Treasury must continue to properly analyse tax changes

HM Treasury is to publish analysis of the effects on economic growth of cancelling the planned rises in Fuel Duty. The estimates show that half of the foregone revenue has been recouped in various taxes as a result of the additional economic growth which occurred as a result of not hiking petrol taxes.

Earlier this month, George Osborne told the Treasury Select Committee:

I’m not expecting some overnight change in the way Parliament and the Treasury does public finances but I think it will start this quiet revolution where people come to realise that if you leave more money in people’s pockets they tend to be better at spending it and investing it than government.

One of the very first policy recommendations of the TaxPayers' Alliance was to get the Treasury to undertake full 'dynamic' analysis of any proposed tax changes. So it's great news that the Treasury is getting a fuller picture of the effects of Fuel Duty, following its recent analysis of Corporation Tax at the Autumn Statement last year.

TaxPayers' Alliance Chief Executive Jonathan Isaby said:

It's great news that the Government have extended their use of dynamic modelling to the cancelled Fuel Duty rises. When Chancellors let people keep more of their own money they find that the impact on government finances and the wider economy is always better than expected. The Government should set out a plan to extend their dynamic analysis to all fiscal policy decisions.
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