In this year’s Red Book, several tables were amended by written answer only a couple of weeks after it was published. New Labour said that, as it was keeping to the previous government’s spending plans, there was no need for a spending analysis.
Yet there were changes to the plans and the reduction in the control total of the first year was carried forward into the second year, meaning for 1998/1999 it was breached. All the Red Book shows is the expenditure changes – which mean little without reference to previous spending plans.
The estimates for the working families tax credit raises issues concerning the government’s assumptions about the effect of the proposals, and whether credit should be treated as expenditure or negative income.
The government estimates the cost of the working families tax credit will be a net #1.4bn a year above the current cost of family credit. This implies the scheme would provide more generous benefits for those on low incomes rather than reducing total unemployment and benefit pay-outs, which the government sometimes implies is the objective.
Although the chancellor has asked the National Audit Office for its opinion on how the scheme should be treated, the amendment of the Red Book implies he has already decided to treat it and the current family credit as negative income. This reduces the percentage of tax as a share of GDP.
The Red Book is also coy about the full impact of phasing out advanced corporation tax, which will net the government in this parliament a cash benefit of #8bn. Business organisations tried to persuade the government for some transitional relief but none appears to be forthcoming unless the government can be persuaded during the passage of the finance bill.
In reality, the government has made forward-spending commitments and significant tax changes, which will set the framework of revenue and spending for the rest of the parliament. The chancellor remains, however, reticent about opening up the books in a way that will allow real scrutiny and debate.
Malcolm Bruce is MP for Gordon and the Treasury spokesman for the Liberal Democrats.
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