The distributional effects of tax and benefit reforms since 1997 Stuart Adam Matthew Wakefield

Some questions to answer Have Labours reforms since 1997 taken money from households or returned money to them? Who have been the winners and losers from the reforms? How does Labours second term compare with its first?

Reforms since 1997 Taxes and benefits only – not public services Estimate effects on government revenues and household incomes in Adopt Treasury no change assumptions as baseline Reforms since 1997 imply net give-away of £1.1bn in

Reforms since 1997 Government revenue gain in , £bn

Allocating payments to households Model effect on individual households where possible Data limitations mean we cannot model all reforms Allocate the remainder proportionately to income We do not model non-take-up of benefits and tax credits Direction and size of resulting bias unclear

A progressive package Distributional effect in of reforms since 1997

Change by parliament Distributional effect in of reforms since 1997

Change by household type Distributional effect in of reforms since 1997

Council tax changes Excluded so far as not directly set by central government But are affected by central government decisions And are tax changes that affects households What is no change in council tax? Use inflation increases as baseline Actual annual rises so far average 5.2% above inflation If no further change, this will raise £5.8bn in

Adding in council tax rises Distributional effect of reforms since 1997

Conclusions The overall average impact of tax and benefit reforms since 1997 is small The combined set of reforms is highly progressive Labours second term has been less generous overall than its first, but better for those on low incomes