Osborne opens the door to dynamic costings

George Osborne’s announcement that the Treasury is going to start looking at the dynamic effect of tax changes is significant. The aim, I understand, is for them to gather data on this which could then be used to work out the costs of various tax and spending changes. This would mean that most tax cuts would, in the Budget Red Book, cost the government less.

The decision, though, about what system to use is no longer in the Treasury’s hands. The independent Office for Budget Responsibility now does all forecasts and policy costings so the decision on what model to use ultimately rests with them.

Osborne made this announcement in his appearance before the Treasury select committee today, an absurd amount of which was taken up by questions about Budget leaks. Strikingly, when defending the cut in the 50p rate, Osborne said that he wanted a tax system that gave the country a ‘fighting chance’ of growing.