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Taxation for the Enabling State


  • John Hills


This paper takes as its starting point Henry Neuburger's injunction that taxation must be seen as a contribution to the maintenance of the welfare state, not as a dead-weight burden. It sets recent developments in the UK tax ratio in the context of changes in public spending, particularly on welfare services, in the public sector's balance sheet, and the distributional effects of both tax and spending. It then discusses tax and transfer policy since the change of governance in May 1997 in the context of public attitudes to inequality and different forms of redistribution. It compares the distributional effects of the four Labour Budgets since July 1997 with those which would have resulted from simply indexing the April 1997 tax and social security system for income growth. This suggests that actual reforms will on average deliver as much to lower income groups as income indexation would have done, but at lower cost to the public finances, and in a way which is more consistent with public attitudes. However, delays between Budget announcements and implementation meant that inequality and relative poverty increased in Labour's first two years in office. If further progress is to be made towards the target of abolishing child poverty in a generation, the measures so far announced will have to be added to each year.

Suggested Citation

  • John Hills, 2000. "Taxation for the Enabling State," CASE Papers case41, Centre for Analysis of Social Exclusion, LSE.
  • Handle: RePEc:cep:sticas:case41

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    References listed on IDEAS

    1. Richard Blundell & Alan Duncan & Julian McCrae & Costas Meghir, 2000. "The labour market impact of the working families’ tax credit," Fiscal Studies, Institute for Fiscal Studies, vol. 21(1), pages 75-103, March.
    2. Glennerster, Howard & Hills, John (ed.), 1998. "The State of Welfare: The Economics of Social Spending," OUP Catalogue, Oxford University Press, edition 2, number 9780198775904.
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