Significant change was made to both tax and benefits systems during the period 1997-2001. The impact of the changes which directly affect households is highly progressive, reflecting a significant increase in means-tested benefit levels. But the underlying distribution of income has moved such that overall inequality of income has not fallen, and the government has made less progress on reducing poverty than it had hoped. This paper described the aggregate impact of changes on the level of tax and public spending and on the composition of the tax system. The main changes that were introduced to the system are also discussed. The distributional impact of the main changes directed at personal incomes, and the direction of change in the structure of intervention by government in individual outcomes is presented.