This paper provides a joint analysis of the output and distributional long term effects of various fiscal
policies in the UK, using a Vector Autoregression approach. Our findings suggest that the output
effects of fiscal policies are consistent with the Keynesian paradigm for both direct and indirect taxes
but not for public spending. The estimated long term impact on GDP of increasing all type of
expenditure and taxes analysed is negative and especially strong in the case of current expenditure. We
also find significant distributional effects associated to fiscal policies, indicating that an increase in
public spending and direct taxes reduces inequality while a raise in indirect taxes increases income
inequality. Finally, the relationship between inequality and output is also explored
