Budget 2014 - Treasury Contents

1  Introduction

Our inquiry

1. The Committee took evidence from nine panels of witnesses during the five meetings we held, as follows:

25 March: City economists and the Institute for Fiscal Studies

First panel: Paul Mortimer-Lee, Global Head of Market Economics, BNP Paribas; Michael Saunders, Head of West European Economics, Citi; Rob Wood, Chief UK Economist, Berenberg Bank.

Second panel: Paul Johnson, Directorand Gemma Tetlow, Programme Director, Institute for Fiscal Studies.

27 March: Office for Budget Responsibility

Robert Chote, Chairman, Graham Parker CBE, Member, and Professor Stephen Nickell CBE, Member, Budget Responsibility Committee.

1 April: Financial Conduct Authority; consumer and industry representatives

First panel: David Geale, Head of Savings, Investments and Distribution and Chris Woolard, Director of Policy, Risk and Research, Financial Conduct Authority.

Second panel: Dr Ros Altmann, pensions policy, investment banking, savings and retirement expert, and Jane Vass, Head of Public Policy, AgeUK.

Third panel: Chris Hannant, Director General, Association of Professional Financial Advisors, Robin Fieth, Chief Executive, Building Societies Association, and Joanne Segars, Chief Executive, National Association of Pension Funds.

3 April: HM Treasury

Rt Hon George Osborne MP, Chancellor of the Exchequer, Sir Nicholas Macpherson KCB, Permanent Secretary, and James Bowler, Director, Strategy, Planning and Budget.

8 April: Association of British Insurers; professional accounting and tax bodies

First panel: Otto Thoresen, Director General, Association of British Insurers.

Second panel: Andrew Courts, Member, ACCA Global Tax Forum, Frank Haskew, Head of Tax Faculty, Institute of Chartered Accountants in England and Wales, and Patrick Stevens, Tax Policy Director, Chartered Institute of Taxation.

2. We are very grateful to all our witnesses and to those who submitted written evidence. Their willingness to provide evidence within the short timescale available for this inquiry is particularly appreciated.

Compliance with principles of tax policy

3. We have continued our innovative practice, begun in 2011, of asking three professional accounting and tax bodies—the Association of Certified Chartered Accountants, the Institute of Chartered Accountants of England and Wales, and the Chartered Institute of Taxation—to provide the Committee with written evidence on the extent to which the provisions of the Budget, and the Finance Bill which will implement them, meet the criteria set out in our Report of 2011, Principles of Tax Policy.[1]The principles are: fairness; supporting growth and encouraging competition; certainty, including simplicity; stability; practicality; and coherence.

4. This year, in view of the importance of this work, we asked the three professional bodies to give oral evidence to us, in addition to their written submissions. We are very grateful to these bodies for their assistance in our work. We have drawn extensively on their evidence in Chapter 5 of this Report, in which we consider in detail the extent to which this year's Budget measures comply with our principles.

The Office for Budget Responsibility

5. The Office for Budget Responsibility (OBR) states in the Economic and Fiscal Outlook that accompanied the Budget that "we have come under no pressure from Ministers, advisers or officials to change any of our conclusions" and that "we have been provided with all the information and analysis that we requested".[2]The Chairman of the OBR repeated these assurances to us in oral evidence.[3]

6. The OBR was not, however, informed of the Government's plans to extend childcare support to all families eligible for Universal Credit until after the deadline for the submission of new policies to the OBR had passed. In a briefing following the Budget, the Chairman of the OBR, Robert Chote, said:

    Regrettably, our forecasts do not include the costs of the Government's announcement yesterday that it will extend childcare support to all families on Universal Credit, and not just those paying income tax. We were only notified of this announcement on Monday evening, well after the EFO had been sent to the printers and almost a week after the deadline for us to be notified of new policies.

    The Government claims that the cost of this measure will be around £200 million a year. It would have been much better for this costing to have been subjected to proper scrutiny and to be included in our forecasts, along with every other policy measure that affects the public finances. To say that the cost to the Exchequer will be offset later by some as-yet-unidentified changes to Universal Credit is no excuse. We will look at this measure, and any accompanying measures, very closely in the run-up to the Autumn Statement.[4]

7. It is regrettable that the Government did not supply details of its additional support for childcare to the OBR in time for it to verify the Government's claims about the costs of this policy. The OBR has said that it will look at this measure closely in the run up to the Autumn Statement. It is not acceptable, however, that the Government's figures should be left unverified for what may be more than eight months. We recommend that, when Budget announcements are not submitted before the OBR's deadline, the OBR should scrutinise major uncosted policies as soon as reasonably possible thereafter and publish its findings.

Leaks and advance briefing

8. This Committee deprecates both leaks and advance briefing of Budget announcements. In 2013, following the premature release of Budget information by the Evening Standard, we recommended that "there should be no Treasury pre-releasing of Budget information, even in secure conditions."[5] The Chancellor asked Sir Nicholas Macpherson, Permanent Secretary to the Treasury, to undertake a review of the practice of pre-releasing of Budget information under embargo on Budget day. Sir Nicholas recommended that the Treasury introduce "a ban on the pre-release of the core of the Budget (and Autumn Statement), that is: the economic and fiscal projections, the fiscal judgement and individual tax rates, reliefs and allowances."[6]

9. This year, we were pleased to note that the key Budget measures did not appear in the press in advance of the Chancellor's statement to the House of Commons. In particular, the pension reforms announced in the Budget were not leaked or pre-briefed. Otto Thoresen, Director General, Association of British Insurers, told us that the Budget announcements had come as "a genuine surprise to everybody".[7] We asked Sir Nicholas Macpherson, Permanent Secretary to the Treasury, how this level of secrecy had been achieved. He told us:

    There was an agreement last year about the way we were going to approach the Budget, especially about not pre-briefing the main elements of it, and everybody was extraordinarily well disciplined, which was really important in the context of the pension proposals that, as you know, were very market sensitive.[8]

10. We welcome the fact that the Government maintained the confidentiality of the Budget this year. This can only have helped the presentation of the Budget measures. This Budget was unusual, however, in that one of its most important components—the reform of pensions—was highly market sensitive: the rules against selectively disclosing market sensitive information appear to have constituted a powerful enough deterrent to advance briefing of those reforms. We will expect this year's good practice in maintaining confidentiality to be maintained in future Budgets, when such considerations do not necessarily apply.

1   Eighth Report of Session 2010-11, Principles of Tax Policy, HC 753 Back

2   Office for Budget Responsibility, Economic and Fiscal Outlook, Cm 8820, March 2014, Foreword, p 3 Back

3   Q98 Back

4   Office for Budget Responsibility, Economic and Fiscal Outlook Briefing, 19 March 2014 Back

5   Ninth Report of Session 2012-13, Budget 2013,HC 1063, para 205 Back

6   HM Treasury, Review into the pre-release of Budget information, July 2013, para 5.3 Back

7   Q454 Back

8   Q363 Back

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Prepared 12 May 2014