As we have just heard today the fifth and final Autumn Statement of the current Parliament I thought it would be a good time to review the performance in this Parliament of George Osborne, the Chancellor of the Exchequer.
When reviewing his performance the biggest issue that has had to be dealt with has been the Deficit Reduction Plan. In the Statement delivered today it was forecast that the deficit will be halved by the end of this Parliament. This compares to the original forecast issued at the start of this Parliament that the deficit would be eliminated by the end of the Parliament.
By a bizarre coincidence the deficit is now forecast to be the same size as the Labour Party originally proposed. This begs the question of what would have happened if the cuts in Government spending had been smaller and less deep, as proposed by the Labour Party. Surely it would mean that the deficit would be significantly larger than forecast.
Now I am fully aware of the argument that the additional money could have been used by the Government to stimulate the economy and therefore accelerate the path back to growth, but as our main export market, the Eurozone, has been in recession for almost the entire period of this Parliament it is difficult not to believe that the only result of such a stimulus would have been a larger deficit but no improvement in the overall economy.
Unfortunately the whole debate has become politicised and it will probably have to be left to history to make the final judgement.
However, putting aside the whole question of Deficit Reduction, I wanted to review the performance of the Chancellor from the viewpoint of a tax professional.
When he was still in the post of Shadow Chancellor I had high hopes that George Osborne would become one of the better Chancellors of recent times. These expectations were severely tested after the first two years of his Chancellorship – remember the Omnishambles of his 2012 budget and the fiasco of the pasty tax and granny tax?
Since then, however, a number of technical and little publicised reforms to the tax system have led to a better taxation system. It is though the main announcements in the 2014 Budget and this Autumn Statement which will define his place in history.
The seismic change in the treatment of pensions which was announced in the 2014 Budget and which will take effect in 2015 was an innovative way to deal with the long-standing problem of annuity rates, and I firmly believe that these changes will ultimately reverse the long-term trend of falling investment in pensions.
For owner-managed companies the use of pensions is now a tax-efficient means of investing surplus company funds, and allows the owners of such companies a greater flexibility when it comes to retirement.
The second major announcement was made in the Autumn Statement and concerns the radical reform of Stamp Duty Land Tax “SDLT”. It has long been accepted that the way that SDLT was structured was hugely distorting and unfair because of the “slab rate” whereby huge increases in tax could occur when house values entered a new band for SDLT purposes.
As a result of the changes in pensions and SDLT I believe that George Osborne will go down in history as one of the great tax-reforming Chancellors of modern times and take his place in history alongside the other most recent tax-reforming Chancellors, namely Nigel Lawson and Geoffrey Howe.
This follows a trend that I have long been aware of as a professional in the tax industry. Conservative Chancellors generally reduce and simplify the tax system whilst Chancellors from the Labour Party generally increase the complexity of the tax system – meaning more work for accountants!