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Chancellor’s tax cuts will ‘disproportionately’ favour London over Wales, analysis shows

24 Sep 2022 4 minute read
Prime Minister Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng. Picture by Dylan Martinez.

The Chancellor’s huge package of personal tax cuts amid a cost-of-living crisis will see those living in London and the South East “disproportionately” better off than those living in Wales, according to a think tank.

Those in the richest parts of England will gain more than three times as much (£1,600) as those in Wales, the North East and Yorkshire (£500), according to the Resolution Foundation.

It comes after an analysis by Wales’ Governance Centre yesterday showed that in Wales, the average person would benefit by £440, compared with a £650 per person average across the UK.

But nearly 90% of the gains would go to households in the top 50% of the income distribution, with 40% going to households in the top 10%, they said.

The Resolution Foundation said that the budget will do nothing to stop more than two million people falling below the poverty line as “only the very richest households in Britain” will see their incomes grow as a result.

The richest 5% will see their incomes grow by 2% next year (2023-24), while the other 95% of the population will get poorer as the cost-of-living crisis continues.

The think tank added that middle-income Britain stands to lose the most overall of all the tax and benefit policies announced. The poorest fifth of households will gain £90 on average, with the middle fifth losing £780, and only the top 5% gaining significantly (£2,520).

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

He further stated that debt is currently on course to rise in each and every year.

“The backdrop to yesterday’s fiscal statement was an ongoing cost-of-living crisis that will mean virtually all households getting poorer next year as Britain grapples with high inflation and rising interest rates,” Mr Bell said.

“But while the measures announced won’t prevent more than two million people falling below the poverty line, they will mean only the very richest households in Britain seeing their incomes grow.

“The Chancellor’s package of measures is likely to boost growth in the short-term. But it will require a large dose of economic good fortune, such as the rapid fall in gas prices that is beyond the Government’s control, to make his growth gamble fully pay off.

“Should strong growth fail to materialise, and tax rises be ruled out, then Osborne-esque spending cuts would be needed to achieve the Chancellor’s fiscal rules.”

‘Paying more tax’

The Resolution Foundation’s findings come after the Institute of Fiscal Studies (IFS) said the Chancellor was “betting the house” by putting Government debt on an “unsustainable rising path”.

The respected financial think tank’s scathing assessment said only those with incomes of over £155,000 will be net beneficiaries of tax policies announced by the Conservatives over the current Parliament, with the “vast majority of income tax payers paying more tax”.

Earlier, the Resolution Foundation said the Chancellor’s measures would involve an extra £411 billion of borrowing over the next five years.

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

That move made Government borrowing more expensive than at any point over the past 13 years.

The Chancellor admitted that the UK is now “technically” in recession, but claimed his tax-cutting measures will ensure the dip is “shallow”.

Using more than £70 billion of increased borrowing, Mr Kwarteng on Friday set out a package which included abolishing the top rate of income tax for the highest earners.

He cut stamp duty for homebuyers, and brought forward a cut to the basic rate of income tax, to 19p in the pound, a year early to April, as part of tax cuts costing up to £45 billion annually.


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George Thomas
George Thomas
2 months ago

Stella Creasy, Labour MP, on twitter: “If you want to know on whose side this government is – and so if they understand how to generate growth by how they spend your money- consider thisThe cut to the 45p tax rate would fund a universal 15-hour childcare offer from 6 months to age 3. Again in plain English, this means taxpayers will have to pay a lot more to cover the debts the government running up so that Kwarteng can pay shareholders of energy companies and cut taxes for the super rich and slash public services. In plain English this… Read more »

Mr Williams
Mr Williams
2 months ago
Reply to  George Thomas

I agree, how can money ‘trickle down’ when much of it will be hidden in off shore accounts?

Ernie The Smallholder
Ernie The Smallholder
2 months ago
Reply to  George Thomas

Unfortunately, the solution to this is not UK Labour. They are guiding Welsh Labour into voting to stay in this rotten UK.

We could do better. We could leave the UK now.
The European Union would treat us much better.

As an independent nation, Wales (and Scotland) would be able to put priorities of our own people first.

Gareth
Gareth
2 months ago

How will Mr Drakeford spin this, when next asked how we are better off in the union.

Mr Williams
Mr Williams
2 months ago
Reply to  Gareth

I really like Mark Drakeford and I think he is a great leader, but like you, I have to disagree with him on that too. No county is better off for being the lesser member of an unequal union.

Ernie The Smallholder
Ernie The Smallholder
2 months ago
Reply to  Mr Williams

Mark Drakeford is like the late, Mikhal Gorbachov. Good intentions, but the union they wished to stay/keep together is an un-reformable mess, centralised, imperialistic and corrupt.

We need to get free from this mess.

We need independence for Wales.
Wales Labour need to campaign for independence OR go the same way as Scottish Labour.

Mr Williams
Mr Williams
2 months ago

Oh, what a surprise. The Tories looking out for the rich!

The original mark
The original mark
2 months ago

The problem the UK has, is a lack of choice of politics, we have two main parties that are both working to keeping the neoliberal imperialist status quo, Starmer has waged a war on the left of the Labour Party since he lied his way to leadership, the NEC is full of right wing pro Israeli shills, the Senedd is under constant attack from London fully supported by Welsh tories, in a word you could say we’re fxxxed whichever way we turn, The whole political system needs a complete overhaul, and we all know that won’t happen.

Ernie The Smallholder
Ernie The Smallholder
2 months ago

Yes, but keep Israel out of this. They are an independent country and members of the UN.

The Original Mark
The Original Mark
2 months ago

not sure what their UN status has to do with anything, they have been declared an apartheid state by the UN, Amnesty International and B’Tselem, they are interfering in British politics especially the Labour Party and have been proven to have done so, just stating facts.
and don’t forget Ms Truss is talking of following in Trumps footsteps and moving the British embassy to Jerusalem

Last edited 2 months ago by The Original Mark
Frank
Frank
2 months ago

Independence couldn’t be any worse than the current situation. I can only see it as an improvement. All we have to secure is our rightful share of the UKs treasures and cash.

Frank
Frank
2 months ago

If the UK breaks up who is going to be supervising a fair share out of treasures and cash. I would be willing to bet that those in the South East have thought of this and will have been fiddling the books and stashing away most of the gold, treasures and cash for themselves.

Y Cymro
Y Cymro
2 months ago

So what’s new. Wales will always lose out. Just look at infrastructure spend in Britain. England, especially the SE, always gets the “three lionshare” compared to Wales. We are lucky to get scraps if that. Only Welsh independence can break this vicious circle.

#YesCymru 🏴󠁧󠁢󠁷󠁬󠁳󠁿 #Ymlaen 🏴󠁧󠁢󠁷󠁬󠁳󠁿

Mab Meirion
Mab Meirion
2 months ago

Interesting to note that Truss and all of her cabinet of grotesques will benefit from the scrapping of the 45% tax rate…

Last edited 2 months ago by Mab Meirion
Mab Meirion
Mab Meirion
2 months ago

The above photo is a mug shot of public enemies number one and two, neither should be in charge, they are not fit people to hold public office…many Britons will die because of their lack of humanity. The 80 thousand people who voted for this should be totally shamed…

Quornby
Quornby
2 months ago

Business as usual then…. Since 1415.

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