Peers demand answers on Budd departure

7th July 2010

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The government's "incompetence" is to blame for the departure of the head of the UK's newly created fiscal watchdog, former Labour minister Lord Barnett has suggested.

On Tuesday it was confirmed that Sir Alan Budd, chairman of the Office for Budget Responsibility (OBR), will not stay on after his three-month contract ends.

During Lords question time, Labour peers Lord Myners and Lord Barnett claimed the OBR lacked independence.

The government maintained that its assessments are produced "with no ministerial involvement" and that the "terms of reference for the interim OBR describe its independence".

Lord Barnett demanded: "Was it the sheer incompetence of the government in not letting them have independence that led Sir Alan Budd to resign?"

Former Labour city minister Lord Myners added: "The OBR is based in the Treasury, it is staffed by people seconded from the Treasury, press inquiries are handled by the Treasury, Sir Alan Budd's appointment letter is signed off by Mr Dave Ramsden, the head of economic forecasting at the Treasury. Sir Alan reports to Mr Ramsden whose work he's meant to be reviewing."

But Treasury minister Lords Sassoon said that "independence" is "absolutely at the core of what the OBR is about".

Lord Eatwell, Labour's Treasury spokesman in the Lords, asked why the successor for Sir Alan has not been announced right away.

He said: "Would you give us the essence as to what has been the disagreement that led to this resignation? Does it not have to do substantially with the issue of independence."

In response, Lord Sassoon said that the search for a successor "will take full account of the need for continuity."

He said that Sir Alan had "always planned to leave in the summer" and that the OBR has "given a transparent probability distribution" which the Treasury has not done before.

Lord Sassoon said it's the OBR's responsibility "following each Budget or other fiscal event to report on whether the Chancellor's latest announcement still sets a course that has a 50 per cent or greater probability of meeting the mandate".

He added: "I'm sorry to pour cold water on a newspaper story but it has always been the case that Sir Alan planned to leave in the summer.

"He was appointed to provide forecasts for the emergency Budget and to advise on the establishment of a permanent OBR and this is exactly what he has been doing and will continue to do."

Tory peer Lord Ryder said Treasury forecasts in the past have proven not to be entirely reliable in forecasting growth.

In response, Lord Sasson said "the treasury forecasts have been as fallible as anyone else’s, which underlines why it is so important to have an independent office up and running to make the forecasts for us".