Howe report: Tories promise to give early warning of big tax changes

Howe report: Tories promise to give early warning of big tax changes

A Conservative government would end the "rabbits from the hat" practices of Gordon Brown by ensuring that major tax changes are proposed at least four months before the annual budget, the party will announce today.

A report on tax simplification by the former chancellor Lord Howe will say that complex tax changes should be floated no later than the autumn pre-budget report. The proposal is designed to avoid a repeat of the fiasco of the abolition of the 10p starting rate of tax, signalled in Brown's final budget as chancellor last year.

Brown briefly mentioned the move in his budget statement, which ended with a flourish when he announced a cut in the basic rate of tax from 22p to 20p. The Tories later condemned the budget as a "tax con" after realising that the cut would be funded by abolishing the 10p rate.

The Treasury select committee also criticised Brown last week, when it raised doubts about "the perceived benefit of seeming to pull rabbits from the hat".

The Howe report will call for "a strong new convention that any changes to tax law with technical content should be proposed no later than the pre-budget report before the finance bill in which they are to be included. Such a convention would have avoided many of the problems we have seen over the last year, with badly thought-through proposals produced with little consultation and last-minute legislation rushed through parliament without sufficient scrutiny."

The shadow chancellor,.....continued below

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George Osborne, will announce today that he accepts the Howe proposals when he attends the launch of the report in the City of London. He will also back a scheme to simplify the tax system and allow greater parliamentary oversight of tax legislation, two other key recommendations designed to ensure an end to what the Tories have dubbed "stealth taxes".

The report calls for an "Office of Tax Simplification" to examine the existing tax code and make proposals to simplify it. The OTS would operate in a similar way to the National Audit Office, reporting to a new joint parliamentary select committee on taxation and overseen by a steering committee appointed by the chancellor.

As well as staff from Revenue & Customs and academia, the OTS should also include individuals from the tax professions to provide expertise and a fresh perspective. "The OTS would become an authoritative and independent voice on tax law, creating a powerful institutional pressure for simplification of the tax system."

Osborne said: "Ten years of Gordon Brown's stealth taxes have destroyed people's trust in the system and given us the most complicated tax regime in the world. The Conservative government is going to overhaul the way tax laws are made, so they are simpler and more transparent.

"With these changes, suggested by the former chancellor Geoffrey Howe, there will be no more stealth taxes. Future governments will no longer be able to bury the bad news in the small print."

Osborne invited Howe, who served as Margaret Thatcher's first chancellor, to chair the tax group for two reasons: to signal to rightwing Tories there could be no quick fixes on tax - Howe famously increased taxes in his 1981 budget - and to signal to a wider audience a Tory government would adopt a cautious approach.