Parliament gains power to dismiss OBR chair

20 Jul 10
MPs have been given powers to sack the chair of the Office for Budget Responsibility, the chancellor has said.
By Lucy Phillips

20 July 2010

MPs will be able to approve the removal of the chair of the Office for Budget Responsibility, the chancellor has said.

George Osborne today wrote to the chair of the Treasury select committee saying the OBR chair should not be removed at the 'whim of the chancellor'.

'The [OBR] Bill will contain provisions to the effect that the chair may be removed by the chancellor only under exceptional circumstances and with the express agreement of the Treasury select committee,' Osborne said.

This represents a significant change of heart by the chancellor. Last week, Osborne had suggested to the committee that they should not be given powers to sack the OBR’s head because it would potentially undermine the independence of the position.

Treasury committee chair Andrew Tyrie said: 'I warmly welcome the chancellor's decision to think again after his initial caution, and to grant a double lock on dismissal of the chair of the OBR. We are taking further evidence on Thursday, and hope to report by autumn.'

Earlier today, interim OBR chair Sir Alan Budd had endorsed the position. Giving evidence to the committee this morning, Budd said ‘double lock’ powers should be given to MPs when it came to early dismissal. ‘It seems perfectly reasonable for this committee to conclude that the chair is not fit to retain their role,’ he said, adding that neither the chancellor nor the committee should have sole authority over the matter.

Recruitment for a replacement for Budd, whose three-month contract ends next month, is currently under way. The body, created by the new government, got off to a rocky start when its independence was called into question following the release of revised unemployment figures last month.

Budd told the committee he was ‘full of hope that excellent candidates will apply’, despite claiming that he ‘was not in my right mind when I took on this job’. He added: ‘It’s a challenging and interesting job and perhaps some of the experiences we have had won’t be repeated.’

He added that in its early days it was inevitable but undesirable that the credibility of the OBR would depend largely on its chair. However, he said, the longer the body existed, the less exposed individuals would be.

Budd also told MPs he hoped eventually the OBR would be judged to be as independent as the Bank of England’s Monetary Policy Committee, but said the MPC had the advantage of having a ‘very simple' task. ‘The remit of the OBR is somewhat wider and pinned to the impossible task of producing correct forecasts,’ he said.

Speaking about the responsibilities of the future OBR, Budd said it was important that the permanent body produced at least two fiscal forecasts each year, at the Budget and in the autumn, to assess the progress of the previous one. ‘Two is a very sensible number... I don’t want to leave the chancellor the choice of only having one,’ he said.

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