'Good times, a bit of power and a little money too...'

... that is what Andrew Dilnot wants to offer young academics when he becomes principal of St Hugh's College, Oxford. Huw Richards reports.

Chancellor Gordon Brown and other leading politicians might wish it otherwise, but Andrew Dilnot will not give up his scrutiny of government taxing and spending when he leaves the Institute of Fiscal Studies.

Dilnot, who will be 42 next week, will be one of the youngest heads of an Oxbridge college and one of the first educated at a comprehensive, Olchfa School, Swansea, when he takes over as principal of St Hugh's College, Oxford, at the start of the next academic year.

It is a considerable mid-career shift to a job that will make copious demands on his time and energy. But he says: "I will carry on doing economics, but I won't be up and down daily on the train from Oxford to London as I have been."

So the ancient bicycle normally to be seen chained up outside the IFS offices, just round the corner from Senate House in London's university quarter, will probably be pensioned off. Dilnot wonders aloud how he is going to replace the exercise inherent in a daily routine that involved cycling from his home in north Oxford to the city station, parking one bike there, taking the train and then riding the second bike from Paddington to Bloomsbury.

"St Hugh's is only about 300 yards from home, and anyway we'll be moving into the lodgings in the college," Dilnot says. He will also miss the IFS, his home for the whole of his working life. "It will be a terrible wrench to leave. I've loved working here, but 21 years, including the past 11 as director, is an extremely long time."

Dilnot's connection with the IFS began with a student attachment. "It was in the summer of my second year as an undergraduate at St John's, Oxford. I was the first summer student - we've had one every year since." By the time Dilnot joined the IFS staff in the summer of 1981, having turned down a highly prized and competitive postgraduate fellowship at Nuffield College, he had already published his first article in Fiscal Studies , written with Nick Morris. "It was about the black economy and tax evasion, and a bit of a counterblast about talk at the time of the black economy being up to 20 per cent of the whole. We compared actual spending with what people declared in the Family Income Survey."

It was, he points out, exactly the sort of research that has become the IFS trademark - "bringing a bit of rigour to an important area of debate". "There are readily accessible pieces of authoritative, uncontested data that can be used to add value to debates," he says.

One such debate is whether income inequality has grown or declined in Britain. Dilnot has an answer derived from the IFS's own economic modelling. "It was broadly constant from 1961, when our series starts, until the mid-1970s. From the late 1970s into the 1980s, inequality rocketed, before stabilising and possibly falling slightly in the 1990s. Very little has changed over the past four or five years."

To build up the picture, data from the 1968 Family Expenditure Survey had to be read. There were also tapes from 1961 to 1968, but they were written on an old ICL mainframe computer. A machine that could read them and the questionnaires on which the surveys were based had to be tracked down.

That painstaking approach has been greatly aided by the advance of computer technology, Dilnot notes. "Our tax-and-benefit model now takes 20 minutes to run. In the early 1980s, it used to take three-and-a-half hours to print out the Family Expenditure Survey results for 700 households - and there are 7,000 in each year. I'd set the machine up, go to bed, set the alarm, and get up three and a half hours later to collect the print-out and set up the next set of data.

"There is no doubt that the IFS has ridden a technological wave, thanks to the vision of John Kay [director from 1979 to 1986 and Dilnot's undergraduate tutor], who saw the possibilities before anyone else."

Although the nature of much of its work is politically sensitive, the IFS is deliberately, almost ostentatiously, politically detached. "We have an absolute rule that members of staff cannot be politically active," Dilnot says.

Its one Commons alumnus - Steve Webb, since 1997 Liberal Democrat MP for Northavon - had to leave before pursuinga political career. This pre-empts the political instinct to detect bias when charged questions receive IFS answers that our rulers do not like. An example is Dilnot's response to queries about the current tax burden: "There's no doubt that it has risen over the past five years."

Detachment does not mean not having views. Dilnot has been exasperated by the pretence, expressed across the political board, that there is a "middle way" by which taxes can be reduced and public services improved. "I feel very strongly about this and it is not popular to say it, but there is no middle way. If you want more and better health and education, taxes have to go up. If you want taxes to fall, you must deliver less or lower-quality public services." He expressed this view in 1994, in his first outing as one of the presenters of BBC Radio's Analysis programme. Brown's 2002 budget acknowledged that he was right.

Dilnot believes that debate on government spending is, on the whole, better informed than it was 20 years ago - citing the superior range of information in government Red Books. He continues, however, to be exasperated by innumeracy - not least among journalists. "A good example was early in the last Parliament. An initiative on childcare by Harriet Harman, spending £300 million over five years on a million childcare places, was reported as though it was going to revolutionise childcare. Nobody did the simple sum that it worked out at about £60 a year, or just over a pound a week, per place.

"I feel passionately about the extraordinary non-numeracy of much political debate," says Dilnot. That passion will be poured into a dozen radio programmes called More or Less over the next two years.

Dilnot is also passionate about St Hugh's. If he'd never gone there again after graduating, the college would still have left an indelible mark on him, he says. "I fell in love there, as my wife was an undergraduate at the college."

Dilnot delights in the college's unpretentious style, enjoys the discovery that he is described in the college statutes as "she" and was impressed by how leakproof a 54-strong governing body was through the process of his appointment.

His background means he is likely to be asked often about Oxford's problems attracting state-school applicants. "Everyone I speak to in Oxford devotes a great deal of thought and effort to this," he says.

Dilnot has two pet projects. "One thing I want to look at is how to make things better for young academics. I remember what a terrific time I had in my 20s and see how much our staff at the IFS, who have a median age of less than 30, manage both to achieve and to enjoy themselves. If you can give people a good time, a bit of power and responsibility and perhaps even a little money, you can get a terrific response."

Dilnot also wants to find a way of "making our 5,000 senior members feel part of the community, not just in terms of inviting them to social events, but as members of an intellectual community centred on the college".