Mansion House speech - Budget surplus will not be welcomed!
In the Mansion House Speech this evening, George Osborne will announce that legislation will be introduced ‘to compel future governments to run a budget surplus’. This follows the earlier announcement of the ‘tax lock’ legislation to be introduced to stop the Government from increasing income tax, national insurance and VAT rates.
The announcement and likely introduction of these pieces of legislation, whilst well intentioned are not to be welcomed. The reason for this is that it creates confusion between what are mere political pledges (and we know how much reliance can be placed on these) and what has the actual force of law.
An Act seeking to bind Parliament in the future from passing a Finance Act that increases the prescribed tax rates or from operating a budget deficit is simply not enforceable. As Parliament is sovereign it can repeal any such Act and in the absence of such repeal, it is understood that the presumption is that where the express words of future legislation is inconsistent with the earlier Act, that earlier Act will be considered to have impliedly been repealed. Helpfully, Parliament’s own website explains this:
‘…no Parliament can pass laws that future Parliaments cannot change. Parliamentary sovereignty is the most important part of the UK constitution.’
It would be useful if Government restricted its legislative activities to matters which have true legal force as opposed to creating legislation which under what is stated to be by Parliament as the most important part of the UK constitution, signifies nothing.
For further information, please contact Nigel May or your local tax advisor.