No abstract

We study earnings and income inequality in Britain over the past two decades, including the period of relatively "inclusive" growth from 1997-2004 and the Great Recession. We focus on the middle 90%, where trends have contrasted strongly with the "new inequality" at the very top. Household earnings inequality has risen, driven by male earnings -although a 'catch-up' of female earnings did hold down individual earnings inequality and reduce within-household inequality. Nevertheless, net household income inequality fell due to deliberate increases in redistribution, the tax and transfer system's insurance role during the Great Recession, falling household worklessness, and rising pensioner incomes.

We study earnings and income inequality in Britain over the past two decades, including the period of relatively 'inclusive' growth from 1997 to 2004, and the Great Recession. We focus on the middle 90%, where trends have contrasted strongly with the 'new inequality' at the very top. Household earnings inequality has risen, driven by male earnings-although a 'catch-up' of female earnings did hold down individual earnings inequality and reduce within-household inequality. Nevertheless, net household income inequality fell due to deliberate increases in redistribution, the tax and transfer system's insurance role during the Great Recession, falling household worklessness, and rising pensioner incomes.

Public expenditure on education in the UK represents around £90 billion, or 4.3% of national income. Yet until last year, there was no comprehensive analysis of how that expenditure is targeted at different stages of education, how it has changed over time, the factors driving those changes, and the associated pressures and challenges. That gap was filled by the 2017 IFS report-funded by the Nuffield Foundation-Long-run comparisons of spending per pupil across different stages of education. The influence of that report on policy debates convinced both the Foundation and IFS of the value of producing this type of analysis on a regular basis. All those working in the education system, as well as the wider public, stand to benefit from a clear and independent assessment of trends in education spending over time and from better understanding the balance of public and private financial contributions at different stages. Such data are essential considerations in decision-making, particularly in the context of continued pressure on public finances, economic uncertainty, and rising pupil and student numbers. It is for these reasons that we have worked with IFS to instigate a series of three annual reports on education spending, of which this is the first. The report provides impartial analysis of spending across each stage of education, complementing the Foundation's goal to explore the impact on outcomes of educational participation across the systemfrom the early years, through school, and into further and higher education and vocational training. Each report will feature a more detailed focus on a particular stage of education, and this year that focus is on further education (including school sixth forms and adult education). The authors show that further education has been a big loser from education spending changes over the last 25 years. There have been significant cuts to spending per student since 2010, and further changes are on the horizon in terms of the regional devolution of responsibility for adult education, the tight timescale for the development of the new T levels, and the continued focus on apprenticeships for adult learners. The Nuffield Foundation has long been concerned about the particular challenges facing further education, and its relative neglect in both financial and policy terms. We are keen to improve the evidence base in this area and hope that this report will help to generate discussion, and ultimately interesting research proposals that we might consider funding. We extend our thanks to the IFS team, in particular to Luke Sibieta, who has led the analysis, and to his co-authors Chris Belfield and Christine Farquharson. We hope the publication of this series of reports will become an important part of the education calendar.

Executive summary• House prices have risen in real terms over time but have also been subject to some strong swings. According to the Nationwide index, real average house prices trebled between 1995-96 and 2007-08. In part, this represented a recovery following a fall of 40% during the early 1990s. However, by 2007-08, real house prices were 77% higher than their previous peak in 1989. They then fell by almost a quarter between 2007-08 and 2012-13, before starting to grow again from 2013-14. In 2014Q4, they remained 17% below their 2007Q3 peak.• In London, house prices grew faster than in the rest of the UK before the crisis and have since resumed growth more rapidly. Real house prices in London surpassed their previous peak during 2014.• In 2013-14, average UK house prices were 6.9 times the level of average earnings -about the same as a decade earlier and still below the 2007-08 peak of 8.1. Young adults are the most likely to be considering buying their first home. The ratio of average house prices to the average earnings of 25-to 34-year-olds peaked at 7.7 in 2007-08 and was 7.2 in 2013-14.• People's regular outgoings on housing can move differently from house prices, depending on trends in mortgage interest rates and rents. During the recent crisis, many homeowners were helped by the dramatic fall in interest rates. On average, real housing costs for owneroccupiers with a mortgage fell by 38% between 2007-08 and 2012-13, taking the proportion of their income spent on housing costs from 16% to 10%. Of course, renters have not experienced the same scale of relief, and the proportion of their income spent on housing costs rose from 25% to 27% over the same period. As homeowners tend to be further up the income distribution than renters, this has had predictable distributional consequences, with those towards the top of the distribution seeing the most favourable trends in housing costs.• Increases in house prices relative to incomes have probably been at least partly responsible for a significant decline in homeownership (and a rise in private renting) since the early 2000s, reversing the trend seen over the late 20 th century. This largely reflects differences between generations: the age-25 homeownership rate fell from 45% for the mid-1960s birth cohort to 20% for the mid-1980s cohort. By age 35, the homeownership rate of those born in the mid-1970s remained 10 percentage points lower than for those born in the mid1960s at the same age.1 The authors gratefully acknowledge funding from the Nuffield Foundation, which has provided generous support for ongoing IFS analysis relating to the 2015 general election. The Nuffield Foundation is an endowed charitable trust that aims to improve social well-being in the widest sense. It funds research and innovation in education and social policy and also works to build capacity in education, science and social science research. The Nuffield Foundation has funded this project, but the views expressed are those of the authors and not necessarily those of the Foundation. Mo...

We study students’ motives to obtain sixth form and university education in a sample of 885 secondary school students in the UK. At each educational stage, perceptions about the consumption value of education explain a substantial share of the variation in students’ intentions to obtain further education, while beliefs about the monetary benefits and costs are not found to play an important role. Beliefs about the consumption value of university predict not only students’ intentions to go to university but also their intentions to go to sixth form, highlighting the importance of dynamic considerations in the choice. We further document that students’ beliefs about the consumption value of further schooling strongly predict students’ perceptions about how likely it is that they will obtain the necessary grades to proceed to the next educational stage. Differences in the perceived consumption value across gender and socioeconomic groups can account for a sizeable proportion of the gender and socioeconomic gaps in students’ intentions to pursue further education as well as in their perceptions about their own performance.

There is substantial evidence of a significant relationship between parents' income and sons' earnings in the UK, and that this relationship has strengthened over time. We extend this by exploring a broader measure of net family income as an outcome. In doing so, we uncover three additional trends in social mobility. Partnership, and the level of earnings from any partner, are increasingly related to family background. The progressive direct tax and benefit system in the UK acts to offset intergenerational income persistence and has a stronger effect for the later cohort. Finally, men from higher-income backgrounds are significantly more likely than those from lower-income backgrounds to be in paid work and hence have higher incomes. Including out-of-work men in the analysis increases the estimates of intergenerational income persistence. This research was carried out as part of CLOSER (Cohort and Longitudinal Studies Enhancement Resources). CLOSER aims to maximise the use, value and impact of the UK's longitudinal studies. Bringing together eight leading studies, the British Library and the UK Data Service, CLOSER works to stimulate interdisciplinary research, develop shared resources, provide training, and share expertise. CLOSER is funded by the Economic and Social Research Council and the Medical Research Council. Its lead research partner is the UCL Institute of Education. The funders took no role in the design, execution, analysis or interpretation of the data or in the writing-up of the findings. The authors would like to thank Alison Park and Anna Vignoles for their helpful comments and suggestions.

No abstract