Introduction

By far the largest component of social policy in Britain measured in terms of government expenditure is the social security system. Despite many changes, this system was for over half a century recognisably the same as that proposed by Beveridge (1942). Over the past decade, however, that system has been radically restructured. Goals have been changed: the guiding mantra has become ‘work for those who can, security for those who cannot’ (DSS, 1998). The period since 1997 is also one in which tackling poverty has been given prominence. In 1999, the Prime Minister set out the goal of abolishing child poverty in a generation (Blair, 1999) and the reduction of pensioner poverty has also been a goal. ‘Redistribution’ has not, however, been a prominent New Labour term. No use of the word will be found in the Labour Party's General Election manifestos of 1997, 2001 or 2005. Yet a whole lot of redistribution has been going on, often in innovative ways.

The purpose of this chapter is to review and assess the changes that have occurred. The emphasis here is on both the structure of redistribution and its extent. The purpose is not to examine overall changes in inequality and poverty but rather to examine how the impact of government through benefits and taxes on the distribution of net money incomes has changed since 1997. The question of how these changes have affected behaviour will be touched on but is not the central focus.

What effect have the changes had on the extent of redistribution? That is the question that this chapter aims to answer.

Major changes in the structure and administration of redistribution, 1997-2006

The British social security system has shown a remarkable resilience, even though the department responsible for it has changed its name four times since 1948, most recently in 2001 to the Department for Work and Pensions. Although it had up to 1997 evolved in important ways, large parts still continued essentially unchanged. Since 1997 there have been the most fundamental administrative changes. These are summarised in Figure 10.1.

Most strikingly, large components of social security have been shifted into the tax system either taking the form of ‘tax credits’ or being administered by HM Revenue and Customs. The Conservative Chancellor of the Exchequer Nigel Lawson (1992) set out his view that the functions of taxing and spending should be kept entirely separate.