Summary
The Treasury Committee comments on plans outlined in the Budget 2011 ahead of the Second Reading of the Finance Bill and calls for a full review of the independent Budget forecast group.
The report 'Budget 2011’ (HC 897) looks at the way the Office for Budget Responsibility (OBR) functioned in preparation for the first Budget since it was permanently established and stresses the need to assess the appropriateness of its operating model.
Forecasts for this year’s Budget were submitted at least a fortnight before Budget day which fell on 23 March and failed to take last minute economic shocks and political decisions into consideration.
The Committee recommends that the OBR’s timetable should be revisited to provide more flexibility for late governmental developments.
In addition, the Committee looked at:
- the economy;
- public finances;
- the plan for growth; and
- taxation.
The Committee advises that a wide ranging review of the OBR including its powers, remit and relationship to Parliament is essential.
The Committee also calls for gradual reform of the tax regime and notes that the Government's decision to increase the supplementary rate of corporation tax on the oil and gas industry by 12 percentage points in the Budget - less than a year after promising to provide a stable tax regime in the sector - might weaken the Government's credibility in seeking to establish a stable tax regime.
The Committee was pleased with the further reduction in corporation tax announced in the Budget as this was a positive measure aimed at boosting growth.
With regard to Enterprise Zones it may have some effect in reviving particular areas, but it was noted that almost all the evidence received is unsure about the extent to which they will contribute to UK growth. It is clear that there is still much to be done on the details of this policy.
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