Treasury and HMRC urged to improve joint working in tax policy shake-up

More pre-Budget consultation, the creation of a new Cabinet committee, and a tougher stance from Treasury perm secs feature on think tanks' wish list


By Jim Dunton

16 Jan 2017

Ministers could avoid embarrassing Budget u-turns such as the “pasty tax” by overhauling the process for making tax policy, three respected think tanks have said, as they called for better joint working between HMRC and the Treasury.

In a new joint report, the Institute for Government, the Institute for Fiscal Studies, and the Chartered Institute of Taxation argue that the nation’s current tax policymaking process in is not fit for purpose, and propose a 10-point plan to remedy the situation.

Among its recommendations, the plans calls for consultation on Budget policy proposals before final decisions have been made, rather than garnering feedback on ideas announced for the first time in a chancellor’s Budget speech.


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The organisations also propose the creation of a “small” Cabinet Budget committee, in a bid to introduce an element of collective decision-making to Budget announcements, and urge Treasury permanent secretaries to be more willing to exercise their “accounting officer” function.

“The prize of a better tax system is enormously valuable and a better policymaking process would make that prize more attainable" – Institute for Fiscal Studies director Paul Johnson

Additionally, the plan calls for better joint working between the Treasury and HM Revenue & Customs, to address “perceived gaps in tax policy making capability that have arisen from a combination of Treasury churn and a reluctance among HMRC operational experts to work in the Treasury”. 

"Multiple interviewees” told the think tanks that cultural differences, the length of working hours, and unfavourable pay differentials fuelled a reluctance on the part of HMRC staff to move to the Treasury.

The report also suggests that the Treasury and HMRC need to “manage parliamentary concerns” about their use of external secondees – some of whom come from global consulting giants – to allow them to keep tapping sources of external expertise.

Report co-author, and IfG programme director, Jill Rutter said too much about the way tax policy was currently made was either taken for granted or thought to be the “sole province” of the chancellor or the Treasury.

“In particular we need to overhaul the internal budget processes, to ensure there is more challenge from within and parliament needs to improve the way it scrutinises tax proposals before they are implemented – and their effectiveness once they are,” she said.

IFS director Paul Johnson said the "lack of any explicit tax strategy" meant policy was often made "on the hoof", making it "harder to engage the public in a much needed rational debate about tax".

He added: “The prize of a better tax system is enormously valuable and a better policymaking process would make that prize more attainable."

CIOT president Bill Dodwell meanwhile said the sheer volume of tax changes produced by the government made it difficult to consult properly on all measures brought forward.

But he said chancellor Philip Hammond‘s plans to introduce a single annual Budget from next year – scrapping the other big fiscal set-piece, Autumn Statement – would be a potential turning point.

“[At present] parliament and taxpayers struggle to keep up with all the changes,” he said.

“Review of the impact of measures is patchy at best. Moving to a single annual fiscal event provides a real opportunity to get off the treadmill of constant change – reducing the strain on the government’s tax policy resources and freeing up time for better consultation and scrutiny of those proposals that are put forward.”  

 

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