Reviewing the Office for Budget Responsibility report
22 February 2016
The Treasury Committee publishes its report reviewing the e-mail exchange between the Treasury and the Office for Budget Responsibility (OBR).
- Report: Reviewing the Office for Budget Responsibility
- Report: Reviewing the Office for Budget Responsibility (PDF 261KB)
- Inquiry: Review of the scope and performance of the Office for Budget Responsibility
- Treasury Committee
Commenting on the report, Right Hon. Andrew Tyrie MP, Chairman of the Treasury Select Committee, said:
"It is clear that the Chief Secretary made requests for non-factual changes to be made to the Economic and Fiscal Outlook. This looks like a misjudgement. It gives the appearance of a Minister trying to lean on the OBR. The OBR's independence is hard-earned and easily squandered.
Little or no damage appears to have been done in this case, but this shouldn't be repeated. The Treasury Committee will do what it can to prevent any further such episodes.
For now, a revised Memorandum of Understanding is needed. This should make crystal clear that early sight of the OBR's work is for fact-checking and quality assurance purposes only. Any requests or comments which could be construed as going beyond this should be brought to the attention of the Chairman immediately and, if necessary, the Chairman of the BRC.
The OBR initially resisted the provision to the Committee of the information required to enable the Committee to assess whether political interference by HMT or Ministers had been attempted, or succeeded. That was a mistake. The transparency brought to this by Parliament is the best safeguard of the OBR's independence. The Committee expects the OBR to be more receptive to requests for information in future."
Sir David Ramsden's "independent" review of the OBR
Right Hon. Andrew Tyrie MP said:
"Sir David is a reliable, highly competent Treasury official. He is also manifestly professionally incapable of conducting an independent review of the OBR. After all, he is bound by the Civil Service code, reports to the Chancellor, and has a duty to support Government policy of the day.
The Chancellor opposes the idea of the OBR costing parties' manifesto pledges in the run-up to general elections. So it is not surprising that Sir David's review considered it to be a bad idea. Sir David did not seek the views of political parties, nor can anyone ascertain whether he has reflected the balance of opinion among those whom he did choose to consult. His reason on this issue can be safely discounted."
After initial reluctance from the Budget Responsibility Committee's Chairman, Lord Burns, to provide it, Treasury Committee staff have now reviewed the e-mail exchange between the Treasury and the OBR in the 'pre-release access period' leading up to the publication of the OBR's December 2014 Economic and Fiscal Outlook.
The correspondence shows that, during this period, a number of non-factual requests for changes to the OBR's Economic and Fiscal Outlook were made by Treasury officials. Some were taken on board by the OBR. While these changes made no material difference to the content of the publication, they raise concerns about the terms of engagement between the OBR and Government officials. These should now be clarified.
Background to the recent reviews of the OBR
Unlike the statutory external review of the OBR completed by Kevin Page, Sir David Ramsden's review was not independent. It would have been difficult for Sir David to have reached conclusions that differed from the views of the Ministers to whom he is accountable; and the fact that the Government accepted his recommendations on the day his review was published, in full and without comment, suggests that he did not attempt to. The conclusions reached by Sir David are therefore of greatly diminished relevance for assessing the independence and effectiveness of the OBR's work. (Paragraph 4)
The Treasury review recommended that one way to address the difficulties in replacing BRC members would be to offer a more flexible job description, including part-time working arrangements, to encourage a wide range of candidates. However, in evidence to the Committee, Sir David said of Graham Parker, the fiscal expert on the BRC, "Graham has a particular expertise, experience and skill set which would be very hard to replicate in someone part-time". (Paragraph 9)
Sir David's recommendation that prospective BRC members be offered part-time working arrangements is evidently not intended to apply to the Chairman of the OBR or the fiscal expert on the BRC. In its response to this report, the Treasury should provide an explanation of why it believes Professor Nickell's role as macroeconomic expert can be performed by an individual working part-time. (Paragraph 10)
The coming Parliament will see the first changes to the OBR's senior leadership since it was put on a statutory footing. The OBR's early success has been intrinsically linked to the quality of its current leadership. However, the OBR does not yet have an institutional reputation distinct from that leadership, making the succession process a key risk to its credibility. The Committee agrees with the findings of both OBR reviews about the importance of long-term succession planning and welcomes Sir David's assurances that work to find replacements for Professor Nickell and Graham Parker is already underway. (Paragraph 13)
The importance attached to succession planning by both OBR reviews is at odds with the Chancellor's late announcement of his preference for Robert Chote to be reappointed as Chairman of the OBR. The Committee has recently recommended that, in the absence of exceptional circumstances, nominations to the BRC should be made by the Chancellor at least four and a half months before the postholder plans to leave office. The Committee expects the Treasury to adhere to this timetable. ‘Exceptional circumstances' do not include general elections taking place under Section 1 of the Fixed Term Parliaments Act 2011 or regular fiscal events such as the Budget and Autumn Statement. (Paragraph 14)
The Memorandum of Understanding between the OBR and Government departments
The current Memorandum of Understanding does not explicitly sanction any changes, factual or otherwise, to the OBR's publications as a result of their being made available under exceptional pre-release access arrangements. Instead, exceptional pre-release access is intended to improve the accuracy or usefulness of the Budget or Autumn Statement. (Paragraph 32)
In any case, the requests made by the Treasury for changes to the December 2014 Economic and Fiscal Outlook clearly stray beyond the factual. The Committee is assured that, on this occasion, it made no material difference to the analysis contained in the final document. However, it is concerning that a number of requests appear to have been taken on board, and that Treasury suggestions for non-factual changes to the draft Economic and Fiscal Outlook during the exceptional pre-release access period appears to have been routine. (Paragraph 33)
Evidence received by the Committee of requests for changes to the Economic and Fiscal Outlook originating from the then Chief Secretary is particularly concerning. It is far from clear why Ministers should have the opportunity to see OBR documents during the exceptional pre-release access period when, given the level of technicality, it is highly unlikely that they could make constructive contributions to any fact-checking and quality assurance process. If Ministers require early sight of the OBR's draft publications for other purposes, this should be made clear in the Memorandum of Understanding. (Paragraph 34)
The Committee has confidence in Robert Chote's personal resilience to pressure from Ministers and officials, and his willingness to speak his mind. It is also encouraged by evidence of the assertiveness of OBR staff in dealing with the Treasury. However, if the OBR is to be institutionally resilient and assertive, the terms of engagement with Government departments must be clarified. At a minimum, a revised Memorandum of Understanding must explain the purpose of exceptional pre-release access, which Ministers and officials are granted access and why, and the sort of changes to OBR documents that are envisaged during this period. (Paragraph 35)
The OBR requires a close working relationship with Government departments, based on free and frank exchange at official level. Subjecting all communications between OBR staff and Government officials to routine public scrutiny could have a chilling effect on this relationship. However, the Committee considers the exceptional pre-release access period to be a particularly sensitive time, not least because it is the Treasury's first opportunity to see the OBR's conclusions and judgements in full. The Committee may, from time to time, repeat the exercise it has carried out on this occasion, to ensure that Ministers, special advisers or officials are not seeking to influence the OBR's judgements and conclusions. (Paragraph 36)
Opposition Policy Costings
The Committee is unconvinced by the discussion and conclusion on opposition policy costings in Sir David's review. First, the review's independence from the Chancellor, whose opinion on this question it reflects, is questionable. Second, it did not consult the other political parties about the feasibility of this idea. Third, even among those whom it did consult, it is far from clear where the balance of opinion lies, or that the views they expressed are accurately represented in the report. (Paragraph 51)
Sir David's evidence to the Committee on opposition policy costings did nothing to assuage our concerns that he had interpreted and selected evidence to confirm the prior view of the Chancellor. We do not believe that the Review's discussion or conclusions on opposition policy costings add to the debate, and consider the matter an open question for consideration by this Committee and Parliament as a whole. (Paragraph 52)