The text below is reproduced from the Executive Summary of the “Better Budgets: Making Tax Policy Better” report, produced by the Institute for Government, Chartered Institute of Taxation and Institute for Fiscal Studies.

Tax policy making is at the centre of political debate and dispute – but at the same time is highly technical. During conversations with people across the tax system, from officials and experts through to practitioners and representative groups, we have heard that the exceptional processes around tax policy making – in particular, secrecy, more limited scrutiny and challenge, and the power of the Treasury – have led to an ever-lengthening tax code, beset by a series of problems: confusion for taxpayers, poor implementation, political reversals and constrained options.

The context for tax policy making is also changing, with limited devolution of tax powers and Brexit absorbing policy makers’ time and attention, while creating new opportunities – but also risks and uncertainties. Successive chancellors have introduced changes to the tax policy making process, committing to more consultation, or creating new institutions, but these have not been strong enough to withstand the political dynamic of the Budget process.

In this report we set out 10 steps towards making tax policy better and giving us better Budgets. These steps build on progress to date and experience elsewhere. Although many of the recommendations we make are aimed at HM Treasury, HM Revenue & Customs (HMRC) and Treasury ministers, we are conscious that the responsibility for a vibrant and productive discussion of the tax system goes much wider, with tax professionals, economists, academics and the wider community all having an important role to play, alongside politicians and the media.

The end point is a quite simple vision: A Budget process that contains fewer measures, which are better thought out – and can be implemented efficiently by HMRC without imposing unreasonable burdens on taxpayers. A better public debate on the big tax choices – with politicians making informed decisions and the public understanding the kinds of long-term choices that must be faced. Greater stability in the areas of the tax system where taxpayers – individuals and business – need to make long-run decisions. A tax system that commands public support – and is robust enough to raise the money we need to finance the state we want.

Since we started this project, the Chancellor announced in the 2016 Autumn Statement his acceptance of a recommendation that our three organisations made in September 2016 – to revert to a single principal fiscal event per year. This move is an important enabler of the other changes we set out below, allowing more time for better consultation and scrutiny and reducing the strain that two big fiscal events a year puts on government and external tax policy resources. But the commitment needs to hold.

Step 1: Stick to the commitment to a single principal annual fiscal event and cut down Budget measure proliferation – Budgets have become engines for proliferation of measures, generating instability and confusion. The Chancellor has said that he will resist making change for change’s sake in his new Spring Statement. If he is to realise the benefits of the single fiscal event, he
needs to stick to that commitment. Below we set out the further steps needed.

Step 2: Establish clear guiding principles and priorities for tax policy – Chancellors should make an early statement in a new Parliament to spell out their priorities for, and approach to, the tax system (while retaining some flexibility to respond to events). This should deter them from falling into ad hoc approaches.

Step 3: Extend the road-map approach – The Corporate Tax Road Map, produced in 2010,2 was a useful innovation. It could be applied much more widely to set out the direction of travel and future reform for areas or themes of the tax system – and form the basis for better consultation and scrutiny.
Good road maps should follow a set of key principles to make them useful, which we outline in detail in this report.

Step 4: Start consultation at an earlier stage – Too many consultations begin when key decisions have already been made, shutting off potential better options to achieve the same goal. The Government should consistently stick to its commitments in The New Approach to Tax Policy Making. It should also start consultations by setting out and obtaining views on different options, or by putting out calls for evidence to allow it to gain the widest possible understanding of an issue.

Step 5: Develop more active approaches to consultation – The Government needs to ensure that responses come from a wide range of sources. It should develop and use mechanisms to seek out consultees proactively, ensuring that a wide view is taken of how tax changes affect all concerned, and give respondents feedback to raise the quality of future responses.

Step 6: Prepare the ground for future reform and engage the public – Departments other than the Treasury and HMRC, along with other countries, have used independent external reviews to open up the discussion of options and prepare the ground for reform. These also provide an opportunity for more active public engagement with the policy making process. There are many areas of the UK tax
system that need reform, and which could benefit from this approach.

Step 7: Address the perceived capability gap around tax policy making – The Treasury and HMRC need to address the perceived gaps in tax policy making capability that have arisen from a combination of Treasury churn and a reluctance among HMRC operational experts to work in the Treasury. That means supporting and building on initiatives aimed at allowing insiders to develop deeper tax expertise in the Treasury and policy expertise in HMRC. The Treasury and HMRC also need to manage parliamentary concerns about external secondees to enable them to tap into that source of external expertise. The increasing importance of digital delivery makes it even more important to keep the split of responsibilities for policy and implementation under review.

Step 8: Overhaul internal processes – The exceptional processes that mean there is insufficient challenge to tax and Budget policy making are a major reason for many of the examples of poor policy making. That needs to change – by making decisions more collectively, with the establishment of a
small Budget Cabinet Committee; and by introducing more powerful early expert challenge. The Treasury Permanent Secretary should be willing to exercise his ‘accounting officer’ function for Budget spending measures and spending-like tax reliefs, which should be subject to scrutiny by the National Audit Office (NAO). There should be independent challenge at an early stage to the Treasury/HMRC assessments of business impacts, as there is now for new regulation.

Step 9: Enhance Parliament’s (and the public’s) ability to scrutinise tax proposals – Parliament needs to do a better job at scrutinising Finance Bills and tax policy. More transparency from government, with better and clearer documentation, would help. So would introducing oral evidence sessions at the start of Finance Bill committee stages – and better liaison between the standing Treasury and House of Lords Economic Affairs Committees and the Finance Bill Committee. Finally, Parliament as a whole needs more standing expert support on tax.

Step 10: Institutionalise and enable evaluations of tax measures – The political (and technical) nature of much of tax policy can inhibit effective upfront scrutiny. That places more weight on the importance of effective evaluation, but at the moment this is poorly done. There needs to be effective and routine post-legislative review of whether measures are achieving their objectives at an acceptable cost, and Parliament should hold government to account for this. Data need to be more accessible to allow outside researchers to evaluate policy.

The consultation process for charities

We heard widespread acknowledgement that while the commitment to consultation is welcome, the sheer volume of changes being consulted on strains resources on both sides of the relationship. This is particularly the case given that consultations are often released in batches, so that consultees may be working on multiple responses at one time. The constraints within government mean that consultees often do not receive feedback on their inputs. In turn, that makes it hard for them to improve the quality of their engagement with government – and makes it harder for those that are charities to justify the time and resources devoted to responding to consultations.