The balancing effect

When Phil Wollass,Labour's envirnomental spokesman appeared on Newsnight following the fuel protests he was quite adamant that the Treasury was losing out as the price of fuel increased.

Over at Ft.com blogs they are not so sure.

They quote Maurice Fitzpatrick of Grant Thorton who says

Tax revenues from North Sea oil would jump from an estimated £10bn - struck when oil was only $84 a barrel - to £16bn at the current price of about $128 a barrel.
Since the Budget in March, the Treasury has already taken an estimated £820m more than its forecasts in North Sea oil tax.
The £6bn of surplus revenue would easily cover the cost of U-turns on both fuel duty and vehicle excise duty, where ministers are introducing new bands which could cost an extra £200 for drivers of inefficient cars.
Deferring the 2p increase in fuel duty by six months would cost £550m. Scrapping the revamped vehicle excise duty altogether would mean the loss of an estimated £465m next year and £735m next year - although ministers may only remove the retrospective element of this tax.

The tresury begs to differ

* an increase in pump prices leads to an increase in inflation. This knocks through to the inflation-linked payments that the government has to make, including benefits, pensions, tax allowances, and government bonds.

* reduced demand for fuel from filling stations, which reduces revenue from fuel duties - as this is fixed at 50.35p per litre if people buy less fuel, revenue from this falls

So who is right or are they both right and does this simply fall into the so called balancing effect?