In Gordon Brown’s last budget as Chancellor he scrapped the 10p starting rate of taxation and this change came into effect for the 2008/9 tax year starting April 6th 2008. The move has been criticised by many Labour MPs and by poverty campaign groups as they argue that the scrapping of the rate will make some poor people worse off. They also argue that it will make it more difficult to meet the targets the government has set for reducing child poverty
Chancellor accused of widening poverty trap for poorer workers Times Online (14/03/08)
Benefit move to cut child poverty BBC News Online (12/03/08)
Questions
| 1. |
Explain what is meant by the poverty trap. |
| 2. |
Explain how the abolition of the 10p starting rate of tax is likely to increase inequality. |
| 3. |
Analyse two policies that are likely to reduce poverty. Then assess the extent to which these policies will also help reduce child poverty. |
Widening levels of income distribution have led to increased anger, according to a poll carried out for the Guardian by ICM. The articles linked to below look at this issue from a range of perspectives and using a series of regional case studies.
Anger at gap between rich and poor – ICM poll Guardian (20/2/08)
Diamonds for rich inside M25; hard times for the rest Guardian (21/1/08)
What the Romans did for us: introduce a North-South divide Guardian (21/1/08)
Where Burberry, Bentleys and bling prevail Guardian (21/1/08)
Dark reality hidden behind the picturesque scenery Guardian (21/1/08)
Mills and mail order: end of Empire marks another stage of decline Guardian (21/1/08)
Mind the gap Guardian (21/1/08)
Questions
| 1. |
Define the terms ‘Lorenz curve’ and Gini coefficient’. |
| 2. |
Using diagrams as appropriate show the changes that have taken place in income distribution in the UK in the past decade. |
| 3. |
Assess the principal causes of the growing North-South divide. |
| 4. |
Evaluate two policy options available to the government to reduce the widening gap in income distribution. |
Globalisation has reduced the bargaining power of unskilled workers and pushed up inequality in many western countries, the OECD said, urging governments to improve their social safety nets.” With the gap between rich and poor widening once again, the media have been considering the impact of widening income and wealth distribution. The articles below look at this widening gap and also at the ways in which the rich are using their money.
Gap between rich and poor widens Guardian (20/6/07)
For the super-rich it’s all give and take – at record levels Guardian (20/6/07)
Looking after the super-rich BBC News Online (Evan Davis blog) (9/8/07)
Questions
| 1. |
Define what is meant by the terms (i) Lorenz curve and (ii) Gini coefficient. |
| 2. |
Using illustrations as appropriate, show how the Lorenz curve and the value of the Gini coefficient have changed in the past decade. |
| 3. |
Assess the likely impact on the major macroeconomic targets of growing income inequality. |
| 4. |
Discuss policies that the government could put in place to try to reduce the level of income inequality. |
During the period that Mrs Thatcher was in office, the post-war trend towards greater equality of income was reversed. Although some of the changes the Labour government has made since 1997 have helped those on lower incomes, the rise in incomes at the top of the scale has meant that the gap between rich and poor has widened again. The article below from the Guardian looks at the latest figures on income inequality.
Inequality at same level as under Thatcher Guardian (18/5/07)
Questions |
| 1. |
Define the terms (a) Lorenz curve and (b) Gini coefficient. |
| 2. |
Given the changes in income distribution outlined in the article, discuss how the value of the Gini coefficient has changed since 1997. |
| 3. |
Draw Lorenz curves to show the changes that have taken place in income distribution during Mrs Thatcher’s period in office and during Tony Blair’s time in office. |
| 4. |
Analyse two policies that the government could introduce to reverse these income distribution trends. |
In the Guardian article linked to below, Ashley Seager argues that the only way to reduce the extent of social exclusion is to tax the main asset of a large proportion of the population; their house. He argues that the massive increases in land values that have taken place with rising house prices have increased divisions in society and that a land tax is required to address this. It may be interesting to consider this issue along with News Item 4 about global wealth distribution.
A land tax is 200 years overdue Guardian (8/1/07)
Questions
| 1. |
Explain what is meant by a land tax and suggest different ways that this could be levied. |
| 2. |
Discuss the likely impact of a land tax, as proposed by Ashley Seager, on the major economic targets. |
| 3. |
Analyse possible alternative policies to reduce the levels of exclusion in UK society. |