Government ‘does not know enough about the value of tax reliefs’

THE GOVERNMENT does not know enough about the tax reliefs it provides, MPs have warned.

The House of Commons Public Accounts Committee suggests that too little is known by the Government about whether its reliefs work, provide value for money or how much they cost.

In a new report, the committee indicates that the 10 most expensive UK tax reliefs cost the public purse £117bn a year – equivalent to giving up around five per cent of GDP in foregone tax revenues.

But it says the Government’s own evaluation shows only one of the four reliefs costing more than £1bn a year has the intended effect on economic behaviour.

The committee also claims the Government has not made any assessment of whether the forecast cost of pension reliefs – £38bn in 2018/19 – encourages saving for retirement or reduces dependence on state retirement benefits, or whether it just enables those already saving comfortably to save more.

MPs further suggest that the Government does not know whether the £15bn cost of VAT relief on the construction of new dwellings will subsidise new luxury properties or affordable homes.

The Treasury must now “set out clearly” the range of UK tax reliefs with their intended objectives so that proper assessment can begin on whether these breaks are achieving what they are meant to, the committee concluded.

Labour’s Meg Hillier, the chairwoman of the committee, said: “Every Budget, we get tax breaks announced like baubles hung on a tree and they generate great headlines but the truth is the

Government has little clue about the value of an enormous cost to the public purse.”

A Government spokesman said: “The Government keeps all tax reliefs under review to ensure they strike the right balance between making tax administration as straightforward as possible with being effectively targeted.”