1.7.3 Government Policies to Alleviate Poverty and to Influence the Distribution of Income and Wealth Proverb: “Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.” AQA Econ 3: The Distribution of Income and Wealth: Poverty and Inequality http://www.teachamantofish.org.uk/video-centre

1.7.3 What you need to know The policies which are available to influence the distribution of income and wealth and to alleviate poverty The economic consequences of such policies Students should be able to evaluate the various approaches to redistributing income and wealth and alleviating poverty, recognising the moral and political perspectives

Policies available to influence the distribution of income and wealth A variety of policies are used to influence the distribution of income and wealth, including: Taxation such as income tax and inheritance tax Transfer payments are a redistribution of income for which no product has been produced e.g. jobseeker’s allowance, child benefit etc. Provision of goods and services by government e.g. education and health care Legislation: The National Minimum Wage (NMW) or Living Wage Anti discrimination laws What do Robin Hood and the taxman have in common?

Policies available to influence the distribution of income and wealth Government policies can be used to make society more or less equal More equal Less equal Progressive taxes Increasing inheritance tax Extending universal benefits Increasing the National Minimum Wage Increased spending on public and merit goods Regressive taxes Reducing inheritance tax Restricting universal benefits Reducing or maintaining National Minimum Wage Reduced spending on public and merit goods http://www.bbc.co.uk/news/uk-politics-26618139 Childcare subsidy for working parents to be increased Universal credit is replacing a number of means tested benefits such as jobseeker’s allowance and housing benefit. It will also replace child benefit. Childcare subsidy for working parents to be increased.

The economic consequences of such policies A more equal society: Might allow greater opportunities for lower paid people to realise their human capital, leading to: Greater enterprise amongst this income group Increased employment and associated benefits such as higher government revenue from taxation Higher economic growth as productive potential is more likely to be realised Can lead to higher spending as the marginal propensity to consume is higher amongst this income group, leading to the benefits associated with greater demand in the UK economy Can reduce social costs as individuals and communities feel as though they are part of an inclusive nation where opportunities exist for all However, government expenditure is likely to be higher resulting in increased taxation or borrowing

The economic consequences of such policies A less equal society: Might create incentives for lower paid people to work harder and unemployed people to enter the labour market as welfare becomes less attractive Can lead to greater enterprise amongst this income group Can lead to a trickle down effect as richer individuals spend increased income in the UK economy leading to more demand Might lead to greater saving and investment as richer people look for reward from their increased income However, social costs will arise: Crime and unrest will increase Hopelessness in some communities as a generation feel passed by due to less opportunities http://www.bbc.co.uk/news/business-36939271 Can a radio station make a difference?

Redistributing income and wealth: the moral and political perspectives Statistical evidence suggests that there is a correlation between income and wealth inequality and health and social problems experienced in society Those on lower incomes have greater health issues, are more likely to have mental illness and criminal records. Life expectancy and educational attainment are lower than the national average Therefore, society might be seen to have a moral responsibility to ensure that low income earners have greater access to the same opportunities and benefits that richer earners enjoy There is also evidence to suggest that a more equal society can lead to long term economic growth which is shared more equally between citizens This means that there is also a political responsibility to redistribute income and wealth Wales' life expectancy inequality 'not good enough‘. http://www.bbc.co.uk/news/uk-wales-36989486

Redistributing income and wealth: the moral and political perspectives Income and wealth inequality has become more extreme in the last 25 years, much of it concentrated in the richest 1% In 2015 the income of the richest fifth of UK households before taxes and benefits was £83,800. This was 14 times greater than that of the poorest fifth at £6,100 After taxes and benefits these figures were £62,500 and £16,500 respectively, only 4 times greater 13.6 million households (50.8%) received more in benefits than they paid in taxes. In 2011 this figure was 53.5% The political viewpoint of the incumbent government can be seen to have an effect on redistribution

Research task Research four policies that the current government is undertaking to alleviate poverty Complete the table below: How would you rank these in order of effectiveness? Policy Advantages Disadvantages Degree of success

Test yourself First revise: 1.7.2 The problem of poverty Download the January 2013 ECON3 exam paper and mark scheme from www.aqa.org.uk Write a plan to answer section B question 3 Review your plan against the mark scheme and your colleagues Write an answer