Recent work by Emmanuel Saez (Quarterly Journal of Economics, 2002) has shown how earned income tax credits programmes that give more support to low-income workers than to non-workers can be optimal if labour supply responses are more concentrated on the extensive and intensive margin. This project will use Saezs results together with estimates of labour supply elasticities derived from a structural labour supply model for parents in the UK to investigate whether recent tax credit reforms in the UK are taking us towards a more optimal tax system, and what recent reforms might tell us about the UK Governments desire to redistribute to the poor.