New clause 27 calls on the Government to lay a review before Parliament considering all the tax reliefs within this Act, their effect on taxation revenue and the effectiveness of systems to evaluate these reliefs and to ensure value for money. We know that there are real problems with how the Government monitor tax reliefs. Thanks to the outstanding work of the National Audit Office and its report from February this year, we can see how unwieldy the system has become over the past decade and how much this is costing the public purse. It shows that there are currently 362 tax reliefs, which support Government economic
and social objectives. This is a huge financial undertaking. The cost of tax reliefs for 2018-19 is estimated to be £155 billion.
The National Audit Office notes that this is not money that would simply be recouped in tax if these reliefs were abolished, but that is not the point that we are seeking to make. We on the Opposition Benches do not doubt that sometimes the outcomes from tax reliefs can be positive and that they can drive positive social and economic behaviour. The problem, as the NAO’s report makes plainly clear, is that we simply do not know enough about this, because the Government are failing to properly monitor and evaluate their effectiveness.
Of the 362 tax reliefs, only 111 have been costed by Her Majesty’s Revenue and Customs, and only 15 have had published evaluations since 2015. At the same time, on the Government’s watch, their cost has been rising since 2010. In normal times, such an enormous cost, without corresponding effective oversight, would be an area of real concern. As the Office for Budget Responsibility identified in July 2019, tax reliefs are considered to be a new fiscal risk to public finances, due to the Government’s not knowing their full cost and the lack of transparency built into the system. But of course we are not in normal times; we are living through an incredible economic crisis. The lack of effective monitoring and evaluation is hard to justify when our public services are under such enormous strain. The inattention shown by Ministers over the past decade must change and we need a much greater focus on ensuring value for money.
In Committee, we touched on one area where I ask the Minister to respond further today, namely the social investment tax relief, an area also pressed by my hon. Friend the Member for Ilford North (Wes Streeting) and my Front-Bench colleague my hon. Friend the Member for Liverpool, Walton (Dan Carden). What further consideration has the Minister given to extending this relief from April 2021 to April 2023? Will he update us on what further consideration the Treasury has given to this arising from discussions we held in Committee? This important aspect has been raised by many charities. I know that the Minister is sympathetic to the concerns they raise and I am sure they will be grateful for any further updates he might be able to provide in this area.
Our new clause paves the way for a greater focus on value for money, by establishing a more systematic and transparent way for the Government to evaluate the cost of tax reliefs and to empower Parliament to scrutinise this more effectively. The limiting scope for amendments to the Finance Bill set by the Government means that we have been able to opt only for a review of the tax reliefs contained in the Bill. Many changes to tax reliefs—for instance, on the entrepreneurs’ relief and the annual allowance—will potentially have a significant impact on tax revenues. In other areas, there are concerns about whether tax reliefs are being abused.
TaxWatch UK has highlighted particular concerns about the future of research and development tax credits, given the evidence of abuse in recent years. It is therefore right that there is greater transparency and that Parliament can properly scrutinise whether the measures proposed by Government are having their intended effect. The Minister attempted to address some of these concerns in Committee, saying that the Government kept all
these reliefs under review and that he has proposed a more systematic evaluation programme for tax reliefs. We would welcome any progress towards such a system. However, if the picture was so rosy, I doubt whether the National Audit Office would have painted such a concerning picture in its report. I also look forward to the Public Accounts Committee’s report on this issue to find out whether it agrees with his assessment or what further insight it might be able to offer.
None the less, this amendment attempts to get to a wider point, which is that Parliament currently has few proper and meaningful opportunities to scrutinise tax reliefs on an ongoing basis. The Minister will know of the 2017 joint report by the Institute for Fiscal Studies, the Institute for Government and the Chartered Institute of Taxation entitled “Better Budgets: Making tax policy better”. It states that the information publicly available to Parliament on the costs and benefits of tax expenditure is not sufficient for it to assess their value for money, pointing out:
“Although taxes constitute almost 40% of national income, Parliament has little standing support to help look at tax legislation, support general inquiries on tax issues or help with post-implementation reviews.”
The report had a clear recommendation:
“Increase support to Parliament on tax issues”.
That means going beyond the support currently available and the opportunities that exist, in Finance Bill Committees, through the Treasury Committee, through Public Accounts Committee and through other work in this House, and instead embedding a proper system so we can assess the value for money of past tax measures. That is hardly controversial. As the Resolution Foundation points out, the Governments of Canada, Australia and New Zealand produce annual tax expenditure statements, which can be accompanied by parliamentary debate.
We want to see improved scrutiny of whether money is being well spent, to ensure that the system is fair and helps those who need it most. When all the benefits and tax reliefs are taken into consideration, the Government provide more support to the richest fifth of non-retired households than to the poorest fifth, and that gap has grown since 2010. This is in part due to the system of tax reliefs that has flourished under this Government and previous Conservative Governments and is clearly not based on any genuine notion of fairness.
Today, as we grapple with the looming jobs crisis, the question of fairness is paramount. We need to create a recovery from coronavirus that benefits everyone in our society, from young to old and right across every region and nation. The Opposition do not doubt the scale of the challenge. Our public finances are enormously stretched, our public services have been pushed to the brink by the pandemic, and there is a risk of unemployment on a scale not seen since the 1980s. We have yet to hear anything about the economic support package that we need: a back-to-work Budget to help those at the sharp end of the looming jobs crisis—a Budget that creates jobs, supports people back into work and properly invests in our young people so that they have the opportunities they deserve at this challenging time.
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When our public finances are under such enormous pressure, we can only do our best to ensure that there is genuine value for money and that every penny is spent
fairly and wisely. A review of tax reliefs in the Bill is just the starting point. It is a step towards what we on the Opposition Benches want to see, which is a broad review of all tax reliefs. That will help us to know for sure who is benefiting from the hundreds of tax reliefs that exist, whether they are fair, whether they represent good value for money and whether they are having their intended effect. I hope that the Minister will respond to these points and give us some assurances that the Government will do a lot more in this area, so that as we start to emerge from this crisis we can have confidence that taxpayers’ money is being spent well.