The ONS statistical release on the distributive impact of tax and benefits has attracted some attention, including concern that the tax system is not particularly redistributive. I’ve used the figures in this series several times in the past, for example in my 1988 book Principles of Social Welfare and an essay on income and wealth published in 2001. The series has always been controversial, as much for what it doesn’t include as what it does. Having said that, it has shown a remarkably consistent pattern over time. In 1986, the final income of the bottom fifth of households was 28% of the final income of the top fifth. in 1996, it was 26%. In the figures for 2011, released yesterday, it was just below 28%. There has not been much change in the distributive impact, then.
This doesn’t reveal, however, the most striking change. In 1986, many households on lower incomes were pensioners, and others were single people. The average number of people in a household in the lowest fifth was 1.9, and in the highest fifth it was 3.3. In 2011, rather more of the households on the lowest incomes were families with children. The average number of people in a household in the lowest fifth was 2.7, and the average number of people in the households in the highest fifth was 2.4. So the relative share of an individual in the bottom fifth has fallen from 49% of the final income received by the top fifth in 1986 to under 26% now.