Financial Secretary: "a tax system that works for individuals and businesses alike is steady, measured and consultative"
Jane Ellison's remarks on tax policy making following a report by the Chartered Institute of Taxation, the Institute for Fiscal Studies and the Institute for Government.
Thank you for having me – it’s a pleasure to be here today to join in the discussions about this important report.
It’s been put together by some of the leading voices in our tax community.
And given that I share the same aim as the report – to make our tax policy better – it’s clearly something that deserves detailed consideration.
So that’s exactly what I’ve done.
And I’ve found that actually it’s not just the aim of the report I share, but many of the views it contains as well.
So I’ve picked out 4 of the key themes it raises which I think really go to the heart of what you need for sensible tax policy.
In short – you need stability, direction, professionalism, and teamwork.
Stability
I’ll take each of those in turn and start with something I think is absolutely fundamental – and that’s stability.
Because tax policy shouldn’t be about trying to grab headlines with sweeping reforms.
As you might imagine, I heard a lot of representations from various businesses, tax professionals and organisations in the run up to the Autumn Statement.
And people weren’t asking us to ring the changes…
Quite the opposite.
The most common ask of us was that we maintain a steady, predictable tax regime that people could plan around.
They wanted sensible, workmanlike adjustments that provide certainty – or indeed no change at all if that’s the wisest course.
And that’s the style this government wants to adopt.
We want to take a steady, measured approach – precisely what I hope you’ll have seen from us at the Autumn Statement.
In fact, the biggest change we made then was a reflection of that kind of approach – which was to abolish the Autumn Statement itself!
Single fiscal event
We listened to those of you who told us it was time to move away from the system we’ve had in this country for decades now…
One where we hold a Budget in the spring, and then effectively another one in the autumn – each one making a raft of new changes to the tax system.
In fact, it was an early recommendation from the project behind this report today that we did away with the Autumn Statement – and I want to thank CIOT, the IFS and the IfG for sharing their advice on this from an early stage.
It was advice we fully agreed with.
Holding two major fiscal events every single year as a matter of course is something which no other major economy does…
It makes life difficult for the businesses and individuals who need to adapt to all the changes…
And it can get in the way of effective consultation and the smooth implementation of new policies.
2017 will be the last year where we take this this approach – with a spring and autumn Budget.
From 2018, there will be just one major fiscal event a year, when the Budget is presented in the autumn.
In the spring, we will give a statement in response to the OBR’s forecast – in line with our legislative commitment to present two such forecasts to Parliament each year.
We may also highlight longer-term fiscal issues, or launch consultations.
And there would be the opportunity to make changes if there were a compelling reason to do so.
As we move into a period of inevitable uncertainty, it is appropriate to reserve this right – particularly as we enter negotiations to leave the EU, during which we may be forced to act.
But ultimately, having one major fiscal event each year means we can be much more strategic and considered in our approach.
We can raise issues we want to consider in the Spring Statement…
Then set out specific proposals at Budget…
Consult on them widely…
And the following year, we can publish draft legislation and introduce the Finance Bill – with most legislation enacted around the start of the new tax year.
That’s an approach that I know makes much more sense to most of the tax community – and I’m pleased that we’re now making that change happen.
Direction
So stability is without a doubt a real cornerstone of good tax policy.
But linked to that is the need to provide clear direction.
This report places a really strong emphasis on the value of telling people in advance when and how we are going to change tax policy in the future.
This way, they know what’s coming and have the confidence to make decisions on the back of that. And that’s an approach we strongly support.
Early in the last Parliament, for example, George Osborne outlined a corporate tax roadmap to provide businesses with greater certainty in the longer term.
And last year we took that further when we set out the business tax roadmap to 2020.
This covered a range of business taxes – including corporation tax, business rates and energy taxation.
As you’ll have seen at Autumn Statement, we’re sticking by it.
But there are further ways in which we can set the direction too.
To take an example, regardless of what you think about the recent changes we made on salary sacrifice, what I hope you will recognise is that it was helpful that we signalled our intentions in advance.
We said at the Budget in March that we saw this as an area of tax that we would need to address…
We considered how we could do so, consulted on the issue over the summer, and then laid out our intentions in the Autumn Statement – having taken the views we received into account.
A more recent example of this approach was how we signalled at the Autumn Statement our belief in the need to consider how we can ensure that taxation is fair between people with different ways of working – from employees to self-employed to incorporation.
By setting out that this is something we’ll be looking at, we are getting the debate started early…
Because taking views from across the tax profession now will put us into a much better position to analyse the issues.
So I’m in full agreement with the report on the enormous value of being clear and open about the direction of travel – both for the sake of those making plans on the basis of our policies, and for the sake of developing better policies in the first place.
Professionalism
Another area that the report rightly focuses on is making sure we have the expertise we need within government to run a highly professional service.
Let me take this opportunity to pay tribute to the efforts and professionalism of HMRC staff nationwide throughout both their work on the ground and in supporting ministers to deliver sound policy.
And it’s precisely that professionalism that we’re working to develop further, both in the Treasury and in HMRC.
For example, for the first time in the Treasury we’re offering full sponsorship for our staff to gain the professional tax qualifications that I know will be familiar to many of you here today…
Whether that’s to become a Chartered Tax Adviser, or to take the Association of Tax Technicians exams.
We see real value in boosting our technical capacity and I’m pleased to say that our first cohort of staff will begin this training next month.
Alongside that, we also have some great internal training – for instance with our Tax Policy School.
And we’ll keep exploring what more we can do to support the talented staff we have at both the Treasury and at HMRC.
Because we want to make sure we help them develop the skills and expertise to rise up the ranks and lead forward tax policy development in the future.
Teamwork
But it’s not just about building up the expertise we have in the Treasury – and in HMRC – to run a highly professional and skilled operation.
It’s about tapping into the expertise beyond government too.
Because, critically, we want a responsive tax system.
One that looks at the problems, listens to what people have to say, [even those who are always looking for a relief or exemption!], and makes sensible changes as a result.
And I think that’s another focus of the report that really matters.
This is a team effort and we can improve our tax system enormously by drawing on the knowledge people have across the tax community…
From practitioners to parliamentarians, academics, businesses and representative groups…
And I should add to that list the Office for Tax Simplification too.
Because this is a body which has already contributed a considerable amount to making our tax policies better.
They have made hundreds of recommendations to reduce the complexity of our tax system – and we in turn have implemented a lot of changes in response, such as simplifying employee benefits and expenses.
That change alone has saved employers an estimated £20 million per year in administrative costs.
And with just one fiscal event per year, there will no longer be multiple moments at which we ask businesses to make administrative changes or adapt to new policies…
Indeed, as I have heard directly from businesses in recent weeks and months, the value of ringing in the changes is often ‘trumped’ by the virtue of restraint.
But to return to the broader point, what I think we have to recognise is that, for taxation policy to really be well developed, it requires a genuinely collaborative group effort.
And I see it as the job of the government to enable that kind of team approach.
That means opening ideas up for debate…
Seeking views from across the spectrum…
Listening to concerns…
And welcoming scrutiny.
All of which help to build public confidence in our tax system.
That’s certainly what I’m working to ensure we are doing.
And I have no doubt that any tax policies we introduce following that approach will be all the better for it.
Implementation
So I’ve talked about some of the four most essential priorities for better policy making: providing stability, signalling your direction, enhancing your expertise and drawing more on the expertise of others.
But I want to say a quick word about the other side of the policy-making coin: implementation.
Because to have the most effective tax system we can, we need to make progress on both fronts.
And I think there’s a huge amount of potential to bring the tax system into line with what taxpayers now expect from other service providers: a modern digital experience.
And we’re investing a lot in making that change happen.
But more generally, alongside that, HMRC are ambitious about delivering excellence in customer service.
Both the government and HMRC know that it hasn’t always been good enough.
But that makes us all the more determined to set our sights high and step up our efforts to deliver a service that is improving all the time. Indeed, it’s important to recognise that it has in fact done so in recent months…
And I’m ambitious about increasing the transparency around HMRC’s performance in the future.
So in summary, this report captures some of the fundamentals that any government needs to get right for effective tax policy making.
And what really helps establish a tax system that works for individuals and businesses alike, is a steady, measured and consultative approach that gives people both the time and confidence to plan ahead.
The government has listened, and I can assure you that we will continue to listen.
Thank you very much.