07 October 2019

The lack of scrutiny and debate around the Budget process is as worrying as it can be damaging – which is why the Institute for Fiscal Studies' Green Budget is an essential guide to what the government will be thinking, writes Dr Gemma Tetlow.

New legislation is usually preceded by a green paper – a consultation document drawn up by the government that allows those inside and outside Parliament to scrutinise the options proposed and provide feedback. The government can then take these comments on board and refine or amend the proposals, as necessary. But one major piece of legislation each year – the Finance Bill – is made without any such prior consultation.

The Finance Bill enacts proposals set out by the chancellor in the Budget. This law – which renews existing taxes, proposes new taxes, and maintains the administration of the tax system – is drawn up in secret. It is usually devised with neither public consultation nor consultation with other Cabinet colleagues. Other ministers are usually only let in on the Budget details a couple of hours before the public.

This approach causes a variety of problems. The ability of chancellors to change tax policy with little challenge has contributed to a proliferation of tax measures which can leave taxpayers confused and public money poorly spent; lack of scrutiny means past governments have too often faced problems when implementing proposals or have quickly back-tracked on announcements.

The Green Budget is a way to explain what the chancellor is really thinking

To fill the gap left by the lack of a Budget green paper and to promote better debate and scrutiny of fiscal policy, the Institute for Fiscal Studies has – for the past 37 years – published its own Green Budget. This report is published each year before the Budget. It aims to set out the issues that are likely to be on the chancellor’s mind as he puts together the Budget and provides detailed analysis of the policy options the chancellor might or should be considering. The Green Budget draws on the expertise and existing analysis from researchers at the IFS, Britain’s leading independent microeconomic research institute.

By making this analysis comprehensible to a non-specialist audience – providing it free of charge and publicising the findings – the IFS helps improve public understanding of these (often technical) issues and ensure Budget announcements receive a greater degree of scrutiny and challenge.

Budgets suffer from a lack of scrutiny ahead of their announcements

The Institute for Government has long argued that the unusual secrecy surrounding tax policy making leads to a range of problems. Successive chancellors have committed to more consultation and created new institutions – like the Office for Budget Responsibility and the Office for Tax Simplification – to try to address some of these problems. But strong political incentives mean there continues to be too little scrutiny of Budget announcements before they are made.

We are, therefore, delighted to be contributing a chapter to this year's Green Budget. Boris Johnson’s minority government faces gridlock in Parliament and Brexit continues to consume the time of both civil servants and ministers. An important question ahead of this year’s Budget, therefore, is not just what policies should be announced but whether, and how, any of those changes can be implemented in the current political climate. This is the focus of the IfG analysis in this year’s Green Budget.

This analysis – along with analysis from the IFS of the outlook for, and risks facing, the UK public finances, and from Citi of the macroeconomic outlook – will be presented at a public event on 8 October. The event will analyse the issues and challenges facing Chancellor Sajid Javid as he prepares for his first Budget, as well as those which the competing political parties should address in any 2019 general election campaign. These questions will, as a result, be opened up to the wider public debate and scrutiny they deserve.

 

How can the government make progress on domestic policy?