Philip Hammond Urged To Scrap 'Unfair' Tax Cuts In Autumn Statement

Resolution Foundation says Osborne rewarded rich, which prevented balancing books.
<strong>Chancellor of the Exchequer Phillip Hammond arrives in Downing Street.</strong>
Chancellor of the Exchequer Phillip Hammond arrives in Downing Street.
Neil Hall / Reuters

The rich have been the biggest winners from ex-Chancellor George Osborne’s tax giveaways of £32bn, a think-tank has warned as it argues the hand-outs have stopped the country balancing the books.

The Resolution Foundation has called on his successor, Philip Hammond, to re-think the Government’s approach to taxation in his first financial Autumn Statement this month.

They say the £32bn - including £17bn on raising the point at which people pay income tax, £8bn on cutting corporation tax and £7bn in freezing fuel duty - would be enough to eliminate the deficit Hammond will inherit this year.

Successive cuts by Osborne explain why slashing public spending has played a bigger part in getting Britain back in the black, compared to raising tax to do the job, it points out.

Stefan Wermuth / Reuters

And it argues while raising the income tax personal allowance will mean £765 extra in the pockets of people earning between £8,100 and £110,000 by the end of the parliament, around 80 per cent of the gains will go to higher income households.

RES adds the UK tax base has narrowed so just 46 per cent of people are paying income tax today, compared to 53 per cent in 2007 - which is a result of government policy combined with sharp increases in self-employment and lower paid part-time work.

This means the UK’s top earners now account for a greater share of the tax take, with the wealthiest 10 per cent of households accounting for roughly 40p of every £1 of income tax raised, up from 25p in 1977.

RES backs top earners paying more in a progressive tax system, but says an over-reliance on the well-off leaves the economy more vulnerable to economic shocks.

The think-tank wants Hammond’s “fiscal reset” to include a fresh look at tax, and wants further increases to the tax allowance to be halted.

Matt Whittaker, Chief Economist at the Resolution Foundation, said:

“The £32bn worth of tax cuts announced since 2010 has been the difference between the government hitting and missing its deficit reduction targets in the last Parliament, or indeed in this one.

“Tax cuts on this scale have clearly played a role in supporting household incomes, though around four-fifths of the £21bn due to be spent on raising the personal tax allowance by 2020 will have actually gone to the richest half of households.

“With the Chancellor indicating that he will press the ‘fiscal reset’ button in his Autumn Statement, now is the time to rethink the government’s tax policy. By abandoning the previous Chancellor’s pursuit of narrowing the tax base, he can ensure the government’s coffers are more resilient to future economic shocks.

“And if he wants to use any fiscal leeway to support the incomes of just managing families, increasing work allowances in Universal Credit offer a far more targeted boost to living standards than costly further increases in the personal tax allowance.”

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