Does the Budget work?

Stability is the key issue

John Jepps

I would be horrified to have the majority of tax legislation introduced in instalments throughout the year. I firmly believe that all major decisions should continue to be made on an annual basis.

Although minor changes are introduced during the year, the current system seeks to ensure that most major decisions are made on Budget day and are therefore under the spotlight and subject to analysis and review by both the opposition parties and commentators.

By allowing legislation to be changed on an ad-hoc basis, it is likely that the government would resort to the old trick of sneaking things through when big stories are about to break in the news.

Either that or to take other measures designed to dumb down or ‘bury’ their own bad news.

There is nothing to be gained by dropping the annual budget and if the government in power is running the country effectively then there shouldn’t be any need to tinker with tax legislation every couple of months.

It would be ridiculous if employees and employers were to lose any further degree of certainty.

They couldn’t plan their lives from month to month, let alone year to year, not knowing what income tax, PAYE and bank interest they will have to pay.

There is absolutely no benefit in further eroding this certainty.

Businesses would, of course, be adversely affected.

For instance, if a company is trying to put together a deal that takes a significant amount of time, then the tax environment could change faster than the deal could be completed as each new tax regulation or law is introduced or amended.

This would place our businesses at a severe disadvantage compared with other jurisdictions and lead to a reduction in inward investment, or worse a withdrawal of investment and trade by external investors or trading groups.

Much of our success in inward investment derives from the historical stability of our culture, legislation and tax regime.

  • John Jepps is tax partner of Jackson Stephen accountants

Ritual sacrifices proper discussion
By John Whiting

All round the country, a small army of people are gearing up for a special day next Wednesday.

No, I’m not talking about those wishing to celebrate St Patrick’s day – I’m thinking of the Budget watchers, those fiscal twitchers who will be trying to spot all the rare birds that fly out of the chancellor’s Budget box.

Why do we do it? There’s an element of ‘because it’s there’.

More seriously, tax advisers simply have to watch very carefully, worry over the intricacies of the Inland Revenue and Customs press releases, burrow into the fine print of the Red Book (remember para 5.91?), because our clients want to know what it all means and whether they need to take any immediate actions.

But why do we have such a set piece as a main way of changing the tax system? To be fair, there are a lot of arguments in its favour.

The Budget (and its young sibling, the Pre-Budget Report) are in many ways the interim and final reports of UK plc. For the chancellor, Budget day has a lot of merits – not least the guaranteed day in the media sun and the start of the inexorable finance bill juggernaut.

And therein lies my real concern with the Budget day ritual. Packaging up as much as possible into the bumper fun bundle that we unwrap on the day often means that things are not exposed for proper discussion. Budget secrecy means that surprises get pulled out of the hat without consultation.

These days, once a provision hits the finance bill, it takes a problem approaching major Richter-scale proportions to effect a change.

So the Budget process can mean changes to our tax system just do not get the consultative engagement they should.

Actually, I don’t want to drop Budget day. It has a lot of merits. But please can we make sure it is part of a co-operative, consultative process of developing our tax law.

The taxpayer goose is much happier if it has a say in which feathers are plucked and how, rather than a man with a red box just grabbing a handful.

  • John Whiting is tax partner of PricewaterhouseCoopers.

Related reading