Source · Select Committees · Public Accounts Committee
Recommendation 2
2
HMRC and HM Treasury are insufficiently curious about the impact of some key tax reliefs...
Recommendation
HMRC and HM Treasury are insufficiently curious about the impact of some key tax reliefs on different groups. Data on who benefits from tax reliefs are crucial to understanding whether they are achieving their intended objectives and to informing decisions about which tax reliefs need amending. When he announced in the 2020 Budget that he was reforming entrepreneurs’ relief, the Chancellor stated that the relief was unfair, with nearly three quarters of the £2 billion a year cost benefiting just 5,000 individuals. However, HMRC does not collect and report data on who benefits from all major tax reliefs. It does not, for example, distinguish between subsidising new luxury properties or affordable homes that are built as a result of the £15 billion VAT relief on the construction of new dwellings, and subsequently does not know who benefits from the tax relief. The data HMRC publishes on who receives pensions reliefs is limited and we are concerned that some groups are not benefiting from tax relief on their pension when they should. For example, around 1.75 million low-paid and part-time workers earning less than the personal allowance of whom around three quarters are women, will not be getting tax relief on their pension contributions after being auto-enrolled into employer pensions. Recommendation: HMRC should assess the groups and sectors benefiting from all significant reliefs and publicly report the results during 2021. For pension reliefs, HMRC should publish data showing who is benefiting, split by: income; groups with protected characteristics such as gender, age, ethnicity; people working in the public and private sectors; and people in defined contribution and defined benefit schemes.
Government Response
Accepted
HM Government
Accepted
The Government agrees with the Committee’s recommendation. Or after the end of the pandemic, whichever is first. Contingency planning across government operates under a framework of subsidiarity, with designated lead government departments for specific risks and impacts. A number of departments, including HMT, BEIS and Cabinet Office have a role in monitoring emerging economic risks, and to ensure the public finances are resilient to those risks. The government will, at the appropriate time, undertake a usual post-response lessons learned process. This will also consider the government’s readiness and contingency planning policies and processes. The government already has systems in planning in place to consider the economic impacts of risks. The National Security Risk Assessment assesses all risks, including pandemics, against a set of seven impact criteria; 'economic impacts' is one of these criteria. The government has been building its capacity for monitoring and responding to economic shocks - at a local, national, and sectoral level - for some time. HM Treasury has procedures in place continually to monitor the UK economy, including identifying and preparing for emerging economic risks, as well as to ensure the public finances are resilient to those risks. BEIS regularly conducts desktop exercises on large company failures (circa two per annum) in order to build departmental capability in responding to economic shocks. HM Treasury also took part in Exercise Cygnus. Examples of recent large company failures that have been managed across several government departments include Thomas Cook (2019), Carillion (2018) and Monarch Airlines (2017). In addition to these experiences, departments have also been driven by lessons learned following the economic crash in 2008, and measures taken in the event of a withdrawal agreement with the EU was not reached in 2019. The scenario used for Exercise Cygnus was predominantly focussed on the effect of an influenza pandemic on public services. Due to the different nature of COVID-19, response actions were taken that were not part of the influenza pandemic planning, including a national level lock down. The existing monitoring systems and economic impact plans enabled the government to understand the scale and nature of the challenge of COVID-19 to the economy as a whole and to act quickly. HM Treasury has announced unprecedented policy packages to keep as many people as possible in their existing jobs, support viable businesses to stay afloat and protect the incomes of the most vulnerable – including the Coronavirus Job Retention Scheme (CJRS) and Business Interruption Loan Schemes (CBILS). Additionally, government is already reviewing the contingency planning approach. The Integrated Review (IR), amongst other objectives, is comprehensively assessing the UK’s strategic approach to improving UK resilience. This includes consideration of our economic resilience to a wide range of malicious and non-malicious risks, and reviewing our capabilities to ensure it can anticipate, mitigate, respond to and recover from the economic impacts of events. The IR will draw upon the best available data on the UK risk and capability landscape, whether internal or external to government, to inform its thinking and develop our ability to handle economic impacts in the future, irrespective of cause. 3: PAC conclusion: The Commission is concerned that lessons have not been learned ahead of a potential second spike of infections. 3: PAC recommendation: The Cabinet Office and the Treasury must be open and transparent about the planning and preparations across government for a possible second infection peak, particularly the lessons being applied from the first wave of infection. As part of these plans, we expect to see more detail on the specific issues highlighted below on procurement of essential medical supplies, support for individuals and businesses, and funding to local government. 3.1 The Government agrees with the Committee’s recommendation. 3.2 The government has strengthened and diversified supply chains of PPE – looking to innovative UK-based manufacturers as well as new suppliers abroad. PPE delivery statistics are published online on a weekly basis. In publishing data, the government aims to provide regular summaries for Ministers, policy makers and external stakeholders on PPE items distributed. In partnership with the e-commerce industry, the government has designed an online portal to help care providers who are under-represented in terms of access to wholesalers. 3.3 The business support measures in response to the pandemic include loan schemes, grant funding, the Future Fund and Coronavirus Jobs Retention Scheme. Teams in BEIS and across Whitehall continue to work with stakeholders to understand the issues businesses are facing as a result of the pandemic. This will continue to inform the government’s business support plans. 3.4 The government has introduced further measures