The Treasury Select Committee needs to talk about tax

Tax is not the sexiest of subjects. It usually receives little attention in parliament outside of the budget – though there are occasional high-profile exceptions, such as the recent debates about the loan charge (a form of disguised renumeration). But the sustainability of the UK tax system should be a cause of concern.

As we set out in Taxing Times, growing public spending pressures and downward pressure on revenues pose a stark choice to current and future governments: without raising taxes or borrowing more, the scale or scope (or both) of public services will need to shrink. Our flawed tax system makes it harder to address this choice and holds back the UK’s economic potential. It calls out for reform.

The Treasury Select Committee has been too quiet on tax

The Treasury Select Committee (TSC) has been noticeably quiet in the debate on tax reform. Just 11 of the committee’s 203 inquiries (or 5.4%) since the start of the 2010 parliament have been primarily on tax. Of these, virtually all have focused on specific taxes or issues of tax administration, rather than on the performance and fiscal sustainability of the current system.

Beyond inquiries, the TSC has occasionally sent letters on tax and raised tax issues in appointment and budget hearings, but not as frequently as could be expected for such an important subject. As one former senior Treasury official noted, “the origin of the Commons was to control the King’s collection of tax: you would have thought they’d take more interest.”

The Treasury Select Committee must prioritise tax – or risk it being crowded out by other issues

The TSC’s limited attention to the health of the tax system has been lamentable. Its high profile, cross-party composition, oversight of both the Treasury and HMRC, and ability to adopt a holistic view of the tax system all make it well placed to examine the tax system and make the case for reform. The committee chair also has the potential act as an influential non-government spokesperson for the economy – and could be key in raising the topic among parliamentarians and working with the government to create political space for reform. Yet the TSC has not taken the opportunity to do so.

This absence can in part be explained by the committee’s broad remit, extending well beyond tax to encompass all aspects of the economy as well as the work of the Treasury, HMRC and the Bank of England. The TSC already meets more frequently than any other Commons committee; it sat for four of every 10 sitting days during the 2017–19 session. But its broad remit risks crowding out tax – as has happened in recent years – unless it makes an active decision to make it a priority for the committee.

Mel Stride’s re-election offers an opportunity for the Treasury Select Committee to reassert itself

We do not yet know whether the new TSC will focus on tax. The subject was little discussed during the October 2019 contest to become chair of the committee (won by Mel Stride), much of which focused on issues such as the economic impact of Brexit. With Stride standing unopposed in the election last month, there was little opportunity for further discussion on the topic. However, he did express a welcome interest in reviewing certain aspects of taxation, such as business rates and tax reliefs, both when first elected and when reappointed. Building on this mandate – and his valuable previous experience as the financial secretary to the Treasury, the minister responsible for tax – the TSC should reassert itself in this important debate.

Tax reform combines high politics and deep technicality. Parliament is at the heart of this tension – charged with both the political task of authorising who the government taxes (and how much) and the technical task of legislating so that the complex tax system functions effectively. The TSC’s voice in the tax reform debate has been muted for too long: it’s time for it to talk about tax.