Britain’s richest households are still set to gain almost 40 times as much in cash terms the poorest from Kwasi Kwarteng’s tax giveaway Budget, even after his U-turn on the 45p rate, a leading economic thinktank has calculated.
The richest 5 per cent of households will benefit to the tune of £3,500 each on average from the decisions in the 23 September mini-Budget, compared to £90 for the poorest fifth, said the Resolution Foundation.
And unless he undertakes further U-turns on Budget announcements, Mr Kwarteng will need to impose “significant spending cuts” in his medium-term fiscal plan on 23 November or miss his target of reducing state debt as a proportion of GDP.
Even after ditching the 45p decision – which handed an average £10,000 to the UK’s 600,000 highest earners – Mr Kwarteng’s package remains “very regressive”, said the Foundation’s researcher Lalitha Try.
A quarter of the total cash gains from the remaining £43bn in giveaways – more than £10m – will go to the wealthiest 5 per cent, made up around 1.5m households with a net income of £100,000 or more for a family of four.
By contrast, the total gain for the 15m households in the bottom half of the income distribution is only 16 per cent – less than £7m.
Ms Try said: “The welcome decision this morning to scrap the abolition of the 45p tax rate has made the chancellor’s package of tax cuts less focused on the very richest households.
“But the top are still the main winners, and the scale of spending cuts required to pay for them is largely unaffected.
“Despite today’s U-turn, the richest 5 per cent of households still stand to gain far more than the entire bottom half of the income distribution combined.
“The chancellor remains wildly off-course in meeting his fiscal target of having debt falling in the medium-term, and is on course to announce significant new spending cuts on 23 November as a result.”
Scrapping the abolition of the 45p tax rate has removed 62 per cent of the cash gains going to the richest 5 per cent of households and 54 per cent of the gains going to the richest 10 per cent, said the Foundation.
But wealthy households still gain significantly more than the poor from the reversal of the 1.25 per cent increase in National Insurance on earnings over £12,750.