Millionaires handed at least £55K tax cut by Tory government - ‘More than a nurse earns’

·Political Correspondent, Yahoo News UK
·4 min read
Britain's Chancellor of the Exchequer Kwasi Kwarteng walks outside Downing Street in London, Britain, September 23, 2022. REUTERS/Maja Smiejkowska
Kwasi Kwarteng gave Britain's highest earners a huge tax cut on Friday. (Reuters)

New chancellor Kwasi Kwarteng has faced heavy backlash after he announced tax cuts that will benefit Britain's wealthiest during the cost-of-living crisis.

Kwarteng announced the steepest tax cuts in a generation on Friday, claiming that they are crucial to stimulate economic growth.

"We promised to prioritise growth, he said. "We promised a new approach for a new era. We promised to release the enormous potential of this country. Our growth plan has delivered all those promises and more."

Among the announcements was the government's intention to cut income tax for the highest earners next year from 45p to 40p - handing at the very least tens of thousands of pounds to millionaires.

Read more: Martin Lewis brands tax cuts and borrowing in mini-Budget ‘staggering’

The move immediately triggered accusations the government is prioritising the richest over the poorest at a time where millions of the most vulnerable people are struggling to make ends meet.

"Any of you earn £1m?" said Torsten Bell, chief executive of the Resolution Foundation. "You're getting a £55k tax cut next year - twice what a typical earner brings home a year."

Money Saving Expert Martin Lewis described the budget as helping "mega earners".

"From next April the 45% top rate of tax (applies to those earning £150,000) will be scrapped," he said. "So the top rate will be the 40% higher rate threshold. This means mega earners, pay the same rate as those on £50,000."

Watch: Millionaires handed tax cut by Tory government - ‘More than a nurse earns’

Labour's shadow home office minister, Jess Phillips, placed the cuts into perspective: “Can the chancellor just confirm for me that he has just announced a tax cut that means someone earning £1 million will be £40,000 better off?"

“That is more than a nurse earns, and over £10,000 more than the average wage in Birmingham.”

Former shadow chancellor John McDonnell described the budget as "the most socially divisive budget in a generation" for handing tax cuts to Britain's richest and threatening benefit claimants with sanctions.

And the Joseph Rowntree Foundation (JRF) said the government was "wilfully" ignoring the poorest Brits.

"This is a mini-budget that has wilfully ignored families struggling through a cost of living emergency and instead targeted its action at the richest."

Other major tax cuts cuts that will benefit the wealthiest includes a 1.5% cut to National Insurance Contributions (NICs) - benefiting those on £20,000 per year by around £93, and an earner on £100,000 per year by around £1,093.

According to Resolution Foundation analysis, two-thirds (65%) of the gains from personal tax cuts go to the richest fifth of households - with almost half (45%) will go to the richest 5% alone.

LONDON, ENGLAND - JULY 14: Secretary of State for Business, Energy and Industrial Strategy Kwasi Kwarteng (R) intridcues Conservative leadership candidate Liz Truss (L) as she launches her campaign to become the next Prime Minister on July 14, 2022 in London, England. Liz Truss, the current Foreign Secretary, survived the first round of voting and is in the remaining six candidates vying to become the next Conservative Party leader and Prime Minister. (Photo by Leon Neal/Getty Images)
Kwasi Kwarteng supported Liz Truss' plan to rip up "Treasury orthodoxy" during her leadership campaign over the summer. (Getty Images)

In contrast, in a demonstration of how unequal the package is, just 12% of the gains go to the poorest half of households.

The government has said it also plans to cut corporation tax and lift the cap on bankers bonuses.

As well as concerns about unequal wealth distribution, a growing number of economists have expressed concern that a combination of tax cuts funded by borrowing could send the economy off a cliff.

"Summary: Chancellor has announced biggest tax cuts since the 1970s, at price of public finances being set on an unsustainable footing," said Bell.

He added: "Chancellor has announced biggest tax cuts since the 1970s, at price of public finances being set on an unsustainable footing.

"Gambles on growth, which is in Putin’s hands rather than ours in the short term."

Paul Johnson, director of the Institute for Fiscal Studies, warned the last time a chancellor took this approach it "ended in disaster".

"£45 billion of tax cuts. This is biggest tax cutting event since 1972," said Johnson.

"Barber's "dash for growth" then ended in disaster. That budget is now known as the worst of modern times. Genuinely, I hope this one works very much better."

And, while Kwarteng has argued his strategy will stimulate economic growth, the pound dropped to a fresh 37-year-low as he unveiled his “growth plan” in parliament.

Watch: Mini budget: Kwasi Kwarteng announces cancellation of corporation tax rise on business profits