Draw up a similar table to the one above, only this time assume that the basic benefit is £6000. Assume that the marginal tax rate is 20 per cent up to £10000 and 40 per cent from £10000 to £20000. To what extent would this particular system help to tackle the problem of 

(a) Equity; 

(b) Cost of provision; 

(c) Incentives?

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Tax minus benefit Tax on earnings Net income (£) Earnings Benefit (£) (£) (£) (£) 6000 -6000 2 000 -5200 4 000 800 6000 5 000 -4400 8 000 1600 6000 8 000 11 000 12 000 2800 6000 -3200 4400 -1600 14 000 16 000 6000 20 000 6000 6000 20 000