ABSTRACT
This chapter describes the institutional setting within which the Chancellor makes decisions. It analyses the annual impact of these decisions upon public revenue. The fringe tuning hypothesis is that the decisions of a Chancellor have little impact upon the amount of tax revenue that government raises in a year. In considering taxation, the Prime Minister and Chancellor have different interests. The Prime Minister must think in terms of political imperatives: she or he is responsible for the governing party winning or losing popular support. The Chancellor is concerned with the whole of the British economy, for what happens in the private sector affects the budget, and decisions about the budget affect the private sector. The chapter concludes with the cumulative impact upon revenue of all the decisions that a party makes during its term of office; cumulative impact is compared in size against sums raised by the force of political inertia.
