Missing Incomes in the UK: Evidence and Policy Implications

Abstract

AbstractPolicymakers are liable 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 explore 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 established 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 hidden the impact of tax policies that disproportionately benefit the wealthiest. We urge a renewed focus on how policy affects and is affected by measurement.