POLITICS

Tax Cuts For The Rich? 4 Graphs David Cameron Does Not Want You To See

01/10/2014 13:09 | Updated 01 October 2014

David Cameron revealed today that the Tories plan to fight the next general election on a tax-cutting platform, as he unveiled two major pledges at the party's annual conference in Birmingham.

Telling delegates that he would "build a Britain that everyone is proud to call home", the Prime Minister promised to raise the income tax allowance from £10,500 to £12,500, and increase the threshold at which the 40p tax threshold kicks in from £41,900 to £50.000.

Despite Cameron's insistence that these pledges were aimed at "hard-working" households and would benefit around 30m people across the UK, expert analysis suggests these tax giveaways would, in fact, help the rich much more than the poor - or, for that matter, the 'squeezed middle'. The Tories say their tax cuts would cost just over £7 billion a year by 2020, suggesting - in response to critcism that the cuts are "unfunded" - that they would be paid for with public spending cuts and greater economic growth coming through.

However, former Treasury official James Dowling, now director at FleishmanHillard, told HuffPostUK that far fewer people will "actually feel the fruits" of the Tories' tax cuts than suggested as they would come in after the deficit is cleared, which is set to be around 2018.

"The Tories have been briefing that this would only take place after the deficit is cleared (around 2018), and would cost around £5.5bn/annum," he explained. "These numbers indicate how few people will actually see the benefit of the rise – a fraction of the 4.3m higher rate tax payers."

The respected Institute for Fiscal Studies showed in their Green Budget publication this year that just 15% of the gains from increasing the personal allowance would benefit the poorest half of Britons, concluding: "There are better ways to help the low paid via the tax and benefit system."

Ex-Treasury official James Meadway, who is now a senior economist at the New Economics Foundation, said Cameron's changes were "irresponsible, expensive gimmicks that scarcely affect the poorest workers". "They imply swingeing public sector cuts and mean handing over more cash to the already rich," he added.

Meanwhile, Tom Papworth, associate director of economic policy at the liberal think-tank CentreForum told HuffPostUK: "Raising the threshold for the 40p rate cuts taxes for the richest people outside the top 10% of earners. It does nothing for middle earners. "

Here are the four charts that Cameron would really doesn't want you to see as he tries to woo voters on low and middle incomes with these two new tax cuts.

  • 1 Raising the income tax allowance would help the richest half most
    As the IFS say: "69% (£8.4 billion) of the £12.2 billion per year giveaway would go to working families in the top half of the income distribution...Just 15% (£1.9 billion) would go to working families in the lowest-income half of the population."
  • 2 The poorest will benefit little
    IFS
    "Because 17% of workers already pay no income tax, those with the lowest earnings benefit little from a further increase to the personal allowance...The workers who would gain most in percentage terms from this further increase are those in the lower-middle of the individual earnings distribution," the IFS say. "Further increases to the income tax personal allowance would not be particularly effective in helping the low paid."
  • 3 Those on benefits could lose out...
    IFS
    Among the 2.2 million families paying income tax and on universal credit or council tax support, their family income would increase by only 0.8%. As the IFS chart shows, more than 40% of those in the second and third poorest declines would lose some of their extra income through reduced benefits.
  • 4 And his 40p tax rate pledge would help the richest...
    CentreForum
    The Centre Forum think-tank has previously produced research showing that the top 10% would be most helped by the 40p tax threshold being lifted to £44,000, so Cameron's proposal to take it to £50,000 would go even further.

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