“For Christ’s sake, Gordon — he’s the f***ing prime minister. You’ve got to tell him what’s in the budget.” That plea, reputedly made by John Prescott the night before one of Gordon Brown’s budgets, is typical of the way Britain makes fiscal policy. Treasury officials and ministers disappear into the bowels of Whitehall for months, and the rest of the world — sometimes the rest of the government — learns of new proposals only on budget day. Treasury secrecy was at its most intense in the New Labour years, but it persists today. Often that makes for gimmicky policy and stifles debate.
It is welcome, therefore, that a report published today by the Institute for Fiscal Studies, Institute for Government and Chartered Institute of Taxation urges the Treasury to open up the budget process. The mystery in which fiscal policy is cloaked, the authors note, marks it out from any other area of government.
Most legislative proposals go through public consultation, cabinet committee discussion, challenge from another department and scrutiny in both houses of parliament, with implementation reviewed by the National Audit Office later. Budgets are subjected to none of that. Instead, the Treasury proceeds alone. Because budget day amounts to a “big reveal”, the chancellor feels compelled to pull a rabbit out of a red box, lest the public and the headline writers should be disappointed. Once those rabbits see the light of day, they rarely live for very long. In 2002, for instance, Gordon Brown introduced a new 0 per cent rate of corporation tax. He U-turned in 2005. In 2008 he scrapped a low income tax band in order to pay for a 2 per cent tax break across the board. The resultant political fiasco forced him to change his mind in an emergency budget.
George Osborne was scarcely less culpable. Most measures in the 2012 budget generated a row, earning it the nickname “omnishambles”. The political fallout, much of which could have been avoided through consultation earlier on, lasted for weeks. Bakers bemoaned the pasty tax, pensioners the granny tax and charities the restrictions on donations. Mr Osborne’s U-turn on benefit cuts last year, prompted by the resignation of the work and pensions secretary, highlighted again the perils of perfunctory consultation.
There has been some progress. Philip Hammond said in his autumn statement last year that it would be his last. The move to a single fiscal event will discourage the sort of superficial policy changes that often land governments in trouble. That healthy aversion to tinkering ought to be carried into policy making more generally, too, not least because less fiddling will make it easier for people to plan their personal finances. When ISAs swap in and out and rules on annuities and buy-to-let properties chop and change, savers do not know where to put their money.
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The institutes make some simple recommendations on how to address these problems. Engaging the rest of the government, the public and interested parties in debate about tax before the fact, as well as on budget day, would make for better laws. To do that, more transparency about the evidence considered by ministers will be needed. Bolstering parliamentary scrutiny would help, too. Budgetary policy will never be glamorous. It does touch people’s lives, though, perhaps more than that of any other department. Better that voters can see clearly what the Treasury is doing in their name.