Personal Income: Expenditure
The question
To ask the Chancellor of the Exchequer, with reference to the second bullet point in paragraph 2.3 of the document Impact on households: distributional analysis to accompany Autumn Budget 2024 and Spending Review 2025, Phase 1, whether her Department regularly undertakes modelling on the potential behavioural impacts of policy announcements.
Answered by James Murray
HM Treasury distributional analysis only includes measures if they have a clear first-order impact on the benefit income, tax paid or the benefits-in-kind received through public services by UK residents. Therefore, this excludes the behavioural impacts of most measures, for example where households might reduce consumption to reduce the amount of tax they might otherwise pay. However, estimates of behavioural impacts from policy announcements are conducted by the government, as set out below.
As per the Green Book (2022), appraisals and evaluation are a key part of detailed policy development and design. HM Treasury officials, independently and in collaboration with other government departments, carry out longlist and shortlist appraisals. These include the consideration of distributional effects and consequences, such as possible changes in behaviour, that may result from an intervention.
As the independent official economic and fiscal forecaster, the Office for Budget Responsibility have a responsibility to report on the impact of policy announcements, including behaviour impacts, which they do in their Economic and Fiscal Outlook.
Additionally, Tax Information and Impact Notes, published on gov.uk, describe the 'economic impact' and 'impact on individuals, households and families'.
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