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Missing incomes in the UK: Evidence and policy implications

Missing incomes in the UK: Evidence and policy implications

543/2021 Arun Advani, Tahnee Ooms and Andy Summers
working papers,public policy

543/2021 Arun Advani, Tahnee Ooms and Andy Summers

Policymakers tend to ‘treasure what is measured’ and overlook phenomena that are not. In an era of increased reliance on administrative data, existing policies also often determine what is measured in the first place. We analyse this two-way interaction between measurement and policy in the context of the investment incomes and capital gains that are missing from the UK’s official income statistics. We show that these ‘missing incomes’ change the picture of economic inequality over the past decade, revealing rising top income shares during the period of austerity. The underestimation of these forms of income in official statistics has diverted attention from tax policies that disproportionately benefit the wealthiest. We urge a renewed focus on how policy affects and is affected by measurement.

Public Policy