This release contains the main tables from The Effects of Taxes and Benefits on Household Income publication for 1977 to 2011/12. These tables have been reproduced using the new modified-OECD income equivalisation scale that has been used in this publication from 2009/10 onwards.
Included in this release are:
Also included is an implied deflator for the household sector (30 Kb Excel sheet) . This can be applied to the tables in this release to adjust for the effects of inflation over this period by multiplying the values of any financial variable by the deflator figure for the same year.
The income quintile and decile groups are based on a ranking of households by equivalised disposable income. Equivalisation is a process that adjusts to disposable incomes so that the standard of living of households with different compositions can be compared. The equivalisation process reflects the common sense notion that, in order to enjoy a comparable standard of living, a household of, for example, three adults will need a higher level of income than a household of one person.
In the years preceding 2009/10, the equivalence scale used in the original published Effects of Taxes and Benefits articles was the McClements scale (before housing costs are deducted). However, to allow for comparability with other data sources, the McClements scale was replaced in the analysis by the modified-OECD scale. This resulted in the tables produced before 2009/10 not being fully comparable with those in subsequent publications.
However, the tables contained in this release have all been produced using the modified-OECD scale, allowing for improved comparability of household income, tax and benefit data throughout the time period 1977 onwards.
It is important to note that equivalised £ are only used in order to divide the sample households into quintiles or deciles. The monetary values shown in these tables are ordinary (i.e. un-equivalised) £ per year. Where equivalised values do appear (for example, the decile points in Table 14), they are shown in italics.
Use of equivalence scales
When applying an equivalence scale, the values for each household member are added together to give the total equivalence number for that household. This number is then used to divide disposable income for that household to give equivalised disposable income.
|McClements equivalence scale||Modified-OECD equivalence scale|
|Type of household member||McClements equivalence value||Type of household member||Modified-OECD equivalence value|
|Married Household Reference Person (such as a married or cohabiting couple)||1.00|
|1st additional adult||0.42||Second and subsequent adults||0.33 (per adult)|
|2nd (or more) additional adult||0.36 (per adult)||Child aged 14 and over||0.33|
|Child aged 13 and under||0.20|
|Single Household Reference Person (adult)||0.61|
|1st additional adult||0.46|
|2nd additional adult||0.42|
|3rd (or more) additional adult||0.36 (per adult)|
Table source: Office for National Statistics
For example, take a household that has a married couple with two children (aged six and nine) plus one adult lodger. Using the modified-OECD scales, the household's equivalence number is 0.67+ 0.33 + 0.20 + 0.20 + 0.33 = 1.73. If the household's disposable income is £20,000, its equivalised disposable income is £11,561 (=£20,000/1.73). Using the McClements scales, the household's equivalence number is 1.00 + 0.21 + 0.23 + 0.42 = 1.86. If the household's disposable income is £20,000, its equivalised disposable income is £10,753 (=£20,000/1.86).
Source: Office for National Statistics
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