By Jack Mendel
Half of the Chancellor’s planned tax cuts will go to the richest five per cent of the country, a leading think-tank has said.
In sharp criticism of today’s raft of new policies in the mini-budget, the Resolution Foundation hit out at Kwasi Kwarteng for having “blown the budget”.
This comes after Kwarteng announced a tax cut bonanza, including scrapping pledged hikes to national insurance rates and the introduction of the health and social care levy, alongside a dramatic ditching of the 45p higher tax rate.
His £45bn package, the foundation said, would boost growth int he short term but “raise interest rates and see an additional £411 billion of borrowing over five years”.
Yesterday the Bank of England raised rates for a seventh consecutive time, to 2.25 per cent, as property-owners and those looking to buy face soaring mortgage costs of more than £1,150 a month.
The foundation, which works to improve the standard of living for lower and middle income households, said today’s cuts had “a particular focus on higher income households/
“Someone earning £200,000 will gain £5,220 a year, rising to £55,220 for someone earning £1 million. Someone earning £20,000 will gain just £157.”
It said 65 per cent of the gains from personal tax cuts announced today go to the richest fifth of households, who will be better-off on average by £3,090 next year.
“45 per cent will go to the richest five per cent alone, who will be £8,560 better off.
“Just 12 per cent of the gains will go to the poorest half of households, who will be £230 better off on average next year.
Chief Executive at the Resolution Foundation, Torsten Bell, said: “This may not have been a Budget, but the Chancellor has certainly blown the budget with the biggest package of tax cuts announced since the ill-fated Barber Budget of 1972.”
Bell slammed the “decision to combine the largely unavoidable higher deficit caused by rising energy prices and interest rates with permanent tax cuts will drive up borrowing by over £400 billion in the coming years.”
“No Chancellor has ever chosen to permanently increase borrowing by so much.”
Warning about impending cuts to spending to tackle the debt, he said it would be “on course to rise in each and every year”, which is not what “sustainable public finances look like.”
“Every scrap of Treasury orthodoxy has been torn up.
While praising the Energy Price Guarantee, which is set to take some of the heat out of soaring prices of gas and electricity, he said “today’s tax cuts will do little to boost the incomes of those on low and middle incomes.”
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