Two alternative policy interventions have been proposed as ways to improve the financial situation of individuals and households with the lowest incomes.

Policy 1: A matched saving scheme, under which whatever amount an individual can save each month, up to 500, will be matched pound-for-pound (i.e. doubled) by a contribution from government.

Policy 2: A universal basic income, under which all individuals will have 500 per month added to their income by the government, regardless of the size of their income.

• a.Which of these policies is likely to be more effective in improving the financial situation of people with the lowest incomes? Briefly explain the reasoning behind your answer.
• b.Which of these policies is likely to be more effective at reducing inter-personal or inter-household income and wealth inequality? Briefly explain the reasoning behind your answer.