By Daniel Hunter
The Treasury Committee has today (Tuesday) published a report containing a number of conclusions and recommendations for action following its inquiry into the Government’s Autumn Statement.
The report also announces the Committee’s intention to question the future Governor of the Bank of England, Dr Mark Carney, on possible alternatives to the inflation targeting that currently underpins the work of the Monetary Policy Committee of the Bank.
The Committee would welcome written evidence on this specific point in advance of its evidence session with Dr Carney on Thursday 7 February.
Conclusions and recommendations contained within the report and qoutes from the Chairman
On the primacy of the Budget
- The Treasury should re-establish the annual Budget as the main focus of fiscal and economic policy making.
- We reiterate our recommendation that Treasury and business managers ensure that the House has a longer period than in 2012 between the publication of the Finance Bill and its Second Reading and, particularly, between Second Reading and Committee of the Whole House. (para 6)
- The Autumn Statement is not, nor should it be, a second Budget. In recent years it has come to read like one.
- The case for two Budgets is weak. An additional one can create uncertainty and carries an economic cost. Only in an emergency would it be likely to carry long-term benefit.
- The primacy of the Budget as the main focus of fiscal and economic policy making should be re-established.
"Adequate Parliamentary time must be given to allow proper scrutiny of the Finance Bill. The time provided in 2012 fell well short of what was required."
On the ringfencing of departmental budgets
- Departments face considerable challenges as a result of the cuts already announced in the Spending Review 2010. About half of general government expenditure is to be protected from these new cuts. The complete protection of ring-fenced departmental budgets will be difficult for the Government to sustain while other departments are substantially affected. In some cases such protection may be difficult to justify.
"Any decision to exempt specific departments from spending cuts must be clearly and publicly justified.
"The Treasury Committee made clear its concerns about ringfencing at the time of the last Spending Review.
"We will look closely at this issue again when we come to scrutinise the next Spending Review, due sometime this year."
On Monetary Policy
- As part of our hearing on 7 February 2013 with the new Governor of the Bank of England, we will examine whether Dr Carney considers that the current monetary policy of the Bank of England remains the most appropriate. We would welcome written evidence on this from others prior to that hearing.
"The Treasury Committee will question Dr Carney on whether he thinks that there may be a better monetary policy for the UK than the current one."
On the APF transfer
- The Treasury and to some extent the Bank were at fault for failing to coordinate the announcement of the APF transfer with that of the November MPC press release, the date of which was known well in advance. This failure created difficulties for the reputation of the MPC. This should not be repeated.
"The announcement of the transfer was poorly coordinated. The Treasury and to some extent the Bank of England were at fault.
"It is vital that the MPC fulfils its duty to demonstrate its independence. The way the transfer was announced could have had the opposite effect.
"The Treasury and the Bank must both ensure that there is no repetition."
On the Funding for Lending Scheme
- It is early days for the Funding for Lending Scheme, and it is too soon to consider its impact on business lending. We are concerned, however, by reports that there may be a bias in the effect of the Scheme that favours lending for mortgages rather than lending to SMEs. The Bank of England and the Treasury should assess whether this is the case and report their findings and any proposed action to the Treasury Committee.
"The Funding for Lending Scheme was designed to boost the provision of credit to the economy.
"The Committee is concerned by reports that while benefits may flow to mortgage lending, they may not reach SMEs as intended."
On tax receipts
- The sums expected from the sale of the 4G spectrum and Swiss tax repatriation represent the majority of the additional receipts the Treasury intends to offset against the tax reductions and investment announced in the Autumn Statement for 2012—13 and 2013—14. Both are subject to uncertainty.
"The Government’s projected tax receipts for the sale of the 4G spectrum and for Swiss tax repatriation are far from certain."
On fuel duty
- Recent Government policy on fuel duty has failed to provide either the certainty or the stability that are the hallmarks of good tax policy. The Chancellor must use the 2013 Budget to set out a clearer strategy for fuel duty over at least the medium term.
"A clearer strategy is much needed. Once we have it, the Government must stick to it."
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