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Explain a policy that may reduce inequality in the United Kingdom

The key to answering a question like this is to know a basic policy that HM Government has implemented recently. You can have a few policies that you remember so that when a question like this comes up you instantly know what to say. One of the points I remembered for Economics at school was as follows:

'An effective policy to reduce inequality in the United Kingdom is for the government to use the tax system. A current policy that could prove to be effect is to increase the Personal Tax Allowance. The Conservative Government believes this is an important way of getting people out of taxation and reducing inequality. This policy is significant as it directly affects the incomes of low income earners. The UK Personal Tax Allowance was £10600 in April 2015, is £10,800 now and will be £11000 by 2017. In these two years it is estimated there will be a tax cut for 27 million people, whilst 3.7 million people will be taken out of income tax all together. Taking low income earners out of taxation means that their real disposable income increases, they can purchase more goods and services (which is significant as low income earners are net savers) and therefore increase not only their living standards but their overall wealth. This policy should therefore reduce inequality in the UK as it helps low income earners earn more.'

This paragraph can be molded to be used for many macroeconomic questions; it can be shortened or changed (to for example say how this policy would increase economic growth) in order to suit the chosen question. Therefore the main point you need to remember is the current change in the Personal Tax Allowance rates that can then be applied to many different questions.

The format of your answers should be 'KAA' followed by 'Evaluation'. KAA is Knowledge, Analysis and Application. This means you identify the point or policy, then explain it then add some real world context to it. So in this paragraph you would identify the policy as increasing the personal tax allowance, then explain how this will reduce inequality, then your application would be quoting the figures. If you do all of this, then you should get full marks for your paragraph but if you forget to do all parts then your mark may be capped so having structure is vital. The next paragraph would be an evaluation paragraph where you say what is wrong with the policy, what could be improved or what a better policy could be. This paragraph above could even be used as an evaluation paragraph by saying that. for example, it would be a better policy than increasing income tax for the highest income earners as this decreases the incentive to work and after the Conservatives decreased income tax from the 50% top rate to 45%, tax revenue actually increased (mention Laffer Curve). 

For more information about structure or answering questions like this please visit my page and contact me for more help,

Regards,

Billy Warby

Philosophy, Politics and Economics Student at The University of Exeter

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