Obviously, the OBR is an important body, and the chair of the OBR is an important role in our economic policymaking institutions. On the nature of the recruitment, we are following exactly the normal process that was followed the previous time. There has only been one other time we have recruited a chair. The obvious difference here is that the initiation process for that happening was in less good circumstances, following the first resignation we have seen of a chair from the body. We are following that process. We are in the final stages of that process now. We are very alive to the important role of the TSC in an appointment process. The Chancellor said in a letter to this Committee that we intend for that to be in place before the autumn Budget.

As I said and as the Chancellor said to the Committee back in March, so quite some time ago, yes, the process is in its final stages and we intend it to be at its completion before the Budget.

It is not for me to pre-empt the Committee in choosing its sessions but, as I say, the process is in its final stages and we would hope to have an update for you. Then it is not for me to decide when the Committee does its hearings.

The Committee has an important role in this process. That was set out in the legislation. It has exercised that twice in the past. It absolutely has the right to exercise it in the case of this. All I would say is that the Act is equally clear that the OBR is operating fully within the Act as it stands now, with two members of the Office for Budget Responsibility. It showed that in the spring forecasts. Again, we will be nominating a highly competent individual for the post, and I would obviously hope that the Select Committee takes that into account, but that is without any prejudice to the Select Committee’s important role.

I agree with the first bit of what you said, which is that there are two highly competent individuals. The Act sets out the process for appointing a chair, which is exactly as you have set out and I have reinforced. The Act is also clear that the OBR is operating as it is now. It produced two forecasts exactly in line with that Act back in March, but our intention is to have a chair in place before the Budget.

To some degree, you have answered your question. We want to make sure we get the best possible candidate. As the Chancellor said to you on a previous occasion, these are unusual circumstances. We have never had a resignation of a chair before. That led to a period before the advert came out in February. Since then, we have been following the normal process and will nominate a candidate to be the chair in due course.

The best thing I can do is to say that, as I said before, we are in the final stages of the process, and we hope to update the Committee in due course because it has an important role to play.

The Select Committee inquiry is a good and important one because it is good to be clear about what the role of the OBR is, and it is good to review after what is a substantial period of time since the 2011 Act. When we are being clear about what its role is and what its role is not, you would step back and say that the key feature of our fiscal council is that its role is to remove optimism bias risks, particularly in the fiscal forecasts. That is the central task for the Office for Budget Responsibility. It does that in a unique way compared to any other country in the world by producing the fiscal forecast that underpins fiscal events. Nowhere else in the world does that. That is unusual, but it has big upsides such as, as I say, removing optimism bias, which the evidence suggests it has broadly managed to do, but it means that we probably need to be clearer than you would in some other countries that it is not about a policy role. The OBR does not have that policy role. That is important because you are trying to be really clear about the joint role at the same time as a Budget or fiscal event is happening. It is about providing the baseline for that decision making. The Government are always free to not accept that baseline if they wish to, but every Government have always chosen to do that, and that is important in terms of recognising that core task of removing optimism bias. There are secondary tasks such as informing public debate; those are important. The OBR has also fulfilled those roles, but the key thing is to be clear about what it is and is not trying to do. It is trying to take optimism bias out of the forecasting process; it is not trying to make policy decisions. We need to be clear to segment those roles.

No. If I step back, there should always be challenges. We are all—almost all, sorry—elected representatives. We believe in a democracy where decisions are made by individuals, and we have to protect that. That comes with all independent institutions. There is always a delegation of responsibilities, delegated usually by Parliament, as in the case of this Act. That does not mean that we should not keep making sure that we are living up to what has been delegated and what has not. There will always be some tensions in that. I am trying to step back and say, “What is the most important objective that we wish to have a fiscal council to achieve? It is to remove optimism bias”. If we know it is that, we will then make better decisions about how, for example, we consider reform proposals that I have heard discussed at this Committee.

That is too pessimistic. It is right that the OBR is powerful in the sense of having the ability to set out an independent forecast. We all agree about that. Then the question is how the Government respond to that. Our view is that the Government’s job is to accept that as the baseline for fiscal decision making, subject to politicians taking views about what the fiscal policy and the fiscal rules should be that then operate or overlay on top of those fiscal forecasts. There is then a different thing. If you accept that, that does not mean that you have to accept that as your destiny. There is a difference between making decisions on the basis of that forecast and what you are trying to achieve as a Government. We are taking steps to support a different growth path. There will be disagreements among this Committee about whether those are the right ones. Overall, if you look at some of the outturn data, particularly on growth in the shorter term, those have been better than the OBR has expected on some occasions.

It has different responsibilities; it has more in some cases and less in others.

It depends on what that means. I would just go back to where you started. What is the actual thing that is constraining Governments? It is the substance of fiscal policymaking in a more different world where we have inherited higher debt levels from the previous Government, and then on top of that we have seen those debt levels come at the same time as a big increase in global borrowing costs. Put those two things together and you see a 2% of GDP increase in debt interest payments. That is the single most important fact to understand about the fiscal circumstances we find ourselves in. That is why this Government have been setting out to bring down borrowing levels, which fell 1% last year. That is what is driving most of what you are talking about. There are then decisions about how your institutions interact with that. Again, you see that around the world. You see that with fiscal councils, but you also see it with monetary authorities. The underlying thing that is really driving what you are getting at in terms of constraints is the actual constraints of fiscal policy.

The way I think about it is to encourage people to start from what the OBR is doing. I have set out my view on what that is. That is consistent with the Act. It was generally a matter of cross-party consensus. It is not right to say that the OBR has more responsibilities than all fiscal councils around the world. It has a specifically unusual job, which is to provide the actual fiscal forecasts underpinning a fiscal event. Other bodies, the Dutch for example, produce the economic forecast that underpins a fiscal event; again, that is unusual in and of itself. Most fiscal councils assess the reasonableness of economic and fiscal forecasts that a Government provide. They are a check on what the Government are doing. As part of that, they may produce their own forecasts at a different time and a different place over the course of the year. Those bodies that are not producing the government fiscal forecast often tend to have wider roles that the Office for Budget Responsibility does not have, particularly over policy. Some of them get close to advising on policy. Some of them are certainly involved in looking at opposition and government party policies running up to an election or in a coalition period; for example, the Dutch do that as well. Those are bigger roles. I am encouraging us to think about and be clear on the overall objective we are trying to achieve. For example, I sometimes hear people say that the OBR is too powerful, and their answer is to say that they want to get the OBR involved in more things, such as a bigger role in policy. That is the mistake I am trying to nudge against. The reason we do not have the OBR more involved in policy in the UK is that it has this unusually large role when it comes to producing those fiscal forecasts. That involves a much greater involvement with Government Departments at the official level than you see elsewhere.

I am slightly reluctant to tell someone who was a more senior Treasury Minister than I was how the process works.

That is nonsense, as you are well aware. There is a reason why it says “right honourable” on your nameplate. At one level, it has not changed very much since what you experienced, if I am honest about that. There are some specific changes around how DEL budgeting works; you will be aware of the DEL review and some of the problems that emerged towards the end of the last Conservative Government. Then there are specific changes around the ability of the OBR to produce forecasts in a world where a Chancellor has chosen to ignore it. I will not rehearse all the arguments about that because the Committee has heard them lots of times before. Beyond that, on the economic forecast side, if you looked at the OBR’s record as a whole, it is pretty close to consensus forecasts over the course of those 15 years. It is maybe providing more detail than some other forecasters, but they are pretty consensual forecasts. There will be exceptions to that. The productivity forecast towards the end of the last Government was slightly more optimistic than you saw in consensus forecasts, but broadly you would say that it is pretty consensual. As I say, the unusual thing about our system is the fiscal forecasts. Those are provided well ahead of fiscal events. There is then a process in which the OBR has previously published the timelines. I might come back to that shortly in terms of how that information is updated but, broadly, think about it as a pre-measures process and then a “discussion of policy measures” process. In terms of my reflections, I worked in the Treasury before 2010, so I will offer you some reflections on things that maybe are worth thinking about, and why I am slightly emphasising the specificity of what the role of the OBR is and what that brings with it in terms of how we think about the policy side of things. Richard Hughes spelled this out when he was in front of you for this inquiry as well, saying, “We are not interested in being the arbiter of growth policy; we are meant to inform the policy debate and not be part of it”. I am basically endorsing that and saying that we should all live up to that as well and understand why that is important, given the structure we have chosen for our fiscal council. Obviously, other structures are available. I have heard some of them suggested by people speaking to this Committee. Things to think about are how, in practice, the Office for Budget Responsibility goes about its business. For good reason, over the course of the 15 years of the last Government, you saw an increase in the volume of transparency-producing timetables for when things were being done, for example, and setting those out in public. Those were done for good reason. As a side effect, they have probably increased what is already quite fevered speculation around Budgets. It was a good thing that the OBR chose not to produce that timetable around the spring forecast. It should be in the business of doing its core job, which is removing optimism bias for the forecasts and making sure that people can rely on those as a good basis for policymaking. I hope that the OBR is informing the public debate in important ways, not just with the main fiscal forecast but also with the fiscal sustainability report and other areas. You want to have as calm a basis for policymaking as you can.

I am definitely in favour of opposition parties and government parties having scrutiny of their pre-election plans. The OBR should not be the organisation doing that. Lots of other bodies can do that as well.

You name one very good example, John. Other organisations are available. Britain is, to some degree, better than most European countries in those terms. Obviously, they are too lightly funded; any philanthropists out there should be heavily funding economic think-tanks.

I do not agree that that is our lived experience. Based on the lived experience of the elections that I have been actively involved in, which is fewer than you, that is not the case. The issue is not that people pick and choose between different institutions. I take you back to what I said. What is the most important thing? If you want a stable institutional framework where you have an Office for Budget Responsibility whose core job is to produce the forecasts on which a Government will make decisions, you do not want it then overstepping into what would be taking views on the quality of policy and, in this case, a wide range of policy across a wide range of different parties. For example, you will then create a situation where the OBR is making much more detailed judgments than it does now about the actual quality of different policies. That is risky. Other people do that job and that is what politics and democracy are for, with wider institutions in a plural, liberal society and other people commenting on it. We do not want to set up one organisation as doing everything. You will also build tension into the institutional framework. For example, you do not want a situation where somebody forms a Government having been through an election campaign where they have called the OBR a bunch of liars all the way through it. The set-up you are proposing is walking in that direction, so that would not be a good step unless you want the OBR not to carry out its current job, in which case it is easier for it to do different things.

All institutions should be held accountable. You guys will hold the OBR to account, and so should the Government. It should be challenged. They are not elected individuals, so that is perfectly reasonable. All organisations fulfilling a mandate, in this case set by Parliament, should have public discussions about whether they are doing that job. We should not go straight to the conclusion. It is not because of the existence of the OBR that this Government have raised taxes in the recent past; it is because of the state of public services we have inherited, and it is because debt interest payments need to be paid and we need to put the public finances back on a stable footing. What I am trying to encourage is that those big-picture questions about what is right for Britain are for us to debate and decide; they are not for fiscal councils to decide.

Having read all the evidence you have heard from other people over the course of quite a long time now, my reflection is that too often you are getting proposals for change that do not start from a diagnosis of what the OBR is actually for and doing. That is what I am gently nudging at. There are lots of different fiscal council models that are available that other countries around the world, many of which have lower or higher borrowing costs than us, are able to exercise. That is perfectly feasible. That is a good subject for debate. It is a better debate if you start from what you want this body to achieve. In other countries, they often say, “We just want them to provide a check of the reasonableness of forecasts that are used”. As I say, we have chosen a different approach. Our approach probably does a better job of having certainty of removing optimism bias, but what comes with it is not then straying into giving the OBR other responsibilities, partly for democratic reasons but also to protect that core role.

I just do not agree with that characterisation, obviously.

You have just offered two characterisations of the process and I am rejecting those characterisations. That is the answer to your question. Nothing has gone wrong. We are following the normal process. Yes, we did not advertise the post until February. The Chancellor explained the reasons for that at a previous Committee hearing. We are following the normal process and it is in its final stages.

We have a good field of candidates. We will nominate somebody and that will come forward to the Select Committee to carry out its important role.

I would just gently nudge that there have been some things happening in the world over the course of the last few months. The Government take this role very seriously. We will be nominating a candidate and we have been following the process in the normal way. It is in its final stages.

No, I am not. I am saying that we are following the normal process that we follow. The Chancellor has written to you and said that we intend to have a chair in place for the Budget, and that is what we intend to do.

No. I said we are in its final stages, so that includes being significantly past shortlisting. It is the Chancellor’s job to nominate a candidate. She will do that in the normal way, and then this Committee will carry out its important role.

There are a number of different things within what you have just said. You do not need my word for it on the spending side, because the OBR itself has carried out its DEL review in the fairly recent past because of the very significant problems in terms of the information that was provided to it for the spring 2024 forecasts. The Government have accepted all those recommendations in full, which require us to provide much more information to the Office for Budget Responsibility about the level of spending pressures that exist in year, and to provide that on a quarterly basis to the OBR so that it can make an accurate assumption about what is happening on the DEL spending side. There is then a separate set of issues around what previous Governments have done in terms of longer-term spending plans. Then there is a separate set of issues that is really important to the longer-term fiscal outcomes, which is that decision making in a crisis in the UK has tended to lead to large ratchets in debt, and that has very lasting fiscal consequences. That is separate from the other issues that you are raising, but again, reflecting on the commentary you have heard over the course of your hearings on this, there was less focus on that. If I am honest, that is odd given the scale of what that has done to the public finances.

The Government never provide any assumptions for borrowing; the Government provide longer-term spending assumptions for DELs over time. Yes, if you look historically at some of the 2010 forecasts for DELs, those did include numbers that then turned out to be lower than the outturns when they came through. In some ways, that reflects the stage of the public spending cycle going through at that time. If you are in the business of significant cuts to departmental spending, and then you pencil in further cuts further out, I suppose it is not absolutely surprising that they were unable to deliver those or chose not to deliver those, given the consequences that then came through. We have not only given the OBR more ability to scrutinise DELs; as important if not more important is the fact that the fiscal rules are no longer on a never-never basis but are on a three-year basis. From five years, they have been brought forward to three years. That means that they are then biting within the timeline that we talk about for spending reviews where the Departments have actual budgets. It is not about assumptions. That provides a really big, important change. Also, if you step back, when we talk about headroom, we often talk in absolute pounds versus a fiscal rule. You should think about the quality of headroom as well. If the headroom is versus a fiscal rule that is biting in three years, we should have significantly more confidence in that headroom than we do when it is five years out. You have given one reason for that, which is that it is more likely to be based on assumptions rather than on firm policy, but there are lots of other reasons why longer-term forecasts will tend to be less accurate than shorter-term forecasts.

Across a number of independent think-tanks, I read things that say that sometimes. They make a mistake of thinking that all that matters is rates of change; levels matter. What matters is levels of public spending in each Department. What is different now versus the early 2010s? A big £50 billion increase in current expenditure for Departments rather than a decrease. That should feature in how you think about what is and is not plausible. If you are asking whether there are public spending pressures in Britain in the medium term, as we will probably come on to, then the answer is obviously yes, but the idea that you should treat future spending paths as irrelevant to the actual level of departmental spending that is happening right now is a bit odd.

The OBR already does a large amount of that. Going back to my theme that is hopefully coming across in this evidence, I am a bit nervous about you asking the OBR to suddenly start trying to fix every problem that you see in the undergrowth. In the end, what matters is actual fiscal policy and fiscal outturns. When it comes to that, what matters is things that are shorter term than the fiscal rules, but as I say, with how the fiscal rules are operating, it is a very material change that they are biting three years out within the timeline of spending reviews. That is about government decision making, not about you loading the OBR with more tasks. You have just heard from one of our colleagues about people not wanting to see bodies becoming too powerful. Leaving aside some of the language that is used around that, we all have a duty to consider the balance between democratic and other decision making.

The most important thing, if I am honest, is that all forecasters showed far too much optimism bias all the way through the 2010s. That is the big thing that has happened. There was far too much optimism bias across the board as people reconciled themselves to a world with lower growth, with that lower growth surprising again and again in how bad it was right the way through the 2010s, and then into the pandemic for different reasons. That is the main area. You can still say that government optimism bias was removed from that process. It was not politicians making those decisions. It was about a hard learning that Britain was on a different growth trajectory from the one that we all hoped it was on and the one that it was on in the 2000s.

If you look at last year’s outturns, the Bank of England was too pessimistic about the level of growth.

Yes, and the Bank of England was wrong. Growth came in stronger than that.

We should be discussing that. Your description of how the three-year rules are working and when the rolling will take place is absolutely right. For all of us, we should focus on all aspects of fiscal policy, not just on the fiscal rules. It might be a little bit unfair, but, if you look at the years before the 2024 election, we saw no reduction in borrowing as we emerged from the pandemic; it was stuck at 5% of borrowing. That was consistent with the fiscal rules, yes, but clearly unwise and clearly different from what we saw across most other advanced economies that got on with dealing with it. We were providing tax cuts at a time when we clearly could not afford them. You probably agree with that now in hindsight. It is clearly right that fiscal rules will not always lead to perfect fiscal policy. We should be held accountable for what is happening year to year, not just in terms of the fiscal rules or those who are providing the fiscal anchor. Fiscal policy more generally matters. Also, longer-term fiscal policy and long-term decision making matters. This Committee rightly holds sessions on the fiscal sustainability report, but, more generally, longer-term policymaking has big consequences for fiscal outcomes. Preparations for crises and how well prepared a country is for an economic shock, including what that means in terms of the policy levers that are available to let you deal with that shock without spending more money and putting more future pressure on the public finances than you need to, are all really important. You are right in terms of your characterisation of how British public policy debates tend to focus on a single-point estimate about one or two rules in X years’ time. You are right that we should focus on a broader range of metrics, but that does not mean that the individual metric is not important. It is important to have a fiscal anchor that people can know the Government will stick to. That is what this Government will do. We will not be changing the fiscal rules. That provides an important anchor, but you are right that our discussion of fiscal policy should go across the piece.

Let me answer your question, Dame Harriett. You received a letter from the Chief Secretary on Friday, and she is looking forward to coming to give evidence in lots of detail on defence spending once the DIP is published in the coming days. More generally, to your wider question, has Britain, like lots of other countries, faced challenges about the value for money of all aspects of defence spending? Yes, like in all Departments, that is right. There are some very famous examples. Ajax would be a very good one. It is not right to say that you have consistently seen upward pressure on defence spending. In the first six years of the last Conservative Government, there was a 22% real-terms cut in defence spending.

I know. That is not quite what you said.

As someone who has spent 20 years in this space, I am always for more public debate on all aspects of economic policy, and that includes longer-term fiscal risks and pressures. I am a bit more optimistic than some of the evidence you have heard. If you look at the level of attention that was paid to last July’s fiscal sustainability report, there was significant attention paid in the media but also in Parliament, and that is to be encouraged. You held a session on that yourselves. It is not always “the more, the merrier”, but a bit more is no bad thing.

They can anyway. I am quite a new Minister, but I have learned that that is definitely a question for the business managers rather than the junior Ministers in the Treasury. I am sure the inquiry will think about ways in which it wants to recommend extra attention to the longer-term reports. You want that debate to be in the round. Dame Harriett talked just now about the dangers of single focuses on one particular number. There is a version of that that applies in longer-term public finance reports. In previous lives, I have been involved at the margins in helping to produce those. You need to know exactly what you are looking at. I occasionally see people looking at one line of a projection of public debt levels and drawing very firm conclusions. The fiscal sustainability report’s central projections are telling you that, if tax is held totally constant as a share of GDP, and then some stylised assumptions for spending profiles are put in, some spending pressures exist. You need to know what you are looking at rather than interpreting it as a destiny or as a central estimate of what will actually happen. That is just a fact about how the process works. Also, if you want to be more optimistic, there is clear evidence that some long-term decisions informed by long-term fiscal impacts are being taken. Look at the decision we made back in the autumn on eVED. One of the big things that is being highlighted for years is the need to decide how you deal with the fiscal pressures that come from a collapse in fuel duty revenues. We are getting on with doing it. That is happening now; some people said it could not happen. Let me give you two other examples. Changes to salary sacrifice within pensions is directly in my area, as is inheritance tax and the treatment of pensions. On both of those, we are acting to stop an erosion of the tax base that would make a very big impact on the public finances in 15 years’ time. Those are responsible, long-term fiscal decisions that are being made within the current framework.

“Think-tank calls for longer reports” may be one of the less interesting recommendations made by think-tanks. I am all for longer reports. You should judge us on our actions as well as on our response—the response that we set out at the time of the Budget. We have set out that we will always respond within a year to the fiscal sustainability report. The length of that report is neither here nor there; what matters is the quality of the response to it and then the engagement with the issues. You should be holding us to account for the policymaking. That is why I encourage you to focus on the decisions we have made. You might then critique us on the decisions we have not made. We are showing that we will make long-term decisions that are important for the public finances not in the next three or five years, which is what most of the discussions in fiscal policy focus on, but that are important in the next 15.

Given where we started, on the actual job of the OBR, there are two important constraints to make sure its independence is protected, beyond the obvious one of the legislative basis. One is the ability to access the information from across Government that is required to provide those fiscal forecasts, which is unusual for us. The Government are under a legal duty to do that, and with the DEL review have strengthened the provision of information to the OBR to make sure that it can do that. The lock also means that it cannot be ignored when a big fiscal event turns up. Then if you look at fiscal councils more broadly, the way their independence can be challenged is on resourcing. There have been debates about that in some countries quite close to the UK over the course of the last 10 years. That is why, to provide you with reassurance on that, I would say two things. One is that the level of resourcing to the OBR has gone up very significantly indeed. The spending in 2011 was £1.7 million; it has risen to £6.4 million in 2026. We are talking about an organisation growing from 17 FTE to about 50 FTE. The evidence is pointing to the organisation having grown, not having shrunk. You can then debate whether it should itself be thinking about value for money, like all public organisations, but the budget has grown significantly. Secondly, we have put in place a certainty of that budget. It is always three years ahead, so the people running that organisation know that they have the budget right the way out to 2028-29. That provides the protection against things that would impinge on their independence.

The nature of our model is that you have an Office for Budget Responsibility that will draw on expertise across Departments. That is unavoidable. The only way not to be in that situation is not to have it producing the fiscal forecast that underpins the Budget, given the sheer range of inputs to an official forecast.

Absolutely, it is required to assess as reasonable all government costings.

Lots of contingency planning takes place in Government. It is the OBR’s job to produce independent forecasts to underpin fiscal events, not to be involved in contingency planning by Government. There have been occasions in the past when the OBR has been asked to produce updates outside of fiscal events to inform wider discussions. That can be a valid thing, but I would take us back to whether we are clear on what the OBR’s job is and is not. Its job is not to drive contingency planning for different scenarios for Government.

That is a highly political question. We should all be taking that seriously. Our responsibility is in making sure that we argue the case for the institutions that we believe underpin good policymaking and the long-term prosperity of the United Kingdom. It is relatively minor in the grand scale of things, but that includes an Office for Budget Responsibility where we are clear about what its role is. It is not for the Office for Budget Responsibility or others to stand in for the political debate. It is perfectly reasonable for someone to argue that they do not want to see an Office for Budget Responsibility, but then they will need other answers for how they avoid optimism bias in the fiscal forecasts. I have not seen a case made for an alternative approach.

It would not achieve the objective that you have just set out in its own terms. If you are arguing that publishing more details earlier than a Budget would lead to less speculation, that is an odd argument to run for anyone who has met the British debate.

The Chancellor partially agreed with you when she came and spoke to this Committee in January or February, in the sense that the process in the autumn was not what you would want. That is true in terms of the leaking of the EFO on the morning of the Budget, which is why we are recruiting a new chair in the first place, why the review that has taken place has taken place, and why the EFO in future will be published on gov.uk with tighter security. It is also true in terms of the Treasury, where we have put in place a process to make sure that we have a tighter control of information security about who needs to know what is and is not in a Budget. We have a new Budget market-sensitive security label, and IT system changes that facilitate that, to make sure that information cannot be shared more widely. I would agree with you if you are saying that there was too much discussion.

I am not sure I agree with that characterisation, but I take your general point, which is that there was more speculation than you would like to see. Some of that, as I say, leads to changes inside the Treasury on our control of information. Some of that is driven by wider things outside of the control of Government. We all believe in a free press and all the rest. In terms of the interactions between the Treasury and the OBR, the Act passed by Parliament gives the OBR flexibility over how it goes about its business. It probably is worth us all thinking about the balance there. In the end, the purpose of the OBR is to provide a fiscal forecast without optimism bias that provides a stable basis for fiscal policymaking. How the OBR goes about that does have some impact on that. I have talked about the timetable. Setting out the timetable so clearly does lead to speculation around particular dates. That is why the OBR has chosen not to publish that in the spring, and that probably is an improvement.

That is a clearer case. I just do not agree with that at all. We should be clear. Let me answer your question, John. There is a difference between a forecast, which is the basis for detailed fiscal policymaking, and the ability of politicians—we all believe in a political debate as the way in which we get to outcomes—to lay out the case that they believe in fiscal responsibility, but also in rescuing the NHS and driving down borrowing levels. That is what the Chancellor laid out in that speech. She was very clear about that on the day and she has been very clear about that since. We should be careful to distinguish between forecasting and politicians making arguments about what they think is the right future for the country. What I am trying to say is that it is on us to do a better job of that. You do not change the OBR to deliver better political debates. We should do our job.

That would have been very good news for me in my previous life. You would be providing journalists, think-tanks and the rest lots of content and they would spend the entire autumn talking about nothing else. It would achieve the opposite of what you are suggesting.

We are changing how we do things. That is exactly what the information security review was looking at. All its recommendations are being put into place with tighter security. I agree with what you have said, and the answer is that we are acting.

I would point to lots of foreign investors investing heavily in the UK.

They absolutely should have the autonomy, and they do.

I am not sure I am quite following the actual line of argument.

No. My honest view is that the Conservative Party let us pass the reserve power, exactly as we said it needed to be, to deliver exactly the objective that we said, and then attempted to redefine what had happened to save face about having let a Bill pass that included something that it said was the end of the world but in fact was totally sensible. That is the answer on the first bit. On the second bit, what is the truth? We should be clear to specify which bits of the pension market we are talking about. You are talking about, largely, the DC workplace pension market because the DB schemes are in a very different place. The open DB schemes that exist already do invest, one, more in the UK and, two, in a much wider range of asset classes, as you and I have discussed on a number of occasions both in Select Committees and in the House itself. We are talking about the DC market. We are seeing the evolution of a market that has grown very fast from a very low level under the last Government because of the excellent progress made on automatic enrolment. That market needs to move into a world where we are in a smaller number of larger schemes that are able to have the level of expertise required to invest in a wider range of assets. The truth is that that is the actual evolution that is going on. The actual barriers to institutions are building the capacity to invest successfully in a wider range of assets. It is not that there is something unique about British defined contribution schemes that means they should invest differently from every other pension system in the entire world, which invests in a wider range of assets. They just need to get on with building the capacity to do that. As we discussed at very great length during the passing of that Act, there were some collective action problems that got in the way of that happening. If I am honest, what you started with about whether there are UK assets to invest in is a complete red herring. There are, because they are being invested in by pension schemes from around the rest of the world.

I do not expect Government to need to use those powers because pension schemes themselves have recognised that investing in a wider range of assets, as we see in every pension system, including in the UK and abroad, is the right thing to be doing for the interests of their members. There is a huge amount of literature making that case. They are just asking how to do it and they are working through the process, as I say, of changing their institutions to be able to do that. They all wanted to do that anyway. The reserve power just solves one particular barrier to that, which is the collective action problem. The wider substantive barrier is about institutional change, and we are seeing that. For example, I spend my life talking to schemes about how they do not have the expertise currently to invest in venture capital, but over time they are looking to build that either collectively or individually. That is the bread and butter of what is actually going on in this area. That is what matters. That is an important change. The most important thing to say is that that is an important change that needs to happen in the interests of pension savers.

Let me say a number of things to your slightly fair question.

I said “slightly fair”, which is a fair characterisation.

You did not cross into the unfair category. The Labour manifesto sets out very clearly what we will do when it comes to the triple lock throughout this Parliament. That is what we are going to do and that is the right thing to do because it was in our manifesto. That is particularly important when you have around 1 million pensioners who are reliant on either the state pension or wider government support broadly. We have about 1 million pensioners in that space.

I did not get to work with her because she replaced me. I have worked with her in previous lives, but let me come on to answer your question directly. In how you think about that, you should distinguish between the mechanism of the triple lock and the policy outcome. The mechanism—I would probably choose the adjective slightly more carefully now—is clearly a messy mechanism in the sense of how the interactions work between the timing of the movements in different economic variables, prices, earnings and the rest. As the last Conservative and Lib Dem Government found, it is hard to accurately predict the exact year-to-year impacts of the triple lock. It is messy. That is distinct from the outcome. The overall outcome of the triple lock is a higher state pension relative to earnings. That is the best way to think about it. The policy objective is not this particular thing. It is, “Do you want to raise the level of the state pension relative to earnings?” The view of the last Conservative Government was yes and our view is also yes. We are undoing the impact of the Thatcher decoupling of—

Raising the basic level of the state pension has an impact on the vast majority of state pensioners because the state pension is a very large part of almost all of their incomes. That is particularly true for the poorest pensioners. You are right to highlight that the triple lock was introduced in the 2010s, at a time when pensioner poverty itself also went up slightly—not loads, but it went up slightly. You are right to say that we should learn lessons from that. There is a wide range of lessons from that. One of them is that, if we step back and look at the pension system as a whole, you would say that the biggest burning platform is on the private pensions side. That is where the biggest challenges are. Those are the biggest challenges in terms of average adequacy levels and what you are nudging me to talk about here, which is inequality and poverty measures, where the gaps are much wider. On the state pension, we have now moved to a flat rate where everybody more or less will get the same over time. That has also removed the gender gap almost entirely on the state pension side. On the private pension side, there are serious questions. Our own projections show that people retiring in 2050 will be on a lower private pension than people retiring today. That is the main focus of our reform agenda. That is what is going on with the Pension Schemes Act, which you have already mentioned, but it is also what the Pensions Commission is looking at, and it will report back early in 2027 for the next stage of reform to that system for exactly the reasons you are highlighting. Even if we are delivering okay outcomes for the majority of pensioners today, they are unequal in some ways. On the private pension side, there are questions about how adequate that will be for future pensioners tomorrow.

First, it is definitely right that we should think about the self-employed a lot more in this space. If you look at the interim report of the Pensions Commission, which came out quite recently, one of the facts that has not had enough attention is that, across the self-employed population overall, their pension saving has fallen from about half to less than one-fifth. That is less than one in five of the self-employed. That is not new. The interesting fact is that, if you just focus on those who are only self-employed and who do not have an employee job at the same time, the number falls to 4%. It is basically none of the self-employed who are only self-employed. That is a core focus for the Pensions Commission. I do not want to prejudge where its work is going to get to. I will take what you have just said as a submission to it and encourage it to read the transcript of this hearing because we do need to do a better job of being clear about what the mechanism is for helping the self-employed. The self-employed includes a lot of different kinds of people with different needs and different circumstances. What the right pension outcome is for a high-earning self-employed person in their 50s who is a lawyer is very different from someone who is on a delivery bike and is in their 20s. We absolutely do need to think that through, but I do not want to prejudge the work of the Pensions Commission.

I was enjoying that. I was waiting for the link to the Office for Budget Responsibility.

I will say some things with higher and lower levels of certainty. We know that inheritances are growing. Their role in society will grow very significantly. We know that because, one, we can see it in the outturn data—the wealth and assets survey and others give us that—and, two, we know that household wealth in the UK, one, is higher than in most other similar countries and, two, has grown very significantly relative to GDP over time. That will feed through into inheritances being a bigger part of British society in the coming decades than it was in the past. Some of that will come at the point of inheritance. Some of it will be passed down earlier. You can see that talked about a lot in the space of access to the housing ladder, the bank of mum and dad or the bank of grandma and grandad. That is having an effect. In my previous life, we produced studies showing that the correlation between your parents’ home ownership situation and your own has grown over time for all the obvious reasons. That is one illustration of how that has been taking place. The aggregate effect of inheritances per se, rather than just the wealth of parents, is probably a bit more nuanced. It is not as straightforward as inheritances pushing up wealth inequality in each generation straightforwardly. That is partly because there is a decent level of randomness. There is a lot of luck and other situations involved in that process. What you can say with confidence is that the role of inheritance is probably to increase wealth gaps. Even if inequality as measured by ratios and the rest does not go up, more wealth being passed down means that in the generation that receives the wealth you will probably see a widening of the distribution, i.e. the pounds and pence gaps between those with not much wealth and those with lots. You will see a stretching of that. One thing that I see is that lots of the public discussion in this area focuses on the impact on the housing market. That is important. I did say this before I was the Pensions Minister, but we are underestimating the effect on pensions and retirement. I will give you a simple way of thinking about that. People talk as if inheritances will get you on the housing ladder, but the average age of inheritance is the early 60s. It is not in your 30s and 40s. What we are underestimating is that, in a world where we have raised the state pension and we are worried about private pension incomes in the future, inheritances may be deciding not who is a homeowner or not—that is done by wealth transfers earlier in the life course—but who can retire early. It is worth us thinking very hard about how that interacts with our wider policymaking in both the private and state pension space.

You are now stretching my memory back slightly. I think the point I was making in that hearing is that one thing we have learned from the last four decades is that what matters for home ownership rates is the effective demand of different groups. In a world where interest rates come down, which means that house prices relative to income levels rise, the deposit barrier to first-time buyers goes up relative to other groups who do not have the deposit barrier, irrespective of the average affordability issue. If I am a buyer who does not need a mortgage with a large deposit or a cash buyer, you will see the effective demand being higher relative to first-time buyers. That is one of the things sitting behind this. No one talked about youth home ownership in British politics until about 2006-07, but it started falling in 1989. The point I was making there is that, given that we probably all would like to see higher home ownership rates among the younger generations, we should build a lot of houses. That is a good idea for a whole host of reasons. I am very much in favour of that. I hope I made that point at the Committee. If I did not, I should have done. One of the roles of the tax system can be to think about the relative position of those different groups. We have already moved quite significantly in the direction of what I was talking about in that hearing. You can see that in the stamp duty space, the council tax space and a number of other areas.

That is a very good question. We should discuss that a bit more. What is the truth? The truth is that there are not detailed fiscal forecasts from anybody in the market. I will be honest about it. You have lots of people doing economic forecasts of different time periods and with different levels of detail. When it comes to fiscal forecasts, there are a handful, but, if I am honest, they are very short term. If I am really being unfair, a lot of them are taking the OBR’s forecast and tweaking it. They are not going to say that, given the context of what they are doing. There is a big edge. What is unique about the UK is that the OBR is being informed by all that government information. In other institutions, you are seeing the institution doing an economic forecast that is not being done that differently from all the other market participants that you are referring to. They are trying to do a fiscal forecast, but they are doing that without the information that is available within Government. The Government itself, probably paying some attention to what has been said by that fiscal council, then produce their own fiscal forecast, which is informed by all the information within Government. That is how I would think about it. That collapses into saying that the OBR has a very significant edge versus external forecasters.

There probably is some inherent tension, not institutionally but in what we are trying to achieve. We want the OBR to produce a central forecast. That means taking into account the policy that has been announced. On the first sentence, I would not underestimate that the main advantage for the OBR is probably not in terms of the policy. It is lots of other things, such as what is happening within DWP, what is happening within different tax receipts, and forecasting with that information. That probably makes a bigger difference than the policy side. It depends on the nature of the fiscal event, obviously. Focusing specifically on your question on the supply impacts, you want them to aim for a central forecast. That does mean trying to think through the supply effects of material policies, where it really matters. I should distinguish that we are talking just about supply here. There is a wider question about the demand effects of the policy package as a whole, which other organisations are much more likely to do. This is specifically on the supply effects, i.e. the growth and productivity effects of changes. You want them to think about that, but you also want them to do that in a way that does not accidentally bring them into policy debates. That is where there is some tension. As I say, that goes back to what I am trying to encourage you to do, which is to think about the structure as a whole. As the Government, our job is to pursue policies that we think will affect growth.

As adults, we should just recognise that there are tensions in the objectives that we want. I do not agree with the point, by the way, about us not knowing what causes growth. We know that Britain’s low investment levels are a very large obstacle to growth. That is why we are raising public investment levels. That is why we should stay focused on raising private investment levels. We know that higher employment rates, which the UK currently has, are really important for that. We do know some of the things that are really material to growth. There are things within total factor productivity that, to be honest, are less well understood, but we know the important role of innovation and the diffusion of that innovation. There is too much fatalism in the British public policy debate about what will make a difference to growth. We do know lots of the things that would make a difference. Specifically on your question, there are challenges. Those are inherent within, as I say, the two things we are trying to weigh up. The OBR rightly will want to produce as central a forecast as it can because it knows that is the basis for policymaking and those policies have come out at the same time as the forecast, but it needs to do that without entering into policy debates. It wrestles with that reasonably well. The move to the 0.1% threshold for considering supply impacts is a sensible one in terms of avoiding lots of time being spent discussing small measures where the short-term growth effects are relatively small. Remember that we are talking about short-term effects. We have said to the OBR, “Feel free to set out the longer-term growth effects of policies”, but the time period that the forecast covers is not going to get into those. It is more on us to debate whether we think policies are good and bad for growth. People will disagree about those. The OBR should do its best where the literature is really relatively straightforward and clear about the growth effects of policies. There are challenges with that. Will there be disagreements about that around the edges? Yes, there will be. That is unavoidable. Using a threshold and the OBR taking very seriously its job, as set out in the legislation, not to get involved in the policy debate, as both the previous chair and the current chair have set out for you in this Committee, are really important things for us. I hear a lot of people saying, “The OBR is too powerful. Please can it do this other stuff as well?” That does not make any sense.

I get to decide what I was saying, and what I was saying was that the previous Government were totally irresponsible with the public finances in the years after the pandemic. They talked tough but then made decisions that were deeply damaging to the public finances, including—you asked me the question —running 5% deficits consistently year after year while other countries were reducing their deficits. That was unwise. Jeremy Hunt, the then Chancellor, said so himself.

We have not reversed those tax cuts. What we are dealing with is the mess that was left to us in terms of both public services that were collapsing and public finances that were unsustainable.

That is a ridiculous question. Our policy has been set out very clearly across a number of fiscal events.