It could be assumed that the issue of poverty is more startling in under-developed or still developing nations. However, majorly, there are two types of poverty namely absolute poverty and relative poverty. Absolute poverty means the condition where people lack sufficient earning even to pay for the basic life necessities, like food, clothing and rent whereas relative poverty is where income of people is significantly lower than the society’s average income. The case of absolute poverty in developed UK is rare; however, the issue of relative poverty is noteworthy. The possible solution to tackle this issue is to encourage sustained economic growth. This would increase total income of society, number of jobs and thereby reduce the gap between the rich and the poor. The issue of poverty is also linked to the issue of unemployment. Therefore, reduction of unemployment by using supply and demand side policies would help in reduction of poverty. Using the policy of increase in progressive taxes, like higher income tax rate from 40-50 percent, causing reduction in income of people with higher income. This would lead to reduction in regressive taxes thereby benefitting the poor by increasing their incomes. However, such policies discourage employees like the greater corporation tax discourages investments. Nevertheless, some economists argue about the income effect in which the increase in tax decreases incomes which might cause people to get involved in more work to sustain and maintain their income. Another method to tackle this problem is o increase the benefits provided to the poor population. The policy of means tested benefits, like child benefit, universal tax credit etc., encourages welfare benefits of the people in lower income groups. This allows the collection of money for most needed people and it proves to be cheaper than the universal benefits, thereby reducing the tax payer’s burden.
The concept of National Minimum Wage by government can be a solution to increase the lowest possible wage in the country and thus can be used as tool to decreasing gap in income in the society (Bunyan, 2016). The subsidized public services like health, education, can prove a good option for providing benefits in kind to the poor population. Setting up a Universal basic income (UBI), that is a weekly income to everyone guarantees a minimum income and thereby help the poor population (Pettinger, 2016).
Along with government, businesses also play a major role in helping to reduce the poverty in the country. The industrialization had proved to be beneficial in the growth of economy in the past too. By the way of growth of economies, creation of new jobs and making the tax receipts important for redistributive state policy and the exchanging the labour of one person for another is the highest sustainable method which could decrease poverty. In the capitalist economy the role of businesses is paramount in changing the picture of the society. The possible four alternative utilization of capital could be transfer of profits by businesses to charitable causes, reduction in process of products and services, thirdly by creating employment for more and more people and lastly by prioritizing the human capital among their existing staff, i.e. increasing income or assisting them with progressive support and training (Ludlow, 2015).