New Labour and Redistribution

An interesting quote from the Business section of today's Observer:

"the IFS's calculations show that during Brown's decade in Number 11 the poor have been the clear winners, with billions of pounds channelled to them through the tax credit system. Redistribution may be a political dirty word, but Labour has done plenty of it."

On the Institute of Fiscal Studies Website you can find all the supporting data for this:

http://www.ifs.org.uk/budgets/budget2007/distribution.ppt#14

One of the slides shows the the effect of the tax and benefit system on net income since Labour took power in 1997:

Poorest 10% of the population - net income up over 12%
second poorest 10% - net income up over 11%
third poorest 10% - net income up about 7%
fourth poorest 10% - net income up over 4%
fifth poorest 10% - net income up nearly 2%
fifth richest 10% - no real change
fourth richest 10% - net income down about 1%
third richest 10% - net income down over 2%
second richest 10% - net income down about 3.5%
richest 10% - net income down about 5%

The specific groups gaining most over the last ten years are:

Pensioner couples - net income up about 5%
Single pensioners - net income up about 10%
Couple with kids not earning - net income up about 15%
Working lone parent - net income up about 12%
Non-working lone parent - net income up about 15%

The IFS concludes on this Budget:

" •Sensible tax reforms with revenue recycled to minimise losers
•Higher-rate tax-payers unaffected, 65+s paying tax gain, hard to generalise about others
•Tax credit rises for low-income families generally exceed income tax losses
•Around a fifth lose, two-fifths gain, two-fifths largely unaffected
•As usual, low-income families with children gain, but still much to do to hit 2010 child poverty target
•Overall impression of Brown’s record unaffected
•Highly redistributive, especially to families with children and pensioners"