Nature of the Pre-Budget Report

74. In our Report on the 2006 Pre-Budget Report, we discussed the nature of Pre-Budget Reports. We emphasised the importance of the Pre-Budget Report retaining a focus on consultation on fiscal measures that may be included in the forthcoming Budget, and called for consultation on substantive tax measures under consideration for inclusion in the Budget to be brought more to the fore in future Pre-Budget Reports.[128] Our comments were based on the requirements set out in the Code for Fiscal Stability, which was given statutory force in 1998 and which states that a Pre-Budget Report

shall be consultative in nature, and shall include, so far as reasonably practicable, proposals for any significant changes in fiscal policy under consideration for introduction in the Budget. However, the Pre-Budget Report shall not be taken as an indication of all tax policy areas where the Government may choose to act.[129]

75. As was the case following both the 2005 and 2006 Pre-Budget Reports, some witnesses questioned whether the Pre-Budget Report had retained its consultative character. Commenting on the extent to which Treasury had consulted with business organisations in advance of announcing changes to capital gains tax, Mr Chote stated that:

I am afraid that [the abolition of taper relief] is probably another example where this is a Pre-Budget Report which is always supposed to be about consultation and laying out potential areas of direction but just ends up looking more like a mini-Budget.[130]

Professor David Heald of Sheffield University described Pre-Budget Reports as "not genuinely Pre-Budgets, in the draft as opposed to environmental sense of 'green', but the first of an annual two-budget process".[131]

76. We observed to the Chancellor of the Exchequer that the 2007 Pre-Budget Report outlined a number of tax decisions that appeared to be final in nature. The Chancellor of the Exchequer did not accept our suggestion that we had moved to a situation where we have "two Budgets a year", arguing:

No, we have one Budget which is normally in the spring of the year. The purpose of a Pre-Budget Report … partly it takes over from the Autumn Statement which we used to have every November which is a half way through the year reporting. We changed the system in 1997-98 when we wanted to have the opportunity to set out not just progress but also thought it would be an opportunity to float ideas. Some were more certain than others, as you can see from this Pre-Budget Report. I have made firm proposals in some areas, there are others which we are consulting on.[132]

The Chancellor of the Exchequer distinguished between the proposed changes announced to aviation taxation, on which the Government intends to consult, and the changes to capital gains tax, which the Government has been criticised for not consulting on. The Chancellor of the Exchequer justified the Government's different approaches to the two sets of reforms on the basis that the proposed changes to aviation taxation were "new in structure" and "essentially a new tax", and therefore "different from capital gains tax which is essentially a rate change and the concept of capital gains has been with us since 1965".[133] We re-state our conclusion that it is important that the Pre-Budget Report retains a focus on consultation on fiscal measures that may be included in the forthcoming Budget. We continue to support the principle set out in the Code for Fiscal Stability, that the Pre-Budget Report should be consultative in nature, and should include, so far as reasonably practicable, proposals for any significant changes in fiscal policy under consideration for introduction in the Budget.

Prior announcement of date of Pre-Budget Report

77. We have previously drawn attention to the advantages that would arise for the House of Commons from earlier notice of the date of the Pre-Budget Report. The House received 18 days' notice of the 2005 Pre-Budget Report and 20 days' notice of the 2006 Pre-Budget Report.[134] In our Reports on both the 2005 and 2006 Pre-Budget Reports, we recommended that the Treasury give at least four weeks' notice of the date of the Pre-Budget Report and that, in any case where this target was not met, the Treasury explain the reasons.[135]

78. The House of Commons was given very little notice of the date of the 2007 Pre-Budget Report. On 5 October 2007, the Treasury issued a press notice announcing that the Chancellor of the Exchequer would present the Pre-Budget Report and the outcome of the Comprehensive Spending Review to the House of Commons on Tuesday 9 October.[136] The House is ordinarily given advance notice of the date of the Pre-Budget Report by way of Written Ministerial Statement; such notice was not given this year. The Chancellor of the Exchequer had previously informed the House of Commons that he proposed "to present the Pre-Budget Report and the conclusions of the Comprehensive Spending Review in a single statement to the House in October".[137] We acknowledge that the circumstances surrounding the notice given to the House of this year's Pre-Budget Report were exceptional. We trust that both the lack of formal notice to the House and the extremely short period of notice will not be treated as a precedent for future years.

129   HM Treasury, The Code for Fiscal Stability, November 1998, para 16 Back

130   Q 76 Back

131   HC (2007-08) 55, Ev 39 Back

132   Q 268  Back

133   Q 269 Back

134   HC Deb, 17 November 2005, col 64WS; HC Deb, 16 November 2006, col 1WS Back

135   Treasury Committee, Second Report of Session 2005-06, The 2005 Pre-Budget Report, HC 739, para 3; HC (2006-07) 115, para 96 Back

136   "2007 Pre-Budget Report and Comprehensive Spending Review", HM Treasury press notice 101/07, 5 October 2007  Back

137   HC Deb, 25 July 2007, col 61WS Back