An expenditure-based analysis of the redistribution of household income

Abstract

This article complements existing Office for National Statistics (ONS) analyses which focus on the distribution of disposable income across households by examining the distribution of household expenditure, in particular the effects of taxes.Analyses of household disposable income and expenditure both show that: households whose members are economically active and composed entirely of adults are more concentrated in the top quintile groups in both distributions; direct taxes are progressive; and benefits are higher for households at the bottom of both distributions.However, a number of interesting differences were also found. These include: indirect taxes are progressive in expenditure distribution, but regressive in income distribution; inequality in expenditure distribution is lower than in the income distribution; and households composed of single parents, couples with children and people in full-time education are more equally spread within the expenditure distribution than the income distribution, where they tend to be more concentrated in the bottom quintile groups.