Treasury committee condemns stream of leaks ahead of budget

? MPs say spinning 'corrosive to government'
? Warning shot fired at Office for Budget Responsibility

The Treasury has been condemned by an influential group of MPs for leaking important tax and benefit changes before the budget, which they described as "corrosive of good government".

MPs said a stream of leaks last month undermined commitments that parliament would be informed about government initiatives before the media.

The Treasury select committee said it was an important issue that had dogged recent budgets by the current and previous governments, and ministers needed to bring leaks from inside the Treasury under control.

Committee chairman Andrew Tyrie warned that the culture of "spinning and leaking" rendered budget day "otiose" and made "more important the following few days, when you found out how much it had unravelled". He added that the culture of spin should be firmly rejected by George Osborne's Treasury.

Several reports before the budget trailed plans to boost the number of apprentices, cuts in fuel duty and a freeze on air passenger duty.

MPs have grown increasingly angry at what they see as clear breaches of a pledge by the prime minister, David Cameron, to bring policy changes to parliament before telling the press.

Tyrie also fired a warning shot at the Office for Budget Responsibility (OBR), which was set up by Osborne to check on the government's fiscal plans and report to parliament on its findings. The committee found the OBR judged only policies decided by the Treasury two weeks before the budget, despite the likely prospect of negotiations inside the department and between ministries happening in the days before the final announcement on 23 March.

Tyrie criticised the OBR for failing to incorporate into its forecasts important measures decided closer to Budget day. "I think the Treasury were right, and the OBR were wrong. They need to show a high level of adaptability," he said.

The all-party committee repeated its call for a wholesale review of the operation of the OBR, introduced last year. "It's clear that they didn't want a full review," Tyrie said, "they wanted something along the lines of an operational review, done by the non-executives. I don't think that's adequate."

Osborne had previously agreed a limited review of the OBR after five years. The chancellor offered MPs the chance to take part in the process, but they demanded a wider review that could lead to a fundamental overhaul.

The report said the OBR served an important function for the public as well as MPs and the Treasury's policymakers. "In our earlier report we noted 'One of the ways in which we will judge whether the OBR is a success is whether there is greater public understanding of the purpose and limitations of the forecasting process, and realistic expectations of what it can deliver.' While forecasts are useful tools, it is important that policymakers, and the public, if possible, are aware of their limitations ... [and] that the OBR plays its part by setting out as fully as possible each year the considerable limitations of the forecasting process and product."

The committee also attacked Osborne's last-minute tax on North Sea oil, which it said was misguided. The demand for �2bn extra from North Sea oil revenues was considered by many MPs to be a repeat of the 1980s, when its oil was used to subsidise welfare payments, rather than infrastructure investments.

It said: "The government's decision to increase the supplementary rate of corporation tax on the oil and gas industry by 12 percentage points in the budget, less than a year after promising to provide a stable tax regime in the sector, might weaken the government's credibility in seeking to establish a stable tax regime."

Accountants PricewaterhouseCoopers said the committee's warnings should be heeded by the Treasury. "The committee's report recognises the potential damage that the chancellor's tax grab on North Sea oil producers will have on the government's credibility in promoting a stable fiscal regime, and to business confidence. Evidence was given that the changes could have a negative impact on investment, a point which the industry has made very loudly.

"The government thinks that future investment will not fall based upon its past experience of unannounced oil tax rises, but the commercial landscape remains challenging and we cannot be certain of the same outcome this time around."

Phillip Inman

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