Effects of Taxes and Benefits on Household Income, 1977-2019: Secure Access

Abstract copyright UK Data Service and data collection copyright owner. This analysis, produced by the Office for National Statistics (ONS), examines how taxes and benefits redistribute income between various groups of households in the United Kingdom. It shows where different types of households and individuals are in the income distribution and looks at the changing levels of income inequality over time. The main sources of data for this study are:Family Expenditure Survey (FES) from 1977-2001Expenditure and Food Survey (EFS) from 2001-2007Living Costs and Food Survey (LCF) from 2008 onwardsSome variables have been created by combining data from the LCF (previously FES or EFS) with control totals from a variety of different government sources, including:United Kingdom National Accounts (ONS Blue Book)HM Revenue and Customs (HMRC)Department for Transport (DfT)Department of Health (DH)Department for Education and Employment (DfEE)Department for Communities and Local Government (DCLG)The Effects of Taxes and Benefits on Household Income (ETB) has been produced each year since 1961 and is an annual analysis looking at how taxes and benefits affect the income of households in the UK. The estimates in this analysis are based mainly on data derived from the LCF Survey, which replaced the Family Expenditure Survey (FES) from 2001/02, and was known as the EFS until 2008. The LCF is an annual survey of the expenditure and income of private households. People living in hotels, lodging houses, and in institutions such as old people’s homes are excluded. Each person aged 16 and over keeps a full record of payments made during 14 consecutive days and answers questions about hire purchase and other payments; children aged 7 to 15 keep a simplified diary. The respondents also give detailed information, where appropriate, about income (including cash benefits received from the state) and payments of Income Tax. Information on age, occupation, education received, family composition and housing tenure is also obtained. The survey is continuous, interviews being spread evenly over the year to ensure that seasonal effects are covered. The Family Spending publication also includes an outline of the survey design. The LCF data used in this analysis are grossed so that totals reflect the total population of private households in the UK. The weights are produced in two stages. First the data is weighted to compensate for non-response (sample-based weighting). The non-response weights are then calibrated so that weighted totals match population totals for males and females in different age groups and for different regions and countries (population-based weighting). The results in the analysis are weighted so that statistics represent the total population in private households in the UK based on 2011 Census data. In 2013/14, an additional calibration to Labour Force Survey (LFS) employment totals was also applied. There are a number of different measures of income used, the most common of which is probably household disposable income. This is the total income households receive from employment (including self-employment), income from private pensions, investments and other sources, plus cash benefits (including the state pension), minus direct taxes (including income tax, NI and council tax). Income is normally analysed at the household level as this provides a better measure of people's economic well-being; while income is usually received by individuals, it is normally shared with other household members (e.g. spouse/partner and children).In 2018/19 a further adjustment was applied to the data to adjust for the under coverage and under-reporting of income of the richest individuals. This method is often referred to as the 'SPI adjustment' owing to its use of HM Revenue and Customs (HMRC's) Survey of Personal Incomes (SPI). For further details please see the ETB Quality and methodology information webpage and the Effects of taxes and benefits on household income technical report. The Living Costs and Food Survey (LCF) is the source of the microdata on households from 2008-09 onwards. Previously, the Expenditure and Food Survey (EFS) was the data source. Derived variables are created using information from LCF and control totals from a variety of different government sources including the United Kingdom National Accounts (ONS Blue Book), HM Revenue and Customs, Department for Transport, Department of Health, Department for Education and Employment, and Department for Communities and Local Government.For further information, see the ONS Effects of taxes and benefits on household income webpage. Variables available in the Secure Access version The Secure Access version of the ETB datasets include additional variables not included in the standard End User Licence (EUL) versions (available under GN 33299). Extra variables include:CASENO (case number): all yearsCESAGE (age of chief economic supporter): 1991-2015CESEMPST (economic position of chief economic supporter): 1991-2015GGOR (Government Office Region): 2000-2015CES (chief economic supporter flag): 2001-2015Prospective users of a Secure Access version of the ETB will need to fulfil additional requirements, commencing with the completion of an extra application form to demonstrate to the data owners exactly why they need access to the extra, more detailed variables, in order to obtain permission to use that version. Secure Access users must also complete face-to-face training and agree to Secure Access' User Agreement (see 'Access' section below). Therefore, users are encouraged to download and inspect the EUL version of the data prior to ordering the Secure Access version.The second edition (June 2021) includes data files for 2016/17, 2017/18 and 2018/19.  The documentation has been updated accordingly. Main Topics:The analysis considers the distribution of household income using five income measures in order to assess the effect of government intervention. The five income measures are:original income: includes income from employment, self-employment, investment income, occupational pensions and annuitiesgross income: original income plus cash benefitsdisposable income: gross income minus direct taxes (income tax, employees' National Insurance contributions and local taxes)post-tax income: disposable income minus indirect taxesfinal income: post-tax income plus benefits in kind (from education, the National Health Service (NHS), travel and housing subsidies)Standard Measures: Historically, the equivalence scale used in this analysis was the McClements scale (before housing costs are deducted). To allow for better comparability with other sources, this analysis adopted the modified-OECD scale for the 2009/10 article. The modified-OECD scale usually assigns a weight of 1.0 for the first adult in a household, 0.5 for each additional adult and a weight of 0.3 for each child (defined as those under 14 years old). However, in this analysis the modified-OECD scale has been rescaled so that a two adult household equivalence value is 1.0. This makes it easier to compare with data that uses the McClements equivalence scale without making any difference to the overall results. The values for each household member are added together to give the total equivalence number for that household. This number is then used to divide disposable income for that household to give equivalised disposable income