Tories plan tax 'early warnings'

George Osborne wants taxation to be made more transparent

Major tax changes should be unveiled six months before the Budget and be more heavily scrutinised, the Conservatives say in a report.

Ideas to simplify the system and end "stealth taxes" have been drawn up by former chancellor Lord Howe.

Shadow chancellor George Osborne said they would "restore trust" in taxes.

He said publishing ideas early would avoid problems like those on capital gains reforms but the Treasury said it would prevent "emergency changes".

Under a Conservative government, any complex changes would be announced no later than the autumn pre-Budget report - allowing them to be scrutinised by experts and businesses before the Budget.

'Invest with confidence'

Mr Osborne said: "Future governments will no longer be able to bury the bad news in the small print."

He backed the report's calls for a cross-party committee of MPs and peers to be set up specifically to examine tax policy and for a new Office of Tax Simplification, made up of Treasury officials, academics and others charged with making the system more straightforward.

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"At a time of deep economic difficulty, the last thing the Treasury should be doing is creating yet more uncertainty and instability," Mr Osborne said.

"With these proposals a future Conservative government will restore trust in the tax system so that businesses and individuals can work, save and invest with confidence."

He said arguments over the government's proposals to change capital gains tax and "non-domiciled" foreigners showed the need to make announcements early.

'Pretty dangerous'

But Treasury minister Kitty Ussher said the proposals were "absurd", adding: "They would prevent your ability to make emergency changes in a Budget - for example, if you discovered a tax-avoidance scam...That would be pretty dangerous."

Earlier Lord Howe told BBC Radio 4's Today programme: "What we have seen over the last 10 years has been a doubling in the number of pages of tax law, a lot of changes being introduced at the last minute with short notice and then turning out to be a mess - the 10p tax rate debacle is a very good example.

"We simply can't go on multiplying the tax law on our statute book. We have got to begin clearing the undergrowth. That's going to be a long business -that's why it is important to set up institutions to carry it through."

The 10p tax rate was abolished by Gordon Brown last year in his final Budget as chancellor.

It coincided with a cut in the basic rate of income tax from 22p to 20p, revealed in an unexpected announcement at the end of Mr Brown's speech.

But the move backfired when it came into effect as millions of low paid workers were left out of pocket, prompting a backbench Labour rebellion and a government U-turn.

Last week a report on the abolition of the 10p rate - and the £2.7bn package brought in to compensate many of those who lost out - raised doubts about the "perceived benefit of seeming to pull rabbits from the hat" at Budget time.

The ideas are not official policy yet, but give a clear indication of what may feature in a future Conservative election manifesto.