LibDem boost for HMRC: I don’t believe it – because they’ll actually be cutting spending by £2.1 billion

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In possibly the most lacklustre speech ever made by a minister to a party conference Danny Alexander has announced HM Revenue & Customs is to get £900 million of resources over four yeasr to tackle tax avoidance and evasion.

Except it isn’t.

Alexander said:

"There are some people who seem to believe that not paying their fair share of tax is a lifestyle choice that is socially acceptable. It is not."

"Like the benefit cheat, their actions take resources from those who need them most."

"Tax avoidance and evasion are unacceptable in the best of times but in today's circumstances it is morally indefensible."

Earlier in the day Nick Clegg had criticised Labour for not doing more to clamp down on tax loopholes that he described as "perfectly legal but morally questionable". According to the Guardian:

He said it was not fair that the better-off were able to afford "an army" of experts to avoid paying their dues when others faced pay and pension misery as the coalition's public spending cuts bite.

Clegg said: "You cannot ask millions of people in this country to have restraint in pay, to have their pensions looked at again because we are having to deal with the deficit and allow people who can pay an army of lawyers and accountants from getting out of paying their fair share of taxes."

"At the same time you make sure you beef up the resources — as we will do in our announcement today — in a big and significant way to recoup billions that should be in the government's coffers to deal with the deficit."

Brave words. And I’m sorry, but they’re hollow and meaningless.

HM Revenue & Customs has lost 30% of its staff in he last five years. It is to lose 25% more. It’s staff cost about £2.45 billion a year in a department that costs £4.8 billion a year to run. And as I noted earlier today — the Treasury is determined to impose 25% cuts on the department on top of those it has suffered in the last five years. Of course that won’t all come in a go. But using currency of current value it’s going to be £300 million in year one, £600 million in year two, £900 million in year three and £1.2 billion year four — making 25% by the end of the period. Add it up and that’s £3 billion of cuts in routine spending, with only £900m million coming back (much it seems to be spent outside the department with layers and on private sector debt collection, which is wholly inappropriate for the task) and you immediately see that this government that announces spending of £900 million is actually cutting it by not less than £2.1 billion.

In that case there’s not a hope — not one iota of a hope - that they’ll achieve their goal of closing the tax gap.

How can I be so sure? Because I’ve just shown that the problem with uncollected tax is not the peripheral issue that Clegg and Alexander are claiming — it’s systemic. That means only systemic reform will tackle this issue. And they’re not delivering that.

So what are they doing? I suggest all they’re doing is putting out a false message — that they’re tackling tax abuse, claiming there is no more tax to collect after these taken these measures and that therefore cuts must be imposed — as is their ideological desire.

I have a simple answer to that as well. Just as I don’t believe that they’re giving extra resources to HMRC in the announcement they’ve made to day — because that’s obviously untrue — they’re also not telling the truth when they say they’re going to tackle the tax gap — because that’s very obviously not the case.

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