Fiscal redistribution cycles: four decades of social assistance in the UK

David Coady

Oxford Review of Economic Policy, 2025, vol. 41, issue 1, 120-139

Abstract: This paper describes the evolution of fiscal redistribution (FR) in the UK through social assistance transfers over the last four decades and the contribution of each of its determinants: budget effort (the share of national income devoted to redistributive transfers) and transfer progressivity (the extent to which these transfers are concentrated on lower-income households). Trends in FR have been driven by a combination of economic and political cycles. Over the 1980s and 1990s, the heavy reliance on means-tested transfers indexed to prices resulted in FR fluctuating over the ‘economic cycle’. Over recent decades, FR has been driven primarily by ‘political cycles’. Under a Labour government (1997–2010), a large expansion of coverage of in-work benefits resulted in an unprecedented, sustained increase in effort which, despite decreasing progressivity, was large enough to ensure a continuous rise in FR. This increase was reversed under a Conservative-led government from 2010 in the context of fiscal austerity, which decreased effort and increased progressivity as remaining transfers were concentrated more on lower-income households. A striking feature over the last four decades has been the sharp decline in FR to the poorest income decile under different political leadership as emphasis has shifted to reducing in-work rather than out-of-work poverty and ‘making work pay’.

Keywords: social assistance; progressivity; budget effort; redistribution; inequality; poverty (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:oup:oxford:v:41:y:2025:i:1:p:120-139.

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