Macroeconomics: UK economy, IB Economics

It seems that the fiscal battle lines are being drawn, with the Prime Minister hinting at the prospect of an income tax cut before the next election, at the expense of tighter controls of benefits. It's the usual narrative about rewarding the hard working - like Baroness Mone, perhaps - and punishing the 'lazy' - such as anyone on benefits. 

But is it a narrative that's going to play well with the electorate. After 13 years of the current government, I doubt it.  

It seems as though cuts in Inheritance Tax is going to be a part of the Autumn Statement, a £4.5 billion pot for British manufacturing and, potentially benefit cuts. 

The 'economics' of this is that such moves are intended to 'spur' economic activity, because clearly those liable to pay Inheritance Tax will be more productive as a a result of tax cuts, and those in receipt of benefits will be keener to look for work under these circumstances. 

But, on the other hand, it's awfully regressive - and you might argue that given the lower marginal propensity to consume of the rich means that leaving Inheritance Tax as it is, and raising benefits might be more likely to generate growth.  

I'll leave this here. Make your own minds up.

Would a government in the world's sixth largest economy feel comfortable doing this, at a time when their tax cuts have made the rich better off? 

Difficult to disagree with this Guardian editorial which looks at the implications of an Inheritance Tax cut: rewarding the rich and punishing the poor. Regressive in the extreme. 

Lots of talk about the public finances, triggered by the mini-Budget and the urgent need for spending cuts to balance the books and reassure investors. As a result, many have wondered about how the government is going to cut spending, with some thinking that they are going to link rises in benefit payments to average earnings rather than inflation.

If such a move went ahead - and the Prime Minister's denial that this was going to happen during PMQs yesterday is no guarantee that it won't - it would represent a £1,000 decline in real incomes for the poorest families in the UK according to the Resolution Foundation. 

To be honest, I feel for the Prime Minister to some degree - she's rather carrying the can for her predecessor's sins.