Mr. Barra Roantree:

The expenditure data will be collected at a household level. The survey on income and living conditions, SILC, from where we take most of this information, will say how much the main respondent to the survey got and how much his or her partner got. That allows us more scope on the income and expenditure side. There is also the conceptual point of whether user charges or, in particular, indirect taxes are regressive.

It is not always clear that one wants to measure those as a percentage of income. For example, when looking at increases in the main rate of VAT, rather than exemptions, there is a good case for taking changes in those taxes as a percentage of expenditure and looking at that also. One would get some picture of the distributional impact of indirect taxes by looking at that against income but it is also important to take into account that some people, particularly at the bottom of the income distribution, may have very high expenditure as they have temporarily low incomes. They seem to spend much without any income because they might be running down savings as they are temporarily out of work. An important conceptual point in thinking about indirect taxes is the question as to what is the appropriate base from which to assess progressivity or regressivity. It is something that may come up in the forthcoming budget if carbon taxes are to be increased, as is being suggested in some papers. We will look at and go into more detail on that when the time comes and consider the appropriate way to think about whether it is progressive or regressive.

On a related point, it may be important to think about assessing the package of measures as a whole rather than each individual component. For example, carbon taxes may be increased for some environmental elements but not every tax is necessarily progressive. It may be more important to think about what the package as a whole looks like. For example, one would consider whether the 2019 budget is progressive or regressive rather than picking out each individual measure. It is better to take a look at the entire package taken together, which is something we will pull together some time after the budget in the quarterly economic commentary we produce. It tends to come before this committee or another one.