Taxation For The Enabling State

This paper takes as its starting point Henry Neuburger’s injunction that taxationmust be seen as a contribution to the maintenance of the welfare state, not as adead-weight burden. It sets recent developments in the UK tax ratio in thecontext of changes in public spending, particularly on welfare services, in thepublic sector’s balance sheet, and the distributional effects of both tax andspending. It then discusses tax and transfer policy since the change ofgovernance in May 1997 in the context of public attitudes to inequality anddifferent forms of redistribution. It compares the distributional effects of thefour Labour Budgets since July 1997 with those which would have resultedfrom simply indexing the April 1997 tax and social security system for incomegrowth. This suggests that actual reforms will on average deliver as much tolower income groups as income indexation would have done, but at lower costto the public finances, and in a way which is more consistent with publicattitudes. However, delays between Budget announcements and implementationmeant that inequality and relative poverty increased in Labour’s first two yearsin office. If further progress is to be made towards the target of abolishing childpoverty in a generation, the measures so far announced will have to be added toeach year.[...]