Source · Select Committees · Public Accounts Committee
Recommendation 25
25
In March 2015, we concluded that there was inadequate assessment of the value for money...
Conclusion
In March 2015, we concluded that there was inadequate assessment of the value for money of tax reliefs.45 In 2017, HM Treasury began to make assessments of the value for money of tax reliefs and by 2019 had assessed the value for money of 63 tax reliefs.46 We asked HM Treasury how it assessed value for money. It explained that in considering a proposal for a tax relief it first tried to establish the ultimate objective and consider alternative ways of achieving that objective, such as through spending or regulation. It said it then looked at the relief’s cost, likely impact including on behaviour, possible levels of deadweight loss47 and the potential for fraud and abuse. It also explained it looked at how the relief would interact with the wider tax system, and then it made an overall assessment of the likely consequences of the new relief.48 HM Treasury’s value for money assessments of tax reliefs also often compare actual costs to the forecast cost of tax reliefs. HM Treasury’s assessments of the value for money of tax reliefs contain information which could help Parliamentary scrutiny of tax reliefs. However, HM Treasury does not publish its value for money assessments as it asserts these to be policy advice to ministers which do not represent the formal position of the department.49 44 Qq 28–29, 36 45 Committee of Public Accounts, The effective management of tax reliefs, Forty-ninth Report of Session 2014–15, March 2015 46 C&AG’s report, paras 2.13, 3.8 47 The amount of relief going to taxpayers’ whose behaviour is unchanged. 48 Q64 49 C&AG’s report, paras 19, 3.13, Figure 15 16 Management of tax reliefs 3 Responding to problems with tax reliefs
Government Response
Not Addressed
HM Government
Not Addressed
5: PAC conclusion: HMRC and HM Treasury do not publish sufficient information on the value for money of tax reliefs to enable Parliament to hold government to account. 5a: PAC recommendation: HMRC should ensure that the results of internal, as well as external, evaluations are published, and are easily accessible to Parliament and the public. 5.1 The Government agrees with the recommendation. Target implementation date: December 2021 5.2 The government recognises the importance of transparency in providing information to inform the understanding of tax reliefs. HMRC includes links to external evaluations and research reports about tax reliefs in the annual statistics publications. HMRC will continue to publish externally commissioned evaluations and to include relevant internal evaluation findings in consultation documents. 5.3 HMRC's internal analysis takes a wide range of forms from comprehensive impact assessments to analysis to feed into policy advice to Ministers on specific options, proposals and decisions, which is necessarily confidential. In 2021 HMRC will put in place a more structured programme of internal evaluation work including plans to start publishing this analysis from 2021, subject to Ministerial approval. It will however remain the case that unpublished information included in policy advice for Ministers will be subject to the normal confidentiality arrangements for such advice. 5b: PAC recommendation: HM Treasury should in 2021, prepare its first annual report setting out the results of its value for money assessments of tax reliefs 5.4 The Government disagrees with the recommendation. 5.5 The current value for money assessments made by HM Treasury are part of the policy making process and part of advice to Ministers, which is necessarily confidential. 5.6 The government continues to increase the amount of information publicly available on costs of tax reliefs. For instance, HMRC is providing more information on costs. In order to accelerate provision of additional material on costs of reliefs, HMRC has prioritised analytical resource to undertake a project to publicly provide more information on the costs for reliefs where none are currently published. 5.7 The Government commits to consider the recommendation made by the NAO to “develop a robust methodology for assessing the value for money of different types of tax expenditures” and what indicators could be used to increase understanding around the value of tax reliefs.