POLITICS

George Osborne's Big £7bn Tax Cuts Will Actually Help The Rich Most

01/12/2014 10:18 GMT | Updated 01/12/2014 10:59 GMT
Wiktor Dabkowski/DPA
British Chancellor of the Exchequer George Osborne at the start of a European finance ministers meeting at EU Commission headquarters in Brussels, Belgium on 07.11.2014 by Wiktor Dabkowski

George Osborne's plans to bring in £7 billion of tax cuts in the next Parliament will help the rich far more than the poor, a think-tank has found.

The Resolution Foundation's analysis will awkwardly undermine the Chancellor's ability to boast in his set-piece Autumn Statement on Wednesday that the 2015 tax cuts will help the poorest Britons.

The think-tank also found that Osborne's plans under a Tory government would help the rich by a far greater degree than Labour, the Lib Dems and Ukip.

David Cameron revealed the Tories' prospective tax cuts in a speech to Tory activists at the party's annual conference back in October, promising 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.

However, the Resolution Foundation found that these proposals would not help any of the five million lowest-paid workers in Britain, and neither would any of the other three parties' plans.

The richest 20% of earners would gain 48p in every £1 of the Tories' tax cuts, 46p of Ukip's, 35p of the Lib Dems and 34p of Labour's tax cuts.

Meanwhile, the poorest 50% would receive just 17p in every £1 of the Tories' tax cuts, just less than Ukip (18p), the Lib Dems (23p) and Labour (24p).

See also:

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

How the Tories' tax cuts will benefit the rich

This comes as deputy prime minister Nick Clegg warned that the Tories' plans to rule out further tax rises in the next parliament were "nonsense", and condemned their plan to balance the books after the general election through spending cuts alone.

The Liberal Democrat leader also mounted a robust defence of the government's deficit reduction strategy, insisting the deficit would be "more or less" halved by the end of the parliament.

"We should be able to see the deficit more or less halved by the end of this parliament," he told BBC Radio 4's Today programme.

"What I accept, of course, is if tax receipts are not as buoyant as predicted, then of course that has an effect. Time will tell whether that is a semi-permanent effect or a temporary blip, but it means that it comes down a little less than originally projected."

He said the coalition had been flexible in its approach to eliminating the deficit, having originally hoped to balance the books by the election.

Clegg said: "I think it is right that this Government hasn't been dogmatic about our deficit reduction plan.

"We have been firm, we have been consistent but when it became obvious ... that the structural deficit was not going to be eliminated by the end of this parliament, far from doing what some people urged me to do - which was to chase our tail, cut even more, implement even more stringent cuts - we said no, we are going to stick to the plan but we will accept that it will take a little longer and it will be three years into the next parliament before you wipe the slate clean and balance the books for future generations.

"I think that combination of pragmatism and consistency is the right approach to something as grave as the black hole in our public finances."

However, Ed Miliband tore into the government's "abject failure" on the economy for seeing the public purse lose out on tens of billions of pounds in lost revenues.

The Labour leader released figures from the independent House of Commons Library which, it said, showed that lower- than-expected tax receipts and ballooning social security payments had cost £116.5 billion over the course of the parliament.

The party said the loss was the equivalent of almost £4,000 for every taxpayer - resulting in higher borrowing and the failure of Chancellor George Osborne to meet his promise to clear the deficit by the time of the general election in May.

According to the figures, income tax receipts were £66 billion lower than forecast, national insurance contributions were down £25.5 billion while social security spending is £25 billion higher than originally planned.

Miliband said millions of families had been left trapped in "the most prolonged cost-of-living crisis for a century".

"For them, this is a joyless and payless recovery," he said. "The government's failure to build a recovery that works for everyday people and tackle the cost-of-living crisis isn't just bad for every person affected, it also hampers our ability to pay down the deficit.

"Britain's public finances have been weakened by a Tory-led Government overseeing stagnant wages which keep tax revenues low.

"The result has been David Cameron and George Osborne missing every single target they set themselves on clearing the deficit and balancing the books by the end of this parliament."