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April 18, 2012 12:08 am
George Osborne’s Budget comes under renewed fire on Wednesday, as a group of senior MPs criticised the chancellor on a range of policies, including uncertain estimates on the cost of abolishing the 50p tax rate, plans to strip child benefit from middle-income earners and the use of retrospective taxation.
The criticism from the Treasury select committee opens a new line of attack on the Budget, which has already been subject to several weeks of vituperative media coverage on issues including the “granny tax”, higher value added tax on hot pies, and a limit on tax relief for charitable donations.
After questioning Mr Osborne and senior officials before the Easter break, MPs have identified new targets for criticising the chancellor, including the fact that much of the Budget was leaked in advance. “Coalition government is not a justification for Budget leaks,” they said.
Their report on the 2012 Budget expresses alarm at Mr Osborne’s threat to retrospectively impose taxes on people attempting to dodge stamp duty on residential property; MPs fear this could create a dangerous new principle.
“The government should restrict its use of retrospective legislation to wholly exceptional circumstances, which should be narrow and clearly defined,” the committee said, calling on the Treasury to publish those circumstances “as soon as possible”.
The MPs also doubted Mr Osborne’s costings for scrapping the 50p rate of tax, which he estimated would cost the exchequer about £100m next year.
Mr Osborne cited the independent Office for Budget Responsibility’s assertion that this was a “reasonable and central estimate”, but the MPs point out that Robert Chote, the OBR head, also said it was based on a “heroic exercise to try to disentangle” forestalling and other behavioural changes.
The report concluded: “The cost and benefits of reducing the additional rate to 45p are both highly uncertain and could be significantly more or less than the cost included in the Budget.”
The MPs also dwelled on Mr Osborne’s attempts to limit the impact on middle-income earners in his plan to remove child benefit from households with a higher-rate taxpayer – a policy that many Tory MPs fear is a time-bomb that will detonate in January 2013.
Mr Osborne, under pressure from David Cameron, prime minister, raised the threshold for the withdrawal of benefit to £50,000, with a taper gradually removing all child benefit for anyone earning more than £60,000.
But the MPs point out that this does not deal with the policy’s bias against single-earner households relative to two-earner households, saying that 500,000 more people will have to fill in self-assessment forms, adding “further complexity”.
Beyond the Budget, the report suggests Mr Osborne should consider giving help to pensioners and savers at his autumn statement, pending a proposed Bank of England study into the redistributional impact of its quantitative easing programme.
The Treasury committee also announces an inquiry into the new “macroprudential tools” to be granted to the Financial Policy Committee of the Bank of England – controversial powers that could include restrictions on mortgage lending to control a housing boom.
The report also calls on the OBR to consider a wider range of risks – for example, an escalation of the eurozone crisis – when making future forecasts.
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