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.
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.