Public spending in the UK in 2008/9 amounted to over £10,000 per person or about 43% of national income (Crawford, Emmerson and Tetlow 2009) while net receipts from tax and social security contributions exceeded £8,000 per person or about 35% of national income. These transfers of resources between individuals and the state, either as cash payments or as supply of goods, affect individual standards of living and do so in ways that differ markedly between different households. Assessing the impact of government activity on the distribution of household living standards is essential to the evaluation of public service provision but raises challenging conceptual issues that we discuss in this report.