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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