of senior civil servant allowances; those will broadly be in place for OBR members. I should point out that members are not civil servants, but the allowances will be comparable.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

We know about the remuneration of the chair of the OBR, but what is the remuneration for the other two executives? What will be the remuneration allowance arrangements for the non-executives?

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

The hon. Gentleman keeps talking about remuneration allowances; it might be better to ask, “What is the pay?” The pay for the two other Budget Responsibility Committee members will be £69,000. The pay of the chair of the committee is already in the public domain. There is potential for the roles of the non-executive directors to be remunerated. Clearly, however, we are about to begin the process of appointing those people, so at this point I cannot tell him what, if any, remuneration they will get.

I move on to amendments 25 and 26. The Bill gives the OBR and the Treasury the discretion to award a compensation payment if the appointment of a member comes to an end before the period for which the person was appointed. That discretion is standard for legislation establishing NDPBs, which this does. I should emphasise that the discretion is intended to be used only in exceptional circumstances. The Treasury determines the amount, because it would be inappropriate for the OBR itself to determine such payments. In addition, any compensation payment would have to comply with the relevant Cabinet Office and Treasury guidance and represent value for money.

Although the spirit of the amendment may be to avoid excessive payments by linking the terms to those that previously applied to the civil service compensation scheme, to do so in this case would be inappropriate because the OBR’s members are not civil servants.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East 10:00, 3 March 2011

Nevertheless, is it not important to give a signal? The appointees are clearly not civil servants, but the Minister has indicated that in other respects the terms and conditions on allowances and expenses will be similar. Having made such a big issue of public service pay, severance pay and compensation, it is important to be consistent, and for the OBR to take a clear lead and say that it will be bound by the same restrictions or rules that the Government have clearly stated they wish for the civil service more generally.

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

That is precisely why there is a standard provision for such an NDPB. That is the reassurance I was trying to give the hon. Member for Wirral South. The provision in the Bill is exactly what we would have for any NDPB, but my other point was that behind that is the need for any payment. As I said, we expect payments to be made only in exceptional circumstances, and they would have to comply with Cabinet Office guidelines and represent value for money for the Treasury. It is a standard provision for setting up such a NDPB, and behind it is the need, which the hon. Member for Edinburgh East is right to point out, to make the usual governmental checks to ensure that any payments are reasonable and not excessive.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

Just because it is existing practice for other NDPBs does not mean that this not a good opportunity to improve the circumstances, as perhaps the Minister felt was necessary just before Christmas during the passage of the Superannuation Act 2010. Can she foresee any circumstances when the severance or compensation arrangements would exceed those that might apply to the civil service terms—12 months for compulsory severance and 15 months for voluntary severance? If she will at least put on record that she cannot see any circumstances in which those terms would be exceeded by the Treasury, it will assure the Committee that it is not necessary to write this into the Bill.

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

The NDPB we are establishing has the same provisions that any new NDPB would have. To the extent that compliance with Cabinet Office guidelines and the Treasury assessment of value for money would have to be behind any discretionary payment within the  OBR, and across any Department, no different benchmark will be applied. Hypothetically, there should not be, as the hon. Gentleman points out, a need for a payment in excess of what would be seen in a different NDPB with the same rules behind it. I can provide some reassurance, in that this part of the schedule will provide precisely that check to ensure that there is an assessment of any compensation payments.

My concern about amendment 26 is that it seems to suggest that payments will not be exceptional; they will somehow be routine because we will align the OBR with the routine way in which similar payments are made across the rest of the civil service. I do not think that amendment 26 would be sensible, because it seems to suggest some kind of routineness in the payments. We do not want to give that impression; we think that any such payment would be an extreme exception. I hope that I have answered some of the points that have been raised and I look forward to hearing the hon. Gentleman’s response.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

On amendment 24, we know that the chair of the OBR will receive the Prime Minister’s terms and conditions, although not free housing and so forth, but broadly speaking in terms of pay. The other executives will receive £69,000, which from a Member of Parliament’s perspective, and that of many other public sector workers, looks quite generous too. However, there has clearly not yet been a decision within the Treasury on non-executive remuneration; I think the hon. Lady was saying that they have not yet decided what to pay non-executives. There is hope that they will be frugal, efficient and reasonable from a public point of view. I am surprised that the Treasury has not yet settled on what those sums are; but at any point inspiration might strike the Minister on what those could be.

I listened to what was said about the annualised publication of a review and I think it would be good practice, but given the hon. Lady’s comments on terms and conditions being set out for five years I understand why she would want to resist. It sounds fair enough, except that a two-year pay freeze is one thing, but absolutely guaranteeing a CPI uplift in salary thereafter is quite generous compared with the terms of many other people in the public service. I for one cannot envisage circumstances when, for example, Members of Parliament would be granted such arrangements.

We know that in the parliamentary context there was supposed to be a move towards MPs not voting on their own salaries, and it would be done independently; but that seems to have broken down in the translation. I digress slightly, but tying a salary uplift to CPI for a three-year period after the pay freeze is quite generous. Given that this is the Office for Budget Responsibility I am surprised that that is the case.

Amendment 24 is not something that I am particularly concerned about; we have had a debate on it. However, I am surprised that the Minister is resisting amendments 25 and 26. Opposition can be a depressing place from time to time. We come to Committee and try our best to make whatever points we can. We are all trying our best to improve legislation and we want to support the Bill as it goes forward, but to feel that our suggestions are constantly rebuffed in this rather cruel way can be quite dispiriting. Nevertheless we must keep persisting.

Photo of Duncan Hames Duncan Hames Liberal Democrat, Chippenham

In an effort to encourage the hon. Gentleman, given his concerns about public expenditure by the body, perhaps having slept on it, he can take some comfort from the fact that we supported clause 7 the other day, contrary to his advice.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

It was not contrary to my advice in one sense; I was not opposed to the idea of efficiency and effectiveness, I just felt that it needed defining. That is part of the problem with the Bill all along. A little bit of petticoat is shown to suggest that we want to be efficient, frugal and so forth, but when it comes to the crunch of ensuring that that is that case the Bill falls a bit short. For example, under schedule 1,

“the Office may make a payment to the person of such amount as the Treasury may determine.”

It is very untrammelled and not restrained. Of all public bodies the OBR should be the one setting the pace and showing that it is the most responsible. That is palpably not going to be the case. The Minister’s argument essentially rested on the fact that this will be no different than is the case for any other non-departmental public body. I am not convinced that that is good enough. It was helpful that she said that she did not think that a pay-off in terms would exceed those that might occur in any other quango, but are hon. Members really convinced that the pay-off arrangements in other quangos are adequate from their constituents’ point of view? If the Government are content that quango pay-off and severance arrangements are perfect and adequate, that is an interesting state of affairs.

We have started down a road with the Superannuation Act where we ought to revisit these issues and ask, “What are the limits?” I hoped that the Minister would say that she could not envisage circumstances in which the arrangements for compulsory or voluntary severance would be more than 12 months or 15 months. That would be quite an easy thing for her to concede, but she did not say it. That is a pity, so I want to test the views of Committee members on amendments 25 and 26.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 25, page 12, line 29 [Schedule 1], leave out from ‘a’ to end of line 30 and insert—

‘compensation payment to the person in accordance with sub-paragraph (3).—(Chris Leslie.)

Question put, That the amendment be made.

The Committee divided: Ayes 7, Noes 10.

Division number 3 Decision Time — Schedule 1

Aye: 7 MPs

No: 10 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.

Amendment proposed: 26, page 12, line 30 [Schedule 1], at end insert—

The Committee divided: Ayes 7, Noes 10.

Division number 4 Decision Time — Schedule 1

Aye: 7 MPs

No: 10 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury) 10:15, 3 March 2011

I beg to move amendment 27, page 12, line 33 [Schedule 1], at end insert—

‘with the consent of the House of Commons Treasury Select Committee.’.

We have already had quite a lively and robust debate about the role of the Treasury Committee in relation to the Bill and particularly appointments under the Bill. Sub-paragraph (1)(a) states that

“the consent of the Treasury Committee” is required for the appointments to the OBR that are set out in sub-paragraphs (1)(a) and (1)(b). However, the drafting of the schedule is vague, which is why we have tabled the amendment. Paragraph 5 states:

“The Chancellor of the Exchequer may determine other terms of an appointment under paragraph 1.”

Paragraph 4 deals with remuneration. It is not clear, however, whether that relates to incidental terms and add-ons that the Chancellor of the Exchequer might prescribe when deciding the terms of appointment, or whether it is envisaged that he might consider something far more substantial under the proposals.

The amendment adds that the consent of the Treasury Committee is required. Obviously, if the Committee’s consent is required about who should fulfil the role, it would be appropriate for it to look at the terms of the appointment at the same time. No additional burden would be placed on the Committee, because the terms could be discussed in the round when considering the appointment.

Will the Minister explain why it was felt that the provision was necessary? If a contract is to be drawn up when people take up such appointments, that can be done in the usual way, and it does not need to be prescribed in the Bill. If the Minister explains what is meant by the proposals, we will be able to deduce whether the Treasury Committee should have a role.

Photo of Julian Smith Julian Smith Conservative, Skipton and Ripon

Has the hon. Lady spoken to the Chair of the Treasury Committee about the amendment?

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

No, I have not but as I said, the amendment ties in and it would not be an additional responsibility. If the Treasury Committee takes the role that is envisaged in paragraph 1(a), which is that it should give consent to the appointments of the chair and the two other members who will be appointed under sub-paragraph (b), it would be easy for the Committee to look at the terms of the appointments as part of that process.

Paragraph 4 deals with remuneration. Obviously, if the other terms of appointment are things such as annual leave, sick leave, sabbaticals and whether staff would get a free bus pass for their partner, they are not appropriate matters for the Treasury Committee to discuss, and there is no way that it would want to be involved. The fact that terms of appointment are outlined in the schedule, however, leads me to think that the issue might be far more substantial, in which case it might be appropriate for the Treasury Committee to look at it when it considers the appointments. I hope that the Minister will elaborate on those points.

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

I assure the hon. Lady that the schedule is a standard provision for the establishment of such a body. It is necessary because in future, we may want to have terms that include, for example, restrictions on other appointments that members of the Budget Responsibility Committee may have; for example, dealing with any conflicts of interest that may arise. The provision gives the flexibility to be able to deal with what may happen in relation to the Budget Responsibility Committee.

As the hon. Lady knows, those safeguards ensure that the terms are reasonable. First, they are transparent, and secondly, as she has pointed out, the Treasury Committee has a right of veto effectively over who the Budget Responsibility Committee members are. Clearly, the Treasury Committee can scrutinise the terms, too, although it would not be right to give it a veto on them; we would then, effectively, be extending its role into logistical, operational aspects of how the OBR will work. I repeat my earlier point: in the Treasury Committee’s exhaustive inquiry, it did not ask for that power either. However, as I pointed out, it is capable of scrutinising the terms of the OBR members, and such information is publicly available.

I hope that provides reassurance that a standard provision gives flexibility to the Office for Budget Responsibility and the Budget Responsibility Committee members. There is the opportunity for scrutiny by the Treasury Committee and, of course, by the public, because the terms are made publicly available on the Treasury’s website.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

I beg to move amendment 28, page 13, line 21 [Schedule 1], at end insert—

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

I suspect that we will only get as far as introducing this topic before the Committee adjourns. The amendment is crucial in that it goes to the heart of the relationship between the Office for Budget Responsibility and the Treasury. We have already flagged up concerns about the extent to which the OBR will be able to be genuinely impartial and free from political interference. I mentioned that in countries such as Canada and Sweden there came a point when political interference inevitably followed, although the intention was good.

I think the Minister has already said that the Office for Budget Responsibility will not be located in the Treasury, but we want confirmation that that will not be the case and have therefore tabled amendment 28 to confirm that the office and its employees will not be located in the same building as the Treasury. Although we can have Chinese walls and things that in theory separate and create independence, they would be slightly more difficult to enforce unless the OBR was physically removed from the Treasury.

Amendment 29 is also crucial. It would ensure that staff were employed solely by the OBR and not seconded to or from other departments, which is common practice in the civil service. People move from one department to another on secondments. In general, that is a quite a good thing for Treasury officials; it is useful for people who control the purse strings to occasionally have experience of working in some of the Departments that are trying  to spend the money. Obviously, if there were a flow of staff from the Office for Budget Responsibility to the Treasury, or indeed from any other Department, that would compromise the OBR’s independence and impartiality and make things quite difficult. If someone is on secondment to the OBR but actually reports to the permanent secretary at the Treasury, it would be difficult for them to carry out their role in the independent and impartial way we expect of them.

An earlier amendment related to changing the terms of appointment and whether people would be able to hold other roles. That is relevant to amendment 29, which would provide that staff are employed solely by the office and addresses the question of whether they would be allowed to have outside consultancies or roles on boards, and whether that would create a conflict of interest for them in serving in the office. Our general thrust is that there should be a physical separation, the staff should be in a separate building and there should not be overlap with the Treasury and other Departments. It should be clear that the OBR is an arm’s length, independent body that is not subject to undue Treasury control.

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

I rise to support amendment 28. I suspect that it may prove a popular amendment with Members on both sides of the Committee. It would provide an opportunity—

The Chair adjourned the Committee without Question put (Standing Order No. 88).

Adjourned till this day at One o’clock.