The chancellor’s huge package of personal tax cuts amid a livelihood crisis will do nothing to keep more than two million people from falling below the poverty line, according to a think tank.
An analysis of Kwasi Kwarteng’s financial report by the Resolution Foundation says that “only the very wealthiest households in Britain” will see their incomes rise as a result of the biggest tax cuts in 50 years.
The richest 5% will see income growth of 2% over the next year (2023-24), while the other 95% of the population will become poorer as the cost of living crisis continues.
The package will also leave London and the South East “disproportionately” better off than those living in Wales, the North East and Yorkshire. On average, households in London and the South East earn three times as much (£1,600) as the latter regions (£500).
The think tank added that of all announced tax and benefit schemes, middle-income Britain will lose the most overall. The poorest 5% of households will gain an average of £90, while the middle 5th will lose £780 and only the top 5% will gain significantly (£2,520).
Torsten Bell, chief executive officer of the Resolution Foundation, said the “$45 billion package of tax cuts announced on Friday.
He further explained that the debt is currently increasing year by year.
“The backdrop to yesterday’s financial report was an ongoing cost of living crisis which will leave virtually all households poorer over the next year as the UK grapples with high inflation and rising interest rates,” Mr Bell said.
“But while the announced measures will not prevent more than two million people from falling below the poverty line, they will mean that only the very wealthiest households in the UK will see income growth.
“The Chancellor’s package of measures should boost growth in the short term. But it will take a large dose of economic luck, such as the rapid fall in gas prices that are beyond the government’s control, for its growth game to fully pay off.
“Failing strong growth and ruling out tax increases, Osborne-style spending cuts would be required to meet Chancellor Merkel’s fiscal rules.”
The Resolution Foundation’s findings come after the Institute of Fiscal Studies (IFS) said the chancellor was “risking the house” by putting the national debt on an “unsustainably rising path”.
The scathing assessment from the respected financial think tank says only those earning over £155,000 will be net beneficiaries of tax policies announced by Conservatives in the current Parliament, with the “vast majority of income taxpayers paying more taxes”.
Earlier, the Resolution Foundation said the Chancellor’s actions would involve an additional £411 billion in borrowing over the next five years.
The package was announced a day after the Bank of England warned the UK could already be in recession, raising interest rates to 2.25%.
This move made government borrowing more expensive than at any time in the last 13 years.
The Chancellor acknowledged the UK is now “technically” in a recession but claimed his tax cut measures would ensure the contraction was “flat”.
Using more than £70billion in increased borrowing, Mr Kwarteng unveiled a package on Friday that included scrapping the top income tax rate for the highest earners.
He lowered stamp duty for homebuyers and put forward a cut in the property tax rate to 19p a pound a year in early April, as part of tax cuts costing up to £45billion a year.
https://www.belfasttelegraph.co.uk/news/uk/only-the-very-richest-in-britain-will-see-incomes-grow-tax-cut-analysis-says-42013932.html ‘Only the very richest’ in Britain will see incomes grow, tax cut analysis says