Incomes of “only the richest” in Britain will rise, analysis of tax cuts says

According to the think tank, the chancellor’s huge package of personal tax cuts amid the cost of living crisis will do nothing to prevent more than two million people falling below the poverty line.

An analysis of the budget statement by Kwasi Kwarteng of the Resolution Foundation said that “only Britain’s richest households will see their incomes rise as a result of the most significant tax cuts in 50 years.

Incomes of the richest 5% will grow by 2% next year (2023-2024), while the remaining 95% of the population will remain poorer as the cost of living crisis continues.

The package also sees people in London and the South East “disproportionately” better off than people in Wales, the North East and Yorkshire. On average, households in London and the South East will benefit three times more (£1,600) than the latter regions (£500).

The think tank added that middle-income Britain would lose the most from all the tax and benefit policies announced. The poorest fifth of households gain an average of £90, the middle fifth lose £780 and only the top 5% gain significantly (£2,520).

Torsten Bell, chief executive of the Resolution Foundation, said the £45 billion package of tax cuts announced on Friday rejected “not only the Treasury orthodoxy but also the legacy of Boris Johnson”, adding that today’s Conservative Party “is no longer fiscally conservative”. “.

He further noted that the debt is now growing every year.

“Yesterday’s Budget statement was set against the backdrop of the ongoing cost of living crisis, which means almost all households will become poorer next year as Britain grapples with high inflation and rising interest rates,” Bell said.

“But while the measures announced will not stop more than two million people from falling below the poverty line, they will mean only Britain’s richest households will see their incomes rise.

“The Chancellor’s package of measures will probably accelerate growth in the short term. But for its growth to fully pay off, a large dose of economic luck, such as a rapid drop in gas prices beyond the government’s control, is needed.

“If strong growth does not materialize and tax rises are ruled out, Osborne-style spending cuts would be needed to achieve the chancellor’s budget rules.”

The Resolution Fund’s findings come after the Institute for Fiscal Studies (IFS) said the chancellor was betting on an “unsustainable growth path” for government debt.

A scathing assessment by a respected financial think tank said only those on incomes above £155,000 would benefit from tax policies announced by the Conservatives during the current parliament, with “the vast majority of income tax payers paying more tax”.

Earlier, the Resolution Foundation said the chancellor’s measures would include an extra £411bn of borrowing over the next five years.

The package was announced a day after the Bank of England warned that the UK may already be in recession and raised interest rates to 2.25%.

The move made government borrowing more expensive than at any time in 13 years.

The chancellor admitted the UK was “technically” currently in recession but insisted his tax cuts would ensure the fall was “shallow”.

Using more than £70bn of higher borrowing, Mr Kwarteng presented a package on Friday that included scrapping the top rate of income tax for the highest earners.

He cut stamp duty for home buyers and brought in a cut in the basic rate of income tax to 19p in the pound at the start of the year until April, as part of tax cuts costing up to £45bn a year.

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