MPs have attacked Philip Hammond, the Chancellor, for bending fiscal rules to help the Government hit its borrowing target.
The Treasury Select Committee claimed that Mr Hammond moved the implementation of a 30-day window for paying Capital Gains Tax to 2020 in the Autumn Budget to create a one-off windfall to help the Government meet its fiscal target that year.
Delaying the boost to the Treasury’s coffers by bending the rules risks damaging the Government’s credibility and “flatters” tax receipts in that one year, the report claimed. The Chancellor responded by telling them that it would “create a smooth pathway and manage the overall fiscal picture”.
He also dismissed the £1.3bn boost as not “very big” and “purely a timing issue”. The windfall was set to bolster finances in 2019-20, the year initially set for the fiscal target, but will now buoy the Government’s tax receipts in 2020-21, the new year for the target.
In response to the committee’s findings, a Treasury spokesman defended the decision, saying that it will ensure taxpayers are “well-prepared for the change”. The spokesman added: “The 30-day payment window is expected to increase taxpayer compliance, but it is right to allow people time to adjust to the changes to Capital Gains Tax before reducing the amount of time they have to make a payment.”
The Chancellor has pledged to borrow no more than 2pc of national income by 2020-21 and borrowing is at its lowest in the fiscal year to date in a decade. Although the Office for Budget Responsibility expects much of the damage done to public finances to occur in the second half of the year, borrowing has undershot economists’ expectations. Economists forecast figures from the Office For National Statistics to show tomorrow that Government borrowing in December was at its lowest level in 16 years.