THE TREASURY Select Committee (TSC) this morning slammed coalition budget policy as unclear, confused and generating uncertainty.
The MPs on the committee, led by Andrew Tyrie, used the report to criticise the government for turning the Autumn Statement into a second budget; for giving out unclear signals on plans for fuel duty; and for leaving parliamentarians too little time to read finance bills.
“The Autumn Statement is not, nor should it be, a second budget,” Tyrie said. “The case for two budgets is weak – an additional one can create uncertainty and carries an economic cost.”
Overall the MPs concluded that business activity was being stymied by the need to respond to two big policy announcements in the year, rather than just one.
This was especially damaging when highly important tax changes – such as scrapping the pencilled-in fuel duty rise – have been juggled around and shrouded in mystery, the MPs said.
“Recent government policy on fuel duty has failed to provide either the certainty or the stability that are the hallmarks of good tax policy. The chancellor must use the 2013 budget to set out a clearer strategy for fuel duty over at least the medium term.”
The TSC report also registered worries about the effectiveness of the Funding for Lending Scheme, saying that benefits may be flowing back into mortgages – but failing to reach small businesses that are suffocating for lack of credit.
And the committee took issue with another monetary policy – the government’s decision to transfer Bank of England profits on quantitative easing (QE) to the Exchequer, saying the opaque way it was carried out harmed the Bank’s rate-setters’ credibility and reputation.
“The announcement of the transfer was poorly co-ordinated,” Tyrie said. The TSC said the Treasury and the Bank should have made the announcement with the November rate and QE decision, instead of separately, which suggested the government was usurping the Bank and undertaking monetary policy – even though it was not.
“It is vital that the monetary policy committee fulfils its duty to demonstrate its independence – the way the transfer was announced could have had the opposite effect,” Tyrie said.