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Ahead of this month’s Budget, the Treasury Committee has published a report containing conclusions and recommendations from its inquiry into the Autumn Statement 2013.

Some of the recommendations contained in the report (including a full list of conclusions and recommendations) appear on pages 49 - 51 of the report.

On ring-fencing

• The Chancellor says that the ring-fencing of health, schools and overseas aid budgets reflects public preferences. Protection of health and education spending, but not overseas aid, appears to reflect public preferences. (Paragraph 46)
• The Government should do what it can to ensure sufficiently informed public debate on the trade-offs inherent in ring-fencing and the allocation of spending cuts. Such a debate is especially important in a period of transformative spending reductions. (Paragraph 47)

Chair's comments

“Around 43% of departmental expenditure limits are ring-fenced. As a consequence, public expenditure control - on the scale required to address the deficit - will be increasingly difficult.

Eventually ring-fencing will have to be revisited, however difficult the politics of this may be for all parties.

While ring-fencing reflects public priorities, those preferences are not equally strongly held for all ring-fenced areas. Support for the 33.5% cumulative real increase in aid over the course of this Parliament, for example, appears to be lower than for health and schools.”

On Help to Buy: Mortgage Guarantee

• The Committee has previously concluded that the Help to Buy: Mortgage Guarantee scheme could produce negative distorting effects on the housing market. Our judgement has not changed. (Paragraph 60)
• In addition to this, the Government’s Help to Buy: Mortgage Guarantee scheme may have further distorting effects on the UK housing market when withdrawn. The Treasury should examine the impact of an abrupt end to this scheme, and act in advance to mitigate market distortions before they arise. The Government should explain now what the exit strategy from Help to Buy: Mortgage Guarantee will be in order better to influence expectations. The Bank of England may need to adjust the timing of its regular annual review of the Help to Buy: Mortgage Guarantee scheme accordingly. (Paragraph 61)

Chair's comments

“The Committee remains concerned about the impact of the Government’s Help to Buy: Mortgage guarantee scheme.

An abrupt end to the scheme could distort the market, as could announcements which radically alter people’s expectations.

The sooner that we have clarity about the terms for exit, the better.”

On revenues from anti-avoidance measures

Every year estimates have to be made of the yield of anti-avoidance measures, in the face of great uncertainty about the outcomes. The OBR itself points out that there is a limit to what can be learned from previous policies in determining whether such costings are suitable. The Treasury Committee warned in 2012 that the proceeds of the UK-Swiss tax agreement might not meet expectations.

The Government has reduced its estimate of the expected yield of the UK-Swiss tax agreement by almost two thirds over the course of a year. Given the great uncertainty that surrounds the fiscal effects of tax avoidance measures, the reduction in the estimated yield of the UK-Swiss tax agreement should not be a great surprise. (Paragraph 74)

• The Government has now announced a series of further measures designed to close down avenues of avoidance, each vulnerable to similar uncertainties of their own. In the Government’s own words, though, these further measures “will bring in more than £6.8 billion of new revenue over the forecast period—more than any other fiscal event this Parliament”. Therefore this perennial problem has now assumed particular fiscal importance given the size of the revenue being forecast. The OBR should do all it can to report on whether yields were attained as originally costed. Where that is not possible, it should limit the extent to which the Government may account for such projected gains. (Paragraph 75)

Chair's comments

“Forecasts of additional revenue from many anti-avoidance measures are inherently extremely uncertain.

The Committee warned in its report on the Autumn Statement 2012 that the forecast revenues from the UK-Swiss agreement - at £5.3 billion - were subject to uncertainty and that the proceeds may not meet expectations. These concerns appear to have been justified.

Even after the event it is often very difficult to establish how much a particular measure has raised. The more transparency about the yield, and therefore each proposal’s effectiveness, the better.

The OBR should  look again at how the Government accounts for projected revenues, based on previous experience.

Even after the event it is often very difficult to establish how much a particular measure has raised. The more transparency about the yield, and therefore each proposal’s effectiveness, the better.

The OBR should  look again at how the Government accounts for projected  revenues, based on previous experience.

Even after the event it is often very difficult to establish how much a particular measure has raised. The more transparency about the yield, and therefore each proposal’s effectiveness, the better. “The OBR should  look again at how the Government accounts for projected revenues, based on previous experience.”