Queen’s Speech

Baroness Noakes Excerpts

Wednesday 16th May 2012 Lords Chamber

[Baroness Noakes]

My Lords, it is a bit rich that the party opposite has tabled its amendment to the Motion for an humble Address. It seems to have collective amnesia about the economic mess that it left this country in only two years ago. Let me remind it that it left behind a very large deficit. There is no doubt that some of the ballooning of the deficit was down to the financial crisis, but the Labour Government had been consistently spending beyond their means in the run-up to that crisis. They failed to reform welfare spending and failed to deliver efficiency in the delivery of public services. They had overcommitted the defence budget by £38 billion. They left behind a legacy of debt and forecasts of more deficits to come, but they also left no credible plans to reduce them. That was not just our opinion; that is what the IMF and the OECD told us.

Since my Government came to power, we have delivered firm action to control public expenditure and to eliminate the structural deficit. We have balanced the defence budget. Debt will be falling as a percentage of national income by the end of 2015-16. It is through that resolve that we have reduced the cost of borrowing and kept it low. Yesterday, gilt yields were at their lowest for 300 years.

The noble Lord, Lord Myners, who is no longer in his place, is wrong about interest rates. They are a reflection of market confidence, as anyone can find out by looking at what is happening to eurozone interest rates. I hope that, when he winds up this evening, the noble Lord, Lord Davies of Oldham, will tell the House what he thinks interest rates would have been today if his party had continued to manage the economy.

I pay tribute to my right honourable friend the Chancellor of the Exchequer for delivering this impressive result. The economic headwinds have not been favourable in the past two years. He could have lost his nerve and taken the advice of the party opposite to spend our way out of trouble. However, Labour has never explained the magic by which spending more will not result in unsustainably high levels of debt and rising interest rates. Perhaps the noble Lord will do so today.

Our economic policies are often given the label of “austerity” but we are not in the same league as Greece. Our public expenditure will continue to rise. At the same time, we are taking 2 million people on the lowest incomes out of taxation altogether. We are managing to escape from the millstone of a 50p tax rate and reducing corporation tax rates to more competitive levels to support our economy.

There is no doubt that the economic outlook continues to be troubling. The uncertainty created by eurozone instability is a big problem. I can see no future for Greece remaining in the euro and the best thing for it would be to exit, or “Grexit” as Willem Buiter would have us say. Other eurozone countries are also struggling. Spain and Italy are again having a bad week in the bond and credit markets. We need the eurozone to sort itself out, which is why I support the Bill, which has already been introduced, to endorse the eurozone stability mechanism. However, there is not much else that the Government can or should do to support the eurozone. We should certainly not put our cash into any eurozone rescue fund.

The Government can do things to support growth in our economy and have done a lot already. However, there is more to be done and I would have liked to see more in the gracious Speech to support UK businesses. In particular, I would have liked to see a commitment to reverse more of the regulatory burdens and employee rights imposed by the previous Government. These are the very things that make running businesses, especially at the small and medium-sized end of the spectrum, particularly tough.

There are some parts of the legislative plans in the gracious Speech about which I am not entirely enthusiastic. We are promised legislation to reform competition law to promote enterprise and fair markets, which sounds good in theory. However, competition law has often ended up being a big stick with which to beat our most successful businesses. A wholly blame-free company can end up with a lot of costs and huge distractions from running its business if the OFT launches an unnecessary investigation. Let us see whether the Bill really promotes enterprise.

In the same Bill we are promised the green investment bank, about which some noble Lords seem enthusiastic. It is not a bank in any real sense. It will put money into things that sensible banks would not touch with a barge pole. It will be gambling with taxpayers’ money. Even the cheerleading report on the green investment bank commissioned by BIS goes no further than to say that,

“it is unlikely to have a significant impact on economic growth … in the short term, but there might be some benefits in the long term”.

We are paying homage to the green religion at just the time that other countries are seeing that green policies are expensive luxuries. We do not have any spare money for such luxuries. We could spend the £3 billion that has been committed to it on so many more things that would promote our economic growth.

We are also promised a Bill on the reform of the electricity industry. But, in plain English, that means more subsidies for green energy, which in turn means more costs for British businesses and domestic consumers. I hope that the Government will start to understand that the cost of energy in this country is a very real burden. They need to find ways of reducing it and not increasing it. This is another unaffordable green luxury. Last year, my right honourable friend the Chancellor of the Exchequer got it right when he said that he would not save the planet by putting our country out of business. When these Bills come forward, they must be justified against that background.

Finally, I turn to the promises of legislation on the financial services sector. There will be two Bills; namely, the Financial Services Bill, which was carried over from the previous Session, and the banking legislation. I agree with the noble Lord, Lord Myners, on the need to look carefully at the powers of the governor. However, there is one thing that is not likely to be covered in either Bill, which I hope that the Government will want to address. The Bank of England has resisted calls to publish an assessment of its role in the financial crisis. I do not understand how we can be expected to consider legislation explicitly designed to remedy deficiencies that arose during the financial crisis without that background. How will we know whether the problems related to the crisis have been dealt with? I hope that my noble friend the Minister will have an answer to this problem before he brings the Bills before your Lordships’ House.

European Union Membership (Economic Implications) Bill [HL]

Baroness Noakes Excerpts

Friday 25th November 2011 Lords Chamber

[Baroness Noakes]

My Lords, if I have a sense of déjà vu in approaching today's debate it is indeed because we have been here before, as the noble Lord, Lord Pearson, whom I still like to think of as my noble friend, has already reminded us. I supported his last Bill and I support him today. The previous debate on a Bill of his was handled by a Foreign Office spokesman and I am very pleased today that the Government have recognised that this Bill is, first and foremost, about the economic analysis of our membership of the EU. I look forward to my noble friend Lord Sassoon responding for the Government later. I hope that when my noble friend winds up, he will confirm that an understanding of the costs and benefits of our membership of the EU is crucial. It has to be in the public interest that the debate that is already happening about our future in the EU is well informed.

The noble Lord, Lord Pearson, has an immaculate sense of timing in bringing forward his Bill, with the turmoil that is happening in the eurozone. The eurozone is not the subject of this Bill, but it is inextricably linked with the EU. President Barroso has been telling us frequently that the euro is an essential part of EU membership. The euro was meant to be the crowning glory of the European project, but it is now threatening not only its own members, as Germany found out this week with a failed bond auction, but the rest of Europe, which includes us, and the global economy.

The euro was flawed at the outset. It was constructed on two downright lies: first, that the eurozone countries met certain economic tests; and, secondly, that their economies were genuinely convergent. The euro was then flawed in its operation. The European Central Bank delivered the German economic preference for low interest rates. Ireland and Spain have paid the penalty for this one-size-fits-all madness with property booms that have bust their economies, and now the euro is flawed in its inability to deal with failure. The foolish architects of the euro designed it with no emergency exits. Germany and France, as self-appointed guardians of the euro, are still ducking the real issues, and so the profligate, unreformed, book-fiddling Greece and Italy have nowhere to go and suffer the indignity of unelected officials now running their countries.

Fortunately, we have our opt-out. I have absolutely no doubt that our country would be in a very much worse economic position had we become a part of the eurozone. Even though we have kept out of the euro, there is still a centrifugal force in the EU that keeps sucking us in. Mr Blair saddled us with the Social Chapter. That, together with the inexhaustible stream of single market directives, has resulted in our businesses being weighed down by rules and regulations that choke the life out of them. We ceded significant powers when the Labour Government colluded with the rest of Europe and allowed the constitution to be dressed up as treaty changes, thus denying people a referendum, and I am not proud of my party’s failure to rectify that. Brussels has used the recent financial crisis to pursue policies that are naked attempts to ruin the UK’s successful financial services industry. Our Government have woken up to that, but it may be too late.

The noble Lord, Lord Pearson, has already explained the existing analysis of the costs and benefits of the UK’s membership of the EU. Suffice it to say that the best the studies ever show is that the effects might be marginally positive, but most show the disbenefit rising to as much as a quarter, as the noble Lord pointed out. Since the trend in Europe is of an increase in regulation, the trend will be for that analysis to get worse over time for the UK.

The main point for those of us on this side of the argument is that it is pretty clear that there is a cost of staying in the EU, that the cost is significant and that the benefits are limited. Those on the other side of the argument tend to avoid being drawn into the specifics of cost-benefit analysis. They tend to rest instead on rather broad, often irrelevant or incorrect, assertions of benefit, and the noble Lord, Lord Pearson, dealt with some of them. I very much regret that even Conservative Ministers in the coalition Government do this, although I hope my noble friend the Minister will not do so today.

I am not advocating today, as the noble Lord, Lord Pearson, is, that we withdraw immediately from economic membership. I note in passing that the committee that this Bill would set up is entitled a “committee of inquiry” into withdrawal from the EU, although it is very clear that the matters to be covered as set out in Clause 1 deal with the costs and benefits of membership, so I think that the noble Lord has indeed prejudged the outcome of the inquiry by calling it a withdrawal study. I would like to see whether there is any mileage in a Europe in which we can assert more positively the rights of nation states to run their own affairs. We have to be able to have less Europe in our daily lives, not more.

Until recently, I had some hope that a way could be found for the UK to participate in Europe on a more voluntary and less extensive basis. I still think that it is worth a try but I am becoming less optimistic. In particular, the turmoil in the eurozone has emphasised that if the euro survives—and that is now a big if—it seems likely to involve more central control within the eurozone. The prospect of caucusing within the eurozone will become a very real threat to our interests, and I firmly believe that we should remain outside that. So, ever closer union within the eurozone means ever more likely divorce from the EU for us. On this basis, it would be wise for the Government to prepare for all eventualities in our relationship with Europe. That is why I support the Bill.

Of course, there ought to be no need for the Bill. The Government are aware that the EU is not popular, that three-quarters of the population want a referendum on it and that over half think that we should withdraw. The debate is already out there and the Government should positively want to have good-quality information guiding that debate.

There are some things in the noble Lord’s Bill that could be improved in Committee, but for today I hope that the House will give the Bill a Second Reading and that the Government will give it their full support.

Sovereign Credit Ratings: EUC Report

Baroness Noakes Excerpts

Tuesday 15th November 2011 Lords Chamber

[Baroness Noakes]

My Lords, I had not originally intended to take part in today’s debate. I had seen the report of the EU sub-committee chaired by the noble Lord, Lord Harrison, and agreed with its balanced view and recommendations. I also agreed with the Government’s response to that report. Then I noticed, as the noble Lord, Lord Harrison, has already pointed out, that the noble Lord has cleverly timed this debate to coincide with the expected announcement of the EU Commission’s latest regulatory onslaught on credit rating agencies. So here I am.

I start from the position that we have to push back at the relentless tide of regulation from Europe and that any more regulation has to have the highest level of justification. I also believe we should make a start on returning powers to the UK, but stopping further regulation from Europe is not a bad place to start.

Looked at dispassionately, it is not clear that the rating agencies deserve the degree of punishment that has been meted out to them in the wake of the global financial crisis. Both Europe and the G20 needed scapegoats to cover up the fact that neither Governments nor their regulatory and prudential agencies had the faintest idea of the financial mayhem that was stalking the world in 2007. So the credit rating agencies, which certainly did not cover themselves in glory in relation to structured financial products in that period, ended up subject to a range of regulatory interventions and technical standards.

As is well known, the European Commission has never intended to let the financial crisis go to waste. The noble Lord, Lord Harrison, and I attended a breakfast briefing last week where a senior member of the Commission’s staff positively bragged that the crisis had led to 29 pieces of legislation affecting the financial services sector. His justification for this onslaught was, to say the least, minimal, but he evidently relished the opportunity to increase the regulatory reach of Brussels, and credit rating agencies have been caught up in this Commission land grab.

As the noble Lord, Lord Harrison, has noted, the Commission now wants to ratchet up the regulatory pressure on the rating agencies even further. This appears to be retaliation for their alleged failings in relation to the stressed eurozone economies. There is no doubt that Ireland, Portugal, Greece, Spain and Italy have not enjoyed having their credit ratings reduced—the reductions were late and sudden—but those countries had to face up to the fact that their credit ratings had been overstated for too long.

I completely agree with the report of the sub-committee chaired by the noble Lord, Lord Harrison, that the credit rating agencies did not precipitate or exacerbate the euro area crisis. I also agree that they did a rather bad job of not identifying the real risks in those economies. However, this is not a sufficient excuse for additional regulation.

It took me rather a long time today to confirm whether Commissioner Barnier did in fact launch his latest round of regulatory assault on the credit rating agencies. In fact, one blog this afternoon reported that Commissioner Barnier himself had been downgraded from “punctual” to “tardy” because he was late for the relevant press conference. However, a couple of hours ago I managed to track down a one-page summary of the proposals.

As the noble Lord, Lord Harrison, has noted, one of the things being mooted as part of the proposals is one which would allow credit rating agencies to be silenced if a country was in some kind of crisis intervention. That idea should have been killed at birth and never taken into the heart of EU policy-making. Constraining the credit rating agencies from placing their sovereign debt evaluations in the market is contrary to free speech. It is also impractical because the rating agencies would presumably have to declare that they were unable to issue a rating, which could well trigger a panicked response in the sovereign debt markets. The creation of an information void—or, at least, one with only government-controlled information—is likely to have the worst possible effect on credit markets. Fortunately, the Commission has stepped back from the brink on this and the matter is now marked, in the summary that I saw, as “for further consideration”. I hope that that means that the proposal is gone for good, but we have yet to see.

A dodgy proposal that has survived is that of compulsory rotation of rating agencies every three years or every 10 issues. I share the view of the committee and the Government that greater competition in the rating agency market would be a good thing, but there are problems with the rotation proposals. First, as most issuers already use more than one agency, the impact of the rotation proposal is huge turbulence in what is a very small market. It might well give the smaller agencies an opportunity to improve their position, but does that end actually justify the means? Creating further competition through turbulence has no respectable precedent.

Secondly, there are likely to be real impacts. Certainly, issuers will be faced with varying increased internal costs in dealing with additional rating agencies, possibly annually if they do a lot of issues. More importantly, it is far from clear that the markets which look to credit agencies will accept any new players at face value. Disruption in corporate credit markets, and through that disruption in the real economy, may be the only certain result of these proposals. It is not surprising that the Association of Corporate Treasurers is deeply concerned about these proposals and it wrote to the Commission in clear terms recently. It was disappointing and unsurprising in equal measure that Commissioner Barnier’s spokesman dismissed the association’s views as “a typical lobbying move” that “smacks of desperation”.

A further bad idea is the proposal to create a European framework for civil liability. The sub-committee chaired by the noble Lord, Lord Harrison, had it right when it said that civil liability is best left to member states. It is clear that S&P’s foolish error last week on the rating of France has touched a raw nerve, and has strengthened the resolve of those at the heart of the European project to control and punish credit rating agencies. But anybody who has looked at France’s economic position might marvel that it has hitherto escaped the analytical stringency applied to others in the eurozone. Credit spreads are now telling their own story on France. The mistake was unfortunate, but do we want a credit rating sector terrified of making a mistake, or one which is not prepared to boldly challenge received wisdom? What the markets want and what, for example, France might want, may not coincide. I have not had time to look in detail at the Commission’s proposals in this area, but I hope that they do not live up to the rhetoric of punishing mistakes that was being bandied about last week.

The only good aspect of the latest proposals is that the Commission has dropped the barmy idea of establishing the European credit rating foundation, which the noble Lord, Lord Harrison, has referred to. I understand from the press that there is now a suggestion in Brussels that another non-credit rating agency approach might be adopted, possibly using, for example, the European Court of Auditors. Will the Minister say whether the Government will give any support to an EU move to take credit rating agencies out of sovereign debt ratings? More generally, will my noble friend say whether these new proposals from the Commission will be subject to the UK’s veto, or can they be bulldozed through by qualified majority voting?

The Government’s official response to the committee’s report agreed with the committee that further changes should take effect only once the existing raft of changes had had time to bed in. Will my noble friend confirm that the Government will stick to that position?

Independent Commission on Banking

Baroness Noakes Excerpts

Monday 12th September 2011 Lords Chamber

[Lord Sassoon]

All I can say is that my noble friend Lord Flight makes three important and interesting observations which we need to dwell on as we take all this work forward.

[Baroness Noakes]

I declare my interest, as recorded in the register, in particular as a director of the Royal Bank of Scotland, although my views are and always have been entirely my own.

My noble friend the Minister will be aware that there remain concerns, not least from organisations such as the CBI, about the impact of these proposals on the availability and cost of lending to smaller businesses. There are also concerns about the impact of the proposals on the strength of our financial services industry, which is and will remain a significant contributor to the economy. I therefore welcome the emphasis in my right honourable friend the Chancellor’s statement on cost-benefit analysis being carried out before implementation. Will my noble friend say a little more about when this cost-benefit analysis will be undertaken?

[Lord Sassoon]

I am grateful to my noble friend Lady Noakes. We will get on with all the consideration of the detailed recommendations and the cost-benefit analysis as soon as possible. I cannot be more specific than that, but as my right honourable friend said, it may be that some things can be brought forward for the financial services Bill, which is an indication of the speed with which we will go at this.

Greece: Default Contingency

Baroness Noakes Excerpts

Monday 20th June 2011 Lords Chamber

[Lord Sassoon]

I am not able off the top of my head to break down the analysis of our exports, and I am not quite sure where my noble friend would draw the line between hard and soft. The critical point here is that more than 40 per cent of our exports go into the eurozone. Of course, they are generally distributed in relation to the size of economies, with Ireland, as we discussed in relation to the Irish package, having for historical reasons a disproportionately large share. My noble friend makes the point that it is absolutely in the UK's interest to ensure that the eurozone economies are successful, because that is where the largest part of our exports go.

[Baroness Noakes]

Does my noble friend think that a new set of arrangements made within the euro area by the IMF for Greece will work this time? It did not work last time. Unless there is some confidence that new arrangements made to support Greece will work, in the sense that they can restore the Greek economy—there is very little sign that the Greeks are able to take any medicine which would restore it to health—would we not be better served by working within Europe to help our European friends understand that letting Greece remove itself from the eurozone and take the default that it clearly is in is in everybody's interest?

[Lord Sassoon]

My noble friend Lady Noakes asks a very good question. It is inevitable that people will ask: was the package appropriate? One should take comfort from the fact that the IMF has a long and successful record of implementing restructuring programmes. The IMF programme for Greece was put in place in market conditions and with a market outlook somewhat different from that which Greece and the eurozone subsequently encountered. The first requirement is for the Greek Government to be encouraged to get back on track, to stick to the agreed fiscal consolidation path. Beyond that, it is for the IMF to see what needs to be done. The key thing is for the original plan to be back on track. I therefore think that we should not at this point second-guess whether the plan is or is not appropriate.

I will not be drawn into whether the Greek situation would be better in one hypothetical scenario or another.

Consumer Insurance (Disclosure and Representations) Bill [HL]

Baroness Noakes Excerpts

Monday 13th June 2011 Grand Committee

[Baroness Noakes]

My Lords, I shall try to be brief in my contribution to this Second Reading debate. Until late last week, I had not intended to take part in the debate so I did not attend the briefing meeting that I understand my noble friend the Minister arranged. I also apologise to him for not giving notice of the points that I will be making, which arose only late last week. Indeed, some of my briefing arrived only late this morning. I should say at the outset that I fully support the Bill and endorse what my noble friend the Minister and the noble Baroness, Lady Kramer, said about its importance.

While the Bill is about consumer insurance, its impact will not be confined to consumers or insurance companies. Insurance is often sold through people other than insurance companies, which is where the BBA’s members come on to the scene, because banks typically sell insurance products alongside other financial products. It is important, therefore, that the banks can implement the new requirements effectively. Implementation is the topic that I want to address.

Clause 12 deals with the timetable for implementation and provides in broad terms that the legislation will not come into effect until an order is laid, which cannot be for a year after Royal Assent. Implementation could be from some time after next summer. The Minister will be aware that when banks and, indeed, others sell financial products, they have to ensure that their documentation is compliant with legal and regulation rules. Importantly, they have to train their staff and support them with such things as standard scripts to ensure that the rules are complied with.

As the briefing provided by the Financial Ombudsman Service today makes plain, the emphasis of the sales process for insurance products will, as a result of the Bill, shift much more towards asking relevant questions and obtaining specific information. Banks will need to ensure that their staff ask the right questions and then probe the answers to those questions in the appropriate way. More importantly, they will have to assemble the right evidence in all this so that, if necessary, they can determine and prove whether a customer has taken care in providing relevant information.

Many banks sell face to face and do not have the ready evidence provided by telephone or internet sales, so the evidence aspect to this is important. In addition to addressing the sales process, banks obviously have to review and perhaps modify compliance systems. Inevitably, there will also be changes to and investment in information systems. I should stress that the BBA, in briefing me, has no problem with that at all. The issue is not any changes that might be necessary but timing.

As the Minister will be aware, the FSA is in the process of requiring implementation of its retail distribution review, with an implementation date of December 2012—some 18 months away. The changes that will come about through this Bill will involve to some degree the same systems, processes and people to be trained as the RDR; they will not be exactly the same, but they will be in the same area. In addition, the industry will look to the impact of the new simplified advice area, which could well have an impact on insurance sales. The industry is still awaiting FSA guidance on simplified advice and hence does not know what implications that will have for the sales process. If it does have implications, it will be in exactly the same area.

The banks and doubtless others affected by the RDR and simplified advice want to be in a position, if possible, to implement all the changes in one go. It does not make business sense to carry out one set of modifications to systems, processes, training and so on and then to follow it a matter of months later with another similar set in the same area. In theory, it can be done in sequential implementations, but that is not the most efficient way in which to proceed. It adds cost to the system and probably increases implementation risk. How do the Government see the implementation timetable of the Bill? Will it be harmonised with that for the RDR and simplified advice?

The BBA has also raised the issue of the interaction between the Bill and IMD 2—that is, the proposed revision to the insurance mediation directive. The Commission is currently conducting an impact assessment of the changes and expects to produce a revision to the existing directive by the end of the year. This could well also produce changes in the same sorts of areas, raising the same sorts of issues. Have the Government considered the impact of the Bill in relation to IMD2? I hope that my noble friend can reassure me that the Government will be mindful of the burdens on those who need to implement changes in the interface with consumers when they determine when to bring the Bill into effect.

Budget Responsibility and National Audit Bill [HL]

Baroness Noakes Excerpts

Monday 31st January 2011 Lords Chamber

[Lord Barnett]

My Lords, I thank the noble Lord, Lord Sassoon, for his amendments. He referred again to the independence of the OBR but, as he knows, I have all along been concerned with both its relevance and independence.

On relevance, there are dozens of truly independent forecasting bodies all over the country, including the Institute for Fiscal Studies, which used to be chaired by the present chairman of the OBR. The issue concerns itself with the expense of a body such as this when we have not only the forecasts of the independent outside bodies but the Treasury forecasts, the Bank of England forecasts and the OBR forecasts, most of which probably will be broadly in line with the current situation.

We will never know—I have tried to find out on many different occasions—the Government’s view on what should happen when they have the forecasts. The Minister has found all kinds of different ways of not answering my questions about what the Government’s policy is and whether they agree with the Bank of England on keeping interest rates at 0.5 per cent, given the growing pressure—wrongly in many quarters—on the need to increase interest rates. He will not say whether he disagrees—I appreciate that he cannot disagree with or say anything different to what the Chancellor has said—but it would be nice if, at some time or another, he could answer the question of what the Government’s policy is, as opposed to accepting the forecasts, which he has done on numerous occasions.

On the question of independence, I am worried by the constant references in the media to “the Government’s in-house forecasting body, the OBR”. This does not lend itself very well to the independence that we would all like to see in the OBR. I am sure Robert Chote will do his best to ensure that it is truly independent but, if it is no more independent than the dozens of existing bodies, why do we need the OBR at all? That is the question I put to the noble Lord while thanking him for the amendments he has brought forward.

[Baroness Noakes]

My Lords, I add my support for the amendments. It is to the great credit of the Minister that he took away the good discussions we had in Committee and has produced this and the other amendments today.

The noble Lord, Lord Barnett, referred to the OBR being regarded as the Government’s in-house forecasting body. I have never heard it referred to in those terms, although I know that noble Lords on the Benches opposite have tried to make that accusation stick. I believe it is already regarded as a properly independent body under its chairman, Mr Robert Chote, and we should rejoice in that.

[Lord Burns]

I also welcome these amendments. We spent a great deal of time in Grand Committee trying to bring greater clarity to the remit of the OBR and protecting its independence. We also tried to clarify the governance of the OBR and, particularly, the role of its non-executive members. The Government have responded positively to those discussions. The amendments deal very well with the bulk of the issues that were raised, particularly in clarifying those areas of the remit where there was ambiguity and the role of the non-executive members in relation to their oversight of the forecasting process and as the protectors of the external review process. That has been a success.

I fear that there will always be a certain amount of tension between observers when it comes to the relationship between the forecasts of the OBR and the activities that take place within the Treasury. I pointed out at Second Reading that whatever arrangements are put in place for the OBR, you cannot strip the Treasury of its own skill set and the resources it needs to monitor the progress of the economy and to make judgments on whether the economy is following the track that was intended at the time that measures were taken. This is an arrangement that we have to live with. I am sure that as time goes on, we will see much more clearly the way in which those are worked out and how the OBR relates to the internal activities of the Treasury. I hope that noble Lords will not get too exercised about this. That is a natural tension that exists in this type of arrangement and I would be surprised if it cannot be made to work.

Savings Accounts and Health in Pregnancy Grant Bill

Baroness Noakes Excerpts

Tuesday 7th December 2010 Lords Chamber

[Baroness Noakes]

My Lords, the noble Baroness, Lady Howe, raised the issue of a money Bill. I remind her that money Bills are established conclusively by the certificate of the Speaker. This is not a question of government policy and, much as we might like to delve further into it, this is not something that your Lordships' House can do.

I support the Bill. When I was sitting on the Front Bench opposite, I had the privilege to speak for Her Majesty’s Official Opposition on both the Child Trust Funds Bill and the Saving Gateway Accounts Bill, and so I know a little about the schemes. As the Opposition, we did not oppose either the Child Trust Funds Bill or the Saving Gateway Accounts Bill, although we did improve both during their passage here. However, our lack of opposition was not based on a belief that either Bill represented a good use of public money. Rather, as I made plain at the time, we supported them because we were in favour of supporting savings.

We should remember that the savings ratio was a healthy 10 per cent in 1997, when the previous Government took office. It fell disastrously after that. In 2008, the savings ratio went negative: overall, people reduced their savings rather than made additional savings. The ratio has gained ground since then, as is normal in recessionary times, but it is still not at the healthy levels that we experienced in the early 1990s and earlier.

I will start with the Child Trust Fund. The timing of the fund was pure politics. It was designed so that lots of £250 vouchers would drop on the doormats of parents just at the time of the 2005 general election. It was also pure new Labour. It had been described at a seminar organised by the Institute for Public Policy Research—at the time the think tank of choice for new Labour—as “the third way within the third way”. I did not understand at the time what that meant, and the years since 2004 have provided no further enlightenment. I suspect that third-way theology has now been consigned to history by the Benches opposite and so we may never find out.

There was no proper research underpinning the Child Trust Fund proposals. No one knew what the impact would be on savings during the accumulation period, and no one knew whether the acquisition of a financial asset at 18 would make any difference to the savings behaviour of young adults. The Government asserted that a financial asset would increase the life chances of young adults, but, as the acting director of the Institute for Fiscal Studies said in giving evidence to the Public Bill Committee in another place, that analysis relied on correlation, not causation. Furthermore, no one had any idea what young people would do with their windfall of several hundred pounds when they gained access to it aged 18. There were pious hopes about education and other worthy expenditures, but many of us thought that the purveyors of drink and drugs might well be the beneficiaries, because no constraints were placed on how the money could be spent. The Government had done no modelling on likely outcomes; nor were they prepared to set any targets against which the success of the scheme could be judged. This was evidence-free, outcome-indifferent policymaking at its worst.

We have some evidence of the impact of the policy from the regular statistics that are produced by HMRC, but these require some interpretation. The previous Government typically claimed that these statistics showed the success of the scheme. Some of the child trust fund providers, mainly financial mutuals, also claimed that. I am not going to unpick all the statistics today—the noble Lord, Lord Newby, has referred to some of them—but one thing they showed was that only 24 per cent of accounts attracted additional savings beyond the Government’s contributions, and only a tiny number contributed the maximum allowed.

The 2009-10 distributional analysis figures have mysteriously disappeared from HMRC’s website today but in 2008-09 extra savings amounted to £290 million. However, no one knows whether these savings were genuinely additional or whether they were simply diverted from other savings mechanisms to which parents and others would have contributed. The previous Government did not want to know the answer to that question and never asked it.

In order to appease the critics of the abolition of child trust funds, who are largely the providers of child trust funds, the Government have announced junior ISAs to provide a specific tax-incentivised savings vehicle from next year. I am not sure that this was wholly necessary other than to provide a marketing peg for children’s savings product providers. However, if the tax cost is modest, something which promotes savings without the £500 million-plus price tag which came with the child trust fund is to be welcomed.

There is just one area which deserves further consideration, and other noble Lords have spoken about it already—namely, the position of looked-after children. These children do not have families who will save for them. They will start adult life with all the disadvantages that children in care have. When child trust funds disappear, they will have no financial assets either. As has already been stated, my honourable friend Mr Mark Hoban said in another place that he would look at what could be done to get local authorities to provide equivalent savings, and I hope that my noble friend on the Front Bench will be able to say more about that when he responds to this debate.

The child trust fund is also an untargeted, universal benefit, which is usually a good indicator of poor value for money. The savings gateway was a little different in that it was specifically targeted at low-income households. This project was piloted twice and so it was not a wholly evidence-free project. That did not, however, mean that it would be a success in creating an enduring savings habit among recipients of the benefit.

The pilot studies suggested that some savers were simply diverting their money from other forms of saving—often informal methods—and the pilots did not go on long enough to indicate whether there was persistence of savings at the end of the minimum saving period which led to the acquisition of the savings bonus. As my noble friend Lord Sassoon pointed out, the saving gateway scheme was not popular with providers. All building societies and most of the banks shunned it. The Post Office, which was keen, would get involved only with a public subsidy. The economics of the saving gateway scheme simply did not add up. Therefore, it was far from clear that the savings gateway would have flown even if it had got off the ground on implementation.

I have to say, however, that I have concerns about how to encourage those on low incomes to save. The evidence shows that 43 per cent of those on very low incomes, of less than £100 per week, have no savings whatever, and therefore they are very exposed when things go wrong in their lives. I completely support the judgment of the Government that over £100 million a year is too high a price to pay for the saving gateway scheme, which might not have done much to increase long-term savings. However, I hope that the issue of longer-term savings among the poor does not disappear off the Government’s agenda, although I am sure that gimmicks such as the savings gateway are not needed.

I know next to nothing about health and pregnancy grants other than that they are untargeted, universal benefits and, despite their names, are not related to health in any meaningful way. They could have been, and were, spent on whatever pregnant women chose. For me, that is good enough reason for abolition.

The Government have brought this Bill forward against the background of the disastrous economic circumstances which they inherited when taking office this year. It is absolutely right that we take steps to eliminate the deficit, as my right honourable friend the Chancellor has set out. In that light, the schemes being abolished by this Bill are obvious candidates. However, I believe that a respectable case can be made for repealing these schemes even if we had a firmer financial footing. It is unlikely that my party would ever have introduced them as a matter of choice and, with the small exceptions to which I have referred, I shall not regret their demise. I support the Bill, not with the reluctance of the noble Lord, Lord Newby, but with complete enthusiasm.

Budget Responsibility and National Audit Bill [HL]

Baroness Noakes Excerpts

Monday 6th December 2010 Grand Committee

[Baroness Browning]

My earlier question came from reading the evidence of Professor Wren-Lewis to the Select Committee. He considered that if,

“the Treasury decides that the OBR model is wrong in some sense, I think basically then it is up to the Treasury to decide whether it wants to move to an alternative model or an alternative way of doing things whereby it produces its own forecast and does not rely on the OBR”.

I understand that the Government accepted that when they responded to the Treasury Committee. That was what prompted my earlier question.

[Baroness Noakes]

Perhaps I may suggest to my noble friend that much of the debate in Committee has been concerned with establishing that the OBR is properly independent of the Treasury. One of the corollaries of having an OBR that is properly independent and that we are all jolly keen to see in a separate building, with staff who are not too intertwined with the Treasury, is that the Treasury will have given away the ability to make some its own appraisals of the economic position. Clearly, it cannot leave itself completely denuded. It would be frankly ludicrous if, in setting up the OBR as a completely independent body to inform the public debate and to be the official forecaster, as my noble friend the Minister has repeatedly said, we left the Treasury with no internal capability to judge for itself whether or not it was happy with what was coming out of the OBR. It would therefore be entirely logical for the Treasury to retain some forecasting capability. In extremis, the Treasury may wish to rest its judgments on its internal forecasts, rather than those produced by the independent OBR, but even without those extreme conditions the Treasury will need to be satisfied that what is coming from the OBR is fit for the purpose of decision-making.

--- Later in debate ---

[Lord Myners]

Further forecasts on the economy are made in government. I believe that the Department for Business also produces its own economic forecasts. Almost as many forecasts are produced in government as are produced in the private sector.

The noble Lord, Lord Higgins, makes an important point. This might not be the right forum in which to discuss this, but the balance of intent behind the decisions currently being made by the Monetary Policy Committee is more focused on the words that come after “and subject to that” in its remit than on controlling inflation—that is to say that, in an environment in which fiscal policy is reducing demand in the economy, the onus for sustaining demand is coming from monetary policy, with considerable risk, in my judgment, of inflation.

There is no recognition in the Keynesian thinking of this document about the importance of monetary policy. We have what the Americans call a saltwater analysis of economics rather than the freshwater or Chicago school analysis associated with the monetarist view. It will be interesting to hear the Minister’s view on where monetary policy comes into the OBR’s thinking.

[Baroness Noakes]

But not today.

[Lord Sassoon]

I love it when noble Lords preface their remarks by saying, “This may not be the place in which to discuss these things”, and then go into freshwater and saltwater fishing. The noble Lord, Lord Eatwell, has already said that his study of the 20 spreadsheets has raised some questions that he will address directly to Mr Chote. If my noble friend Lord Higgins would like me to relay his questions to Mr Chote, I will be happy to do so—or he may wish to write directly. Either way, I will return to the amendment. We have so much transparency already that it is provoking lots of questions that I am sure Mr Chote and his colleagues will be happy to answer. I will be happy to act as postman if that would be helpful.

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[Lord Eatwell]

My Lords, at Second Reading it was acknowledged on all sides of the House that requiring the OBR to write what was referred to by the noble Baroness, Lady Noakes, as its own school report was not the best way of achieving an objective appraisal of the office’s performance. However well intentioned or even self-critical an organisation might be, it is inevitable that self-assessment embodies a number of allowances, or perhaps things taken for granted that have become embedded in the organisation and are not made explicit, with the result that the sources of any underperformance are not articulated as clearly as they might otherwise be. That is why the provision in the Bill for self-assessment is ultimately unconstructive and even damaging to the reputation of the OBR. Far better to have an external assessment—I will propose a form of external assessment later—that confronts all aspects of the forecasting, such as methods, data, sources, judgments and presentation. The greater credibility and novel insights of such an independent appraisal would enhance both the performance and the reputation of the OBR. The self-assessment procedure is unsatisfactory and it would be a great help if this provision were removed from the Bill by our acceptance of Amendment 23. I beg to move.

[Baroness Noakes]

My Lords, the noble Lord, Lord Eatwell, has already referred to the fact that I did not support the OBR carrying out an assessment of its own forecasts, as set out in Clause 4. I stick by that view, for the reasons that the noble Lord has given. However, I cannot support his amendment because, without another amendment, it would take out of the Bill a requirement for any assessment of the accuracy of OBR forecasts. I do not understand why the noble Lord has not grouped this amendment with later ones that would set up a peer review committee to perform this function. It would be a retrograde step simply to take out of the Bill a requirement for an analysis of the accuracy of the OBR’s fiscal and economic forecasts. I would rather have an unsatisfactory review than none at all.

[Lord Eatwell]

I was hoping to provide space for those who feel as strongly as I do, as apparently does the noble Baroness, Lady Noakes, to suggest alternative arrangements. Indeed, I have put forward my own proposals, which we will discuss later, but a variety of methods could be suggested.

[Lord Peston]

May I interrupt the noble Lord? I am totally puzzled now. The noble Lord uses the word “requirement”. The people who comprise the OBR will not be idiots. They are going to be experts and qualified economists. Quite independent of what is in this Bill, if the forecasting is not working well, they will ask themselves why they got it wrong. There is no need for a requirement here unless you assume that a bunch of morons is going to be appointed to the OBR. If you get a forecast wrong, you immediately ask why you got it wrong. Why is there a need for a requirement to do something that would be a normal way of working?

[Baroness Noakes]

I suggest to the noble Lord, Lord Peston, that it is not so much the requirement to do the assessment as the requirement to publish it that is important.

[Lord Sassoon]

My Lords, I am confused by this, because there are certain other things that I would have thought it would be impossible for the OBR to miss out, such as focusing its forecasts on government economic policies. Where there was a strong wish to put certain things into the Bill that were not there, now it is being said that it is blindingly obvious that the OBR would assess its own performance, so no provision is needed. What goes in the Bill and what does not are matters of judgment. It is my view that this is a sufficiently important matter to justify being included. The noble Lord, Lord Peston, will no doubt be comforted by that, because he has already played back to me the fact that the OBR has stated in its document, Analysis of Past Forecasting Performance, that it is,

“fully committed to transparency, and each year will produce a full and detailed report analysing the accuracy of its economy and fiscal forecasts, and explaining the differences between forecast and outturn”.

It goes on to talk about giving further detail on its forecast methodologies. The office is going to do this anyway and I would like to think that it would be done without the Bill requiring it. However, it is sufficiently important that there should be absolutely no doubting the fact that it will be done.

This is not something that of itself is easy to do. The analysis of forecasting requires fiscal forecasting skills that are in scarce supply. To make the assessment requires access to and full understanding of the data. Critical to the whole process is that actually doing the assessment yourself makes it a learning experience. That goes to the heart of why Mr Chote and his team will do it anyway. We certainly expect to see the OBR doing this and the office has said that it will. However, in the Government’s view the requirement should be on the face of the Bill. In the absence of a discussion that we have not yet had about alternative approaches, I suggest that this is where we need to leave it. For the moment, therefore, I ask the noble Lord to withdraw his amendment.

[Lord Eatwell]

While I agree with the Minister that doing an assessment yourself makes for a learning experience, having someone else do it makes for an even more pointed learning experience. I apologise to the Minister for the fact that he has been forced to speak half-heartedly about this amendment because he has not had the opportunity to discuss Amendments 40 and 43, which cover the issue and which I see as linked. I do not know how the grouping got made up in this way, but there we are. The noble Lord is suggesting that I did it. I can assure the Committee that that does not fall within my skill set.

[Baroness Noakes]

It should.

[Lord Eatwell]

I thank the noble Baroness, Lady Noakes. It is, as we say, a learning experience.

--- Later in debate ---

[Baroness Noakes]

My Lords, the noble Lord, Lord Barnett, has gone a bit over the top in describing Mr Chote and his colleagues as being “used”. The Statement made by my right honourable friend the Chancellor, to which the noble Lord referred, spoke of an audit of the annual managed expenditure savings. It was not an audit of anything other than one part of the totality of the package that my right honourable friend announced last month. The noble Lord has extrapolated from a relatively small use of the word “audit” into something much bigger that is not justified.

I agree, in a sense, that people such as myself, my noble friend the Minister and the noble Lord, Lord Barnett, who have an accounting background, tend to think that the term “audit” is reserved for this statutory audit function, has a very specific meaning and applies only to the audit of financial statements. However, the term means only “independent examination”, and in that sense I do not see any reason why the figure should not be used.

However, I say to the noble Lord that even when considering the audit of annual financial statements, those statements contain loads of assumptions and forecasts. To do an impairment review, you have to forecast cash flows for 10 years and choose discount rates and things such as that to calculate the figure that you put on your balance sheet. For your pension liabilities, you have to do even more complex calculations involving even more assumptions about the future. So even “audit” has to deal with these difficult areas of future estimation, even within the concept of statutory audit.

It would be helpful if the Treasury were to be reminded that the term “audit” has a rather technical meaning; it would be better to say something like “has independently examined”. Perhaps the Minister could take back to the Treasury that its lexicon could have that amendment added. I come back to my basic point, though, that the noble Lord, Lord Barnett, has gone a little over the top on this amendment.

[Lord Sassoon]

I am grateful to my noble friend for delivering my script for me. Perhaps I should declare my interest as a fellow of the Institute of Chartered Accountants in England and Wales. There is certainly a technical use of the word “audit” that we chartered accountants and other accountants are used to using. As my noble friend Lady Noakes has explained, my right honourable friend was using a more general use of the term. The Chancellor used the phrase in the very specific context of,

“audited all the annually managed expenditure savings”.—[Official Report, Commons, 20/10/10; col. 949.]

To be clear, there is no question of the OBR doing an audit in the sense used by, say, the National Audit Office. In the context in which my right honourable friend used the word “audit”, it is completely clear that he was talking about scrutiny of those particular savings, as set out in the terms of reference given to the OBR when it scrutinised the Government’s policy costings. If the noble Lord, Lord Barnett, wants clarity on the meaning of the word, the terms of reference are clear.

In answer to the questions about the number of contacts between the OBR and the Treasury, that information is now published on its website. Between 4 October and 29 November 2010, there are seven recorded contacts: four e-mails, two meetings and one transmission of a hard-copy document. As I say, all those details are on the OBR’s website for people to look at.

The clarity over the OBR’s role is provided for through the provisions in the Bill and the charter. There is no intention for the OBR to do an audit in the technical sense of the word. I hope that it has been useful to have had this short discussion to clarify that that is indeed the situation and, having agreed that, I do not think that we need to clutter up the Bill in the way that the amendment proposes. On the basis that it is not strictly necessary, I ask the noble Lord if he might withdraw it.

--- Later in debate ---

[Lord Myners]

I am not sure that the answer is entirely satisfactory. The Chancellor described this as an audit. He went beyond the language used by the OBR. We are asking the Minister of the Crown, based in the Treasury, to give us a sense of how this scrutiny was conducted. I am beginning to feel that the Minister does not know the answer. If that is the case, it would be helpful if he said, “I have no idea how this was scrutinised”, after which the Committee could form its own view.

[Baroness Noakes]

My Lords, the Opposition are getting overexcited this afternoon. The small phrase in the announcement made by my right honourable friend the Chancellor that there has been an audit of the AME savings is being considerably overinterpreted. As my noble friend suggested, it would be helpful if Mr Robert Chote were asked to say how he conducts this aspect of his work. I am sure that if there are then further questions that noble Lords wish to raise, they will be able to. It would be helpful if my noble friend references any material that is already publicly available. However, it is not reasonable to go beyond that this afternoon.

[Lord Eatwell]

While agreeing with the noble Baroness, Lady Noakes, I think that there is an important point here. If there is a process of scrutiny that is designed to give us a degree of confidence in the Government's costings and in the forecasts made by the OBR, it would be helpful to know, when the OBR scrutinises the costings by the various departments of their savings, whether it agrees with them 100 per cent. If it does, that would be very disturbing and unfortunate: it would be like an old Soviet election. We would expect a degree of disagreement—perhaps not much, but a bit—which would give us confidence in the scrutiny process. It would be helpful if the Minister would tell us whether in the scrutiny process the agreement was 100 per cent or rather less.

Budget Responsibility and National Audit Bill [HL]

Baroness Noakes Excerpts

Wednesday 1st December 2010 Grand Committee

[Lord Eatwell]

Before the noble Lord finishes, I should like to comment. I really am having road-to-Damascus experiences today; I now think that this is rather important, although I did not when we started. Yes, the OBR is moving out, but the point is that this is a Bill to establish that body for the long term. The Minister has said that it is up to the OBR to decide where it goes. Let us suppose that it decided to go back. Would that be acceptable? The answer, of course, is no. Having felt that the noble Lord, Lord Higgins, had tabled an amendment that had been superseded by events, I now realise that he has spotted a rather important point.

[Baroness Noakes]

My Lords, before the noble Lord, Lord Eatwell, gets too carried away with joining in with any opposition to the Bill, I want to point out that the Treasury is not a place, so the drafting of my noble friend’s amendment, while appearing Santa Claus-like, is in fact defective. There is a Treasury building but the Treasury could be anywhere. I think that he means “located in the same premises as Ministers and officials of the Treasury”.

We can take this too far, though. There might be circumstances in future when it is perfectly sensible for space in the same building as the Treasury is located to be occupied by the OBR. If the Treasury shrunk in size to proper proportions again and did not occupy as much of its building, some of it could be let out. What would be wrong with having the OBR even closer to save on shoe leather? We must not get carried away with this amendment.

--- Later in debate ---

[Baroness Noakes]

My Lords, I profoundly disagree with the noble Lord, Lord Peston. I do not know what the initial position might be in the OBR in that they might all be initial employees. But we would restrict the OBR’s access to a pool of talented people if we insisted that they could work in the OBR only if they became its employees and severed any employment connections with other organisations. The OBR will be a small organisation, so in order to get good people it may well need to attract them through shorter secondments, whether to handle specific issues or to be part of the staff more generally. Over time, we have to allow the OBR that flexibility, and there is nothing wrong with that. People move in and out of all sorts of organisations throughout Whitehall and are brought in whenever it is necessary.

[Lord Turnbull]

My Lords, I am amazed at the sheer unrealism of the proposition of the noble Lord, Lord Peston. If this is enacted, there will be a major crisis in the organisation. Around 20 people will have to take a decision whether to resign from the Treasury or quit the OBR and go back to the Treasury. That is something we could absolutely do without. The initial staff in large majority are secondees. We have not complained about their work. We did not say that the report produced last week was ineffective or that we did not trust it because the staff are seconded. The noble Lord is imposing something that will be damaging to the credibility of the organisation and will make it much more difficult to attract people of the quality it needs. As I have said, a major problem will be created immediately if such a proposition is enacted.

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[Lord Sassoon]

My Lords, Amendment 13 is intended to create a legal obligation for the OBR to publish the nature and membership of committees or sub-committees and to publish the reports of those committees. It is inconsistent with the right of the OBR under paragraph 11 of Schedule 1 to determine the procedure of any committee or sub-committee. We should not seek to fetter the way in which the OBR organises its committee structure and processes. While I am happy to talk at greater length, we should leave it up to the OBR to determine how its committees and sub-committees should operate. This would be consistent with everything that we have said about the independent and unfettered way that it should go about its business.

[Baroness Noakes]

I am sorry to interrupt my noble friend. The amendment asks simply that the nature and membership of any committee or sub-committee, and the reports of any such committee or sub-committee, should be made public. That does not fetter in any way the discretion of the OBR to set up those committees; it is merely part of the public accountability of the OBR to explain what it does and how it does it. It is quiet simple and I am not sure why the Minister is resisting it on the grounds that he has given.

[Lord Sassoon]

For example, if the OBR wished to set up a sub-committee to deal with internal personnel matters, it would not be appropriate that it should be required to publish details about that. We are making presumptions that sub-committees have a particular meaning. Perhaps we should step back for a moment. The output of the OBR is essentially the 150-page document that it has now produced, along with a number of other reports and analyses that it has already made, and it has set out plans for future work streams. We must remember that this is not equivalent to talking about the Monetary Policy Committee or the yet to be established financial policy committee of the Bank of England, which will have regular monthly meetings to make decisions about policy.

We need to be clear about this. The output of the BRC of the OBR will be a series of policy documents that will not come regularly out of a minute-taking and minute-making process. Perhaps I was presuming a bit too much in my brief answer. The committee’s structure is up to the OBR, but it is likely to have more to do with the governance and management of the entity than with the reporting that comes out in its major documents. In that context, requiring this straitjacket would be inappropriate for the nature of the entity.

--- Later in debate ---

[Lord Sassoon]

Since the noble Lord is coming to the end of his remarks, I wanted to put something into, if you like, his work plan for thinking more about this matter before Report. This is another point that I had thought hardly needed to be made. The grant-funded NDPB model which we are talking about is common to a great many credibly independent bodies such as the Advisory, Conciliation and Arbitration Service and the Equality and Human Rights Commission. I do not believe that there is any question of funding for other grant-funded bodies of this sort being compromised. They produce explanatory memoranda; the OBR can produce an explanatory memorandum, which will go to parliamentary committees for scrutiny. I simply put on the table that if the noble Lord wants to go on thinking about this, he should also consider the read-across to other NDPB models.

[Baroness Noakes]

Before the noble Lord, Lord Eatwell, takes this away to consider before he comes back on Report, he might want to look at the debates on setting up the Statistics Commission. Very similar points were raised at the time. Although it was a non-ministerial government department rather than an NDPB, the principles are exactly the same. When I sat on that side of the Grand Committee, the concerns were that insufficient resources would be made available to the Statistics Commission to enable it to do the work that it needed to do because it was to be subject to Treasury control.

One of the arguments, which I am not sure has been fully deployed, although many good arguments have been, is that the annual report required by Schedule 1 is the vehicle for the body—the Statistics Commission in that case, and the OBR in this case—to say exactly what it wants. The Treasury has no ability to stop anything being put in the annual report, which must be laid before Parliament. This is in addition to the undoubted ability of Robert Chote to get Mr Tyrie to obtain a Treasury examination if he thought there was a problem, which can be done by informal means. Therefore, Mr Chote has a formal means of bringing to the attention of the wider public any concerns that he has about funding.

[Lord Eatwell]

I am grateful to the noble Baroness. She has given me some ideas to think about. I will go away and think about these things. It would be nice if we felt that the Government were going to do some thinking as well. We have an important issue here, which we will perhaps relate to the annual report. That is an interesting idea and I will look up the debate to which the noble Baroness referred. In the mean time, I beg leave to withdraw the amendment.

Amendment 16 withdrawn.

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[Lord Higgins]

My Lords, Clause 4 states:

“It is the duty of the Office to examine and report on the sustainability of the public finances”.

The amendment proposes to insert at the end of that passage,

“on the basis of section 1(2)(a) and (b)”,

which, as we have already discovered, state that the charter should set out,

“the Treasury’s objectives in relation to fiscal policy and policy for the management of the National Debt”,

and the means by which the Treasury is going to achieve that. It is important to refer back to the earlier passage to be clear about how the OBR will carry out its duties.

I still have considerable problems in understanding how it is going to look into these matters without also examining the Government’s economic policy—a matter that we spent a long time on in the previous Committee sitting. In the mean time, however, we have received a letter from the Minister commenting on that aspect. It is closely written and very condensed, and it deserves careful study. I presume that it is being placed in the Library so that it will be generally available.

[Baroness Noakes]

Is this a letter that only the noble Lord has received from my noble friend the Minister?

[Lord Peston]

We have all been given one. They are over there.

[Lord Higgins]

Has my noble friend now got a copy?

[Baroness Noakes]

Yes. This is an unorthodox way of distributing letters to Peers.

[Lord Higgins]

I presume that the Minister was seeking to be helpful to the Committee so that we should have it in advance of our discussion.