‘A budget for the 1%’: government accused of huge tax cut for super-wealthy

The government stands accused of introducing a “simply staggering, huge tax cut for richer households” that will leave “the super-wealthy laughing all the way to the actual bank”, while allowing hundreds of thousands of already-struggling families to fall deeper into poverty.

On Friday, Kwasi Kwarteng, the chancellor, announced a string of tax giveaways and other measures that economists and campaigners claim will hugely benefit the super-rich at the expense of hardworking people.

The measures include:

• Scrapping the 45p additional tax rate on earnings above £150,000.

• Axing the cap on bankers’ bonuses.

• Scrapping the planned rise in corporation tax to 25%.

• Doubling the stamp duty “holiday” on property purchases to £250,000.

• Allowing the overseas wealthy to shop duty free anywhere in the UK – not just at airports.

• Reversing the 1.25 percentage point rise in national insurance contributions.

• Tightening the benefits rules to make it harder for part time workers on universal credit.

The combined package of measures announced in the mini-budget means that someone who currently makes £1m will gain £55,220 a year, while someone earning £20,000 will be just £157 better off, according to calculations by the Resolution Foundation.

Torsten Bell, the chief executive of the thinktank, said the policies “amount to a simply staggering, huge tax cut for richer households”.

Bell described the mini-budget as socially divisive, and said almost 45% of the £45bn worth of tax cuts would “go to the richest 5% alone, who will be £8,560 better off”.

“In contrast, just 12% of the gains will go to the poorest half of households, who will be £230 better off on average next year.”

There are 3,519 bankers working in the UK making more than €1m a year (£880,000) according to the European Banking Authority (EBA). That is more than seven times as many as those in Germany, which has the second highest number of €1m-a-year bankers. The EBA figures show 27 UK bankers made more than €10m in 2019 (the latest year available).

Nicola Sturgeon, Scotland’s first minister, said: “The super-wealthy laughing all the way to the actual bank. While increasing numbers of the rest are relying on food banks – all thanks to the incompetence and recklessness of this failed UK government.”

Paul Johnson, the director of the Institute for Fiscal Studies thinktank, said the abolition of the 45p tax rate on incomes over £150,000 was “a surprise” that “helps roughly highest income 1%.”

Johnson said combined the measures amounted to “the biggest tax cutting event since 1972”.

Alison Garnham, the chief executive of Child Poverty Action Group, described the budget as “a statement for the 1%” and said it was “more bankers’ bonuses than helping hungry kids”.

“Today was a vital opportunity to provide reassurance and support to those who need it the most,” she said. “But instead the government risks a collision with reality, and the 4 million kids currently living in poverty in the UK will be forced to pay the price.”

Frances O’Grady, the general secretary of the TUC, said: “The government was “making it easier for City bankers to help themselves – making it harder for workers to win better pay and conditions”.

Luke Hildyard, the executive director of the High Pay Centre, a thinktank that focuses on excessive pay, said: “By scrapping the bankers’ bonus cap and cutting tax on the richest 1% of the population, the government is doubling down on a failed economic strategy.

“The richest households in the UK already rake in more than the richest in most European countries.”

He said that instead of “bending over backwards for people who are already extremely well off”, the government should concentrate on “re-balancing income and wealth in favour of low- and middle-income earners”.

James Perry, a multimillionaire and founding member of Patriotic Millionaires, a campaign group calling for higher taxes on the very wealthy, described Kwarteng’s mini-budget as “an abdication of responsibility for sound financial management”.

Perry, who made a fortune from a frozen ready meals company, said that instead of scrapping the high rate of tax Kwarteng should have introduced more taxes on the wealthy.

“We have to deal with the phenomenon of extreme wealth, a vast pool of capital held by a very few. Policies like scrapping the bankers’ bonus cap and the top rate of income tax will do the opposite.

“When 70% of the public are saying it’s time to raise taxes on extreme wealth to invest in our country – and millionaire investors like me agree – why would the government not do the right and obvious thing and get on with it?”