The poverty trade-off: work incentives and income redistribution in Britain

Abstract

Can we reconcile the conflict between policies to help people on low incomes by providing direct financial support and those which encourage them to earn more? Two of the strategies used by governments to help people on low incomes – providing direct financial support and encouraging them to earn more – generally conflict. Drawing on large-scale survey data from thousands of individuals and families spanning the last 26 years, this report from the Institute for Fiscal Studies analyses incomes and work incentives and how they are affected by the tax and benefit system. The report examines how work incentives vary across the population and how this has changed since 1979; estimates how far tax and benefit reforms have been responsible for changes in work incentives; compares these trends with trends in poverty and inequality; considers how various policy options for the future would affect the distributions of income and work incentives.

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