IT IS DIFFICULT to “discern any clear sense of direction in tax policy”, the Institute of Fiscal Studies said yesterday in a withering assessment of the Summer Budget.
Its roundup of the chancellor’s first Budget with a Conservative majority government has made headlines over benefits and tax credits cuts and their impact on low-earning families. But the think-tank’s director Paul Johnson, in his post-Budget briefing, also raised strong criticism of the chancellor’s overall tax strategy.
In what was a tax-raising Budget, Johnson warned that the predicted tax takes of a net increase of £6bn a year by 2020 was optimistic. HMRC has been pledged hundreds of millions of pounds extra to raise more revenues.
He cited the Office of Budget Responsibility’s figures, which flag up 14 of the tax raising measures at various levels of medium-to-high uncertainty in raising the expected revenues. As Johnson noted, tax cutting measures “are scored more certain in their effects”.
Tax changes were “numerous and bigger” than the cuts aimed at welfare, Johnson suggested.
But with the mix of cuts, from increasing the personal allowance and lowering the corporation tax rate juxtaposed with altering a number of reliefs, “it is rather hard to pin down a coherent narrative around the changes”, said Johnson.
It flags up changes to inheritance tax as adding “additional complexity” while Johnson also said the chancellor’s claim that tax system was skewed in favour of buy-to-let owners was a “plain wrong” line of argument.
“This was a big Budget in some respects. It was a deeply disappointing Budget for those of us who hoped the chancellor might take the chance to improve, simplify and reform our creaking tax system. This was not the Budget of a tax-reforming chancellor,” Johnson added.