The government spends more than £1 trillion a year. A big chunk of that simply involves taking money from us in the form of tax and giving it back in the form of benefits and pensions. It’s easy to measure the effect of those transfers, they are highly redistributive. The rich pay a lot more tax than the poor, the poor get most of the welfare payments.
The majority of what the government spends, though, goes on providing services — health, education, that sort of thing. That also has big distributional effects. And if we want a real assessment of the degree of redistribution effected by the government, we need to take account of that spending.
If the government spent the same on providing services to everybody, irrespective of how rich or poor they were, it would spend about £8,000 on every person in the country. That would be paid for via our progressive tax system. As a new report from colleagues of mine at the Institute for Fiscal Studies demonstrates, what we do is, in fact, much more redistributive than that. And it has become more so over time.
Much the biggest chunk of public spending goes on the NHS, and it’s a fast-growing chunk. At any given age, people with lower incomes make much more use of the health service. There is a strong correlation between income and health. If your health is poor, you are less likely to be able to earn a lot.
