Public spending mitigates inequality – at least, for now

Flip Chart Fairy Tales

The ONS published a report on the effects of taxes and benefits on household income last week. It showed a recent slight increase in inequality, as measured by the Gini coefficient, though nowhere near the sort of steep rise we saw in the 1980s and still not quite where it was in the early 2000s.

Screen Shot 2014-06-27 at 14.51.59

It also indicated that, after a drop during the recession, the incomes of those at the top have started rising again while those of the bottom 80 percent have continued to fall.

Screen Shot 2014-06-27 at 14.58.14

It is probable, given what we know about the income shares of the top 1 percent and the ‘just belows’ that the rise in top quintile incomes shown here is largely due to increases at the very top. HMRC projections show the share of the next 9 percent continuing to fall for the next couple of years.

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Chart via Michael O’Connor.

The data on taxation suggest…

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