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PAC calls on Government to account for tax giveaways

20 July 2020

The Government knows too little about the tax reliefs it provides: whether they work, or offer value for money, or even how much they actually cost, says the Public Accounts Committee in a report published today, Monday 20 July 2020.

The ten most expensive UK tax reliefs cost the public purse £117 billion a year - equivalent to giving up around 5% of GDP in foregone tax revenues.  But the Government's own, scant evaluation shows that only one of the four reliefs costing more than £1 billion a year has the intended effect on economic behaviour.

Among the most expensive, pension reliefs, was forecast to cost £38 billion in 2018-19 - but the Government has not made any assessment of whether that huge cost actually encourages saving for retirement or reduces dependence on state retirement benefits, or whether it just enables those already saving comfortably to save more. 

The £15 billion cost of VAT relief on the construction of new dwellings may subsidise new luxury properties, or affordable homes: the Government doesn't know.

When recent reforms to entrepreneur's tax relief were announced, it was revealed that nearly three quarters of the £2 billion a year cost benefits just 5,000 individuals.

The Committee is calling for the Treasury to set out clearly the range of UK tax reliefs, with their intended objectives, so proper assessment can begin on whether these breaks are achieving what they're meant to, for the people intended, and providing value for money in doing so. 

Chair's comments

Meg Hillier MP, Chair 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.

“It sometimes fails to predict with any accuracy what tax breaks will cost, and there is often too little interest in whether it delivers what it intended to.

“Tax breaks are not freebies - they cost the public purse hundreds of billions of pounds in lost income. The Government must know who they benefit and to what end. It's all, still taxpayer's money and Government must account for it.”

Further information

Image: PA