Tories attack Brown over resource accounting

Chancellor Gordon Brown has been accused of using the move to resource accounting to indulge in ‘cooking the books’ by Tory ‘special envoy to the City of London’ Howard Flight.

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He said the previous cash accounting system was at least ‘extremely transparent’. He cited, among other ‘odd little tricks’, the Office of National Statistics’ sudden decision to move £2bn of expenditure by the Highways Agency from revenue to capital expenditure at a time when Brown was getting close to breaking his ‘golden rule’.

Flight – intervening in the Commons debates on the Budget – said he had referred the issue to the National Audit Office which ‘still does not have a full explanation’.

He said decisions on whether PFI and PPP projects are on or off balance sheet were ‘amazingly arbitrary’. He referred to the classification of Network Rail’s £21bn debt off the balance sheet as ‘completely ludicrous’ because ‘it is a re-nationalised rail service provider’, while the government had been ‘surprised’ to have to put the ‘rather bad’ London Underground PPP in the books.

Flight also attacked the retrospective taxation back to 1998 of the private equity sector – referring to a decision by the Revenue to regard the tax deductibility of partnership interest costs as an incorrect tax privilege.

‘A successful example of enterprise in this country is therefore under tax attack,’ he said.

Flight was supported by Sevenoaks Tory MP Michael Fallon, who called for the ONS to be moved out of the Treasury and established independently.

Fallon said MPs were bound to be suspicious that the office, which had been studying the issue for two years, suddenly announced the Highways conclusion just before a budget. He called upon the Treasury’s presentation of national accounts ‘to be signed properly by an independent auditor whose professional judgement is on the line’.

Also in the debate, Tunbridge Wells Tory Archie Norman said he regarded the prospect of a bill on deregulation with ‘a degree of scepticism’ following the Arculus report, estimating the cost to business of red tape at £34bn.

He said the drive to reduce red tape would not survive Brown’s expected removal from the Treasury after the general election.

Labour Treasury Select Committee Chairman John McFall called on the Treasury to publish a paper detailing the principles that would guide future decisions on whether a tax scheme is regarded as tax avoidance or not. He claimed this move ‘could preclude further recourse by individuals and companies to the European Court of Justice’.

Nottingham South Labour MP Alan Simpson criticised accused Brown of having misses ‘a real opportunity’ to impose a windfall tax which could have recovered £5bn to £6bn from the oil and gas industry’s enormous profits. He also urged the removal of the ceiling on National Insurance contributions.

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