On 16 November, at an event organised by the Institute for Fiscal Studies and the Chartered Institute of Taxation, George Osborne’s former adviser Rupert Harrison, Gordon Brown’s former adviser Stewart Wood and the Institute for Government’s Jill Rutter debated the politics of tax change. Jill asks whether the Treasury should continue to be allowed to exempt itself from the normal disciplines of policy making.
- Absence of collective discussion – most government policies have to be cleared through Cabinet Committees: not the Budget. The first most Cabinet ministers know about what is in the Budget is on the morning the Chancellor delivers it, when the documents are printed and there is no chance to change it.
- Absence of Treasury scrutiny – many Budget measures would be laughed out of court by even the most junior Treasury official if they were put forward by a “spending” department. There is no case for applying a different standard just because the Chancellor is announcing them.
- Exemption from scrutiny by the Regulatory Policy Committee (RPC) – despite tax being a major burden on business. Departments wanting to regulate have to observe a one in / two out rule and submit their impact assessments to RPC scrutiny. Meanwhile the Chancellor’s own Office for Tax Simplification only looks at the back catalogue, not new measures.
- Absence of any sort of cash limit – as participants pointed out, it is hard to forecast take-up of tax reliefs. But the Treasury would not put up with the appalling record of forecasting cost from any other department – for instance the National Audit Office (NAO) pointing out a 500% increase in the cost of “entrepreneur’s relief” introduced in 2008/09. The sums involved are not peanuts – the cost in 2013/14 was £ 2.9 bn.
- The Treasury’s self-denying ordinance against exercising accounting officer responsibilities – The Treasury even warned the NAO off their patch when it started showing interest in expenditure like tax reliefs, under the general exemption that “all tax reliefs reflect policy decisions ...and are therefore outside the NAO’s remit”. It’s hard to see why a chancellor’s decision on £100m is less open to challenge than the provision of discounted shares to Royal Mail employees, where the Department for Business, Innovation and Skills (BIS) permanent secretary sought a direction.
- Lack of interest in “what works” – The Treasury was late to the game in being interested in evidence on other departments’ spending programmes. But as the NAO has pointed out, “we found some examples where HMRC and HM Treasury proactively monitored and evaluated tax reliefs, but in general the Departments do not test whether their aims for the reliefs are being achieved”.